State Bank of India (SBIN) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. I'm Pawan Kumar, General Manager, Performance, Planning and Review Department of the bank. On behalf of State Bank of India, I'm delighted to welcome the analysts, investors, colleagues and everyone present here today on the occasion of the declaration of the financial year '25 results of the bank. I also extend a very warm welcome to all the people who are accessing the event through our live webcast. We have with us on the stage, our Chairman sir, Shri C.S. Setty at the center; our Managing Director, Corporate Banking and Subsidiaries, Shri Ashwini Kumar Tewari; our Managing Director, Retail Business and Operations, Shri Vinay M. Tonse; our Managing Director, Risk, Compliance and SARG, Shri Rana Ashutosh Kumar Singh; our Managing Director, International Banking, Global Markets and Technology, Shri Ram Mohan Rao Amara; our Deputy Managing Director, Finance, Shrimati Saloni Narayan. our Deputy Managing Directors heading various verticals and Managing Directors of our subsidiaries are seated in the front rows of this hall. We are also joined by Chief General Managers of different verticals business groups. To carry forward the proceedings, I request our Chairman sir, to give a brief summary of the bank's quarter 3 financial year '25 performance and the strategic initiatives undertaken. We shall thereafter straight away go to question-and-answer session. However, before I hand over to the Chairman sir, I would like to read out the safe harbor statement. Certain statements in today's presentation may be forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual outcomes may differ materially from those included in these statements due to a variety of factors. Thank you. Now I would request Chairman sir to make his opening remarks. Chairman sir, please?

Yes. Thank you. Thank you, Pawan. Good evening, ladies and gentlemen. Thank you for taking the time to join this analyst meet today post announcement of Q3 FY '25 results of the bank. The results for the third quarter of FY '25 highlight continuity, consistency and SBI's significant long-term strength. At the outset, I would like to thank all our stakeholders for their support and helping us in creating sustainable value, not only for the bank but also for the economy as a whole. Over the years, SBI has remained focused on strengthening the key components that contribute to this sustainable value. We have prioritized our liability franchise, refined our processes, continued to improve our underwriting standards and aim to deliver value to all stakeholders while positioning ourselves as a reliable financial services brand. I will first start with a brief description of the present global and domestic economic scenario and then discuss bank's performance. In 2025, global economy is being driven by a strong U.S. economy, offsetting the weak euro area and China. As per its latest assessment, the IMF projects global growth at 3.3%, both in 2025 and 2026, below the historical average of 3.7%. The global inflation has continued to soften and is expected to approach inflation targets for most of the central banks, albeit with a different speed across geographies. However, on the downside, the impact of trade wars on global growth and in turn on inflation remains uncertain at this stage. While the new U.S. administration's tariff decision is so far confined to North America and to some extent to China, the impression of full-scale tariff across all countries has so far not materialized. At the domestic level, India's economic growth is poised to rebound as domestic demand regained strength post the budget announcements even as global uncertainties remain. CPI inflation has also eased to a 4-month low of 5.2% in December '24 and will continue to decline as per forecast. As per the latest data, bank credit grew year-on-year by 11.5% and deposits year-on-year by 10.8%. Coming to SBI, the results for the third quarter for FY '25 demonstrate the bank's ability to operate profitably at scale due to our substantial long-term strengths. These advantages stem from our institutionalized framework, which is guided by structured processes and a commitment to fairness for all stakeholders. The net profit for the quarter was INR 16,891 crores, up 84% year-on-year. At the end of Q3 FY '25, our whole bank credit growth was 13.49% year-on-year with the domestic credit growth at 14.06%, while the CD ratio was 68.94%. Importantly, we maintained stellar asset quality with a slippage ratio of 0.39%, retail personal slippage ratio at 0.32% and credit cost at 0.24%. PCR maintained at robust level of 74.66%. As far as business is concerned, the total deposits have grown by 9.81% year-on-year to INR 52.29 trillion. I think this is the first time we crossed INR 52 trillion, and term deposits have grown by 13.47% year-on-year. Our current account deposits have grown by 14.22% year-on-year and CASA overall grown by 4.46% year-on-year and with CASA ratio at 39.2%. Importantly, the current account growth has continued to remain strong for the bank over the last 2 quarters despite competitive market environment. And as far as credit is concerned, I'm glad to share that the growth continues to be robust across all segments with all the major segments registering double-digit growth. Our domestic advances have grown by 14.06%, driven by 18% -- more than 18% growth in SME, 15% in agriculture, 15% in corporate and 11.6% in retail personal segments. Our foreign offices advances have grown by 10.35% year-on-year. The domestic credit deposit ratio was at a healthy ratio of 68.94% at the end of Q3, indicating sufficient headroom to address future growth requirements of the economy. The bank continues to demonstrate industry-leading asset quality at this scale. The slippage ratio for Q3 FY '25 was 0.39%, while the credit cost, as I mentioned earlier, stood at 0.24%. The net NPA ratio improved by 11 basis points year-on-year and stands at 0.53%. We have a well-provided NPA book with a PCR of 75%. The asset quality of the bank has continued to remain strong over the last 5 years, which demonstrates the quality of our loan portfolio, the robustness of our underwriting processes and the leadership of the bank across business lines. Our capital adequacy ratio is at 13.03% without considering clawback of profits and is well above the regulatory requirement. If we include the profits for 9 months, our CAR would be at 14.5%, while the CET1 ratio will be 10.99%. So based on the current profitability and growth profile of the bank, we believe we have sufficient headroom to take care of business growth requirements. As far as digital is concerned, I'm glad to share the progress we have made in digital banking, which is an ongoing journey. More than 8.5 crore customers have been registered on YONO with 64% of our regular saving bank accounts opened through YONO in Q3 FY '25. So as far as subsidiaries is concerned, they are consistently performing well and continue to create significant value for all the stakeholders. We will continue to nurture these subsidiaries and maintain leadership position in their respective businesses. We are glad to advise that the bank continues to report ROA and ROE greater than 1% and 20% respectively at the end of 9 months. The key point regarding these metrics is our operation at a substantial scale. I think in the last quarter also we did mention this. We reported total assets worth INR 66.1 lakh crores, total advances of INR 40.68 lakh crores and total deposits amounting to INR 52.29 lakh crores. When we mention scale, it indicates the bank's extensive investments in workforce, training, procedures and compliance to maintain this level. Sustaining our growth rates implies that our bank's infrastructure and personnel are equipped to support continued growth at this magnitude. SBI continues to be the leader in all the risk-adjusted profitable lending and liability pools in India. Consequently, SBI's ROA above 1% is derived from the scalable fundamentals of banking, a stable NIM, controlled operating expenses and maintaining credit quality. While we are happy about the outcomes in Q3 FY '25, we are also mindful of areas for further improvement. On the liability side, we continue to focus on increasing our share in current account while maintaining our leadership position in savings deposits by further strengthening our customer outreach and branch network. Although the bank's cost base is substantial, it highlights our commitment to compliance and establishment expenses. The bank's ROE profile is currently higher than its credit growth, implying CET1 accrual in the future. From this strong position, our goal is to consistently achieve an ROE of over 15% through the business cycles. So wrapping up my initial comments, I express my gratitude for your ongoing support to the bank. As the bank advances its objectives, it also plays a role in driving the progress and economic development of the surrounding ecosystem. We are dedicated to upholding your confidence in us by delivering superior, sustainable returns over the long run. My team and I are now open to taking your questions. Thank you.

Thank you, Chairman sir, for the presentation. We now invite questions from the audience. [Operator Instructions] We now proceed with the question-and-answer session. Yes.

Sir, compliments to you for the overall performance of the bank and the many of these factors and most of it is as per the guidance given by you. We are very comfortable comparative to some of the other banks on the business growth also as well as the profitability. Having said that, I have got few basic points. Our operating profit has tremendously -- I mean, has gone down substantially, from INR 29,294 crore in the last quarter to INR 23,551 crore, which I believe is mainly because of the loss on trading or revaluation of investments, this is INR 4,000 crores and ForEx loss. Together, about INR 4,610 crores. Equally, we have tried to set off some of this reduction in the profit by lesser provision and taking advantage of the -- some of the buffer provision also using it here of about INR 1,100 crores. So going forward, now we have one more quarter left in this year, FY '25. What is your view and the plans? And what can you say that, yes, are we going to reach -- arrive at again the same kind of INR 29,000, INR 30,000 of operating profit in the remaining first quarter. Secondly, my second question is on, sir, on the -- though we have done better than some of the other banks, which are much smaller than our size, I mean, our bank is going to be soon when we meet next of INR 1 lakh crore bank business bank. So yes, hopefully, we'll see that immediately in the next quarter only. But then still, I mean, if you look at the, say, even credit figures, our growth in the 9 months is only 6.73% and on the -- sorry, credit is 7.97% and deposit is 6.73%. So that gap between the targeted numbers which are given of whatever 14%, 15% growth or even moderate 14% also, are we in a position to do it in the remaining 2.5 months of the current quarter? How are we placed on that, looking at our pipeline and for the sanctions, which are already -- I mean, loans which are already sanctioned. And some of the proposals which are in pipeline, are we in a position to do it in the March itself, February, March to achieve that targeted number, sir? This is in the first.

Thank you. I think 2, 3 questions what you raised. Partly I will answer, and I'll ask Ashwini to supplement to me. One is INR 100 lakh crore business. You said INR 1 lakh crores, I would have been happy.

Sorry, INR 100 lakh crores.

No, no. I'm just -- on the light of in, I think this bank has a potential to reach that number also Ashok Ajmera sahab what you mentioned. But I think we will now restrict to INR 100 lakh crores. I think we're imminently poised to reach that level. This is what the scale we keep talking about. But at the outset, before I answer your specific questions, I would like to convey to you that our guidance in terms of the credit growth of 14% to 16% stands good. We will explain to you where and how we are confident about it. Partly, I will explain and partly my other MDs will explain. That is about the credit growth. On the deposit side, we had originally given 11% to 12% guidance. But last quarter, we have modified that guidance going by what is happening in the market. We said that we would be happy if we reached 10%. I think we are almost there. And as I mentioned, INR 52 lakh crores is something what we have crossed. So we still be sticking to the guidance of credit growth and deposit growth of 10%. And this is imminently possible in the current quarter also. And the rates which you mentioned are basically YTD rates, but the year-on-year rates, this 14% and 10% will -- 14% to 16% and 10% will hold good. Operating profit, yes, I think it was impacted quarter-on-quarter. Year-on-year, I think we are okay. And the sequential basis, we got impacted by the MTM losses. And it is also important to understand that the cost of resources have gone up. We are trying to see how we moderate these cost of resources. But the behavioral shift of the depositors moving from the savings bank to fixed deposit. As I mentioned, our fixed deposit growth rate is more than 14%. So term deposits growing in the book, obviously alter the CASA ratio and also push the costs up. But we have a very strong franchise and the deposits when people want to move from savings to fixed deposits. And at the branch level, we would encourage the customer to get that benefit. At the same time, now we have increased our customer outreach in terms of opening high-quality savings bank account, particularly focusing on the salary accounts. In the last 9 months, we have acquired 9.5 lakh customers -- salary customer accounts, which means that the CASA ratio would come back to 40%. That is our target, which would also bring down the cost of resources. And as far as visibility of corporate credit growth, I would ask Ashwini to supplement.

So while the growth of corporate credit Y-o-Y is quite good, as you've noticed, but the overall growth in terms of year-to-date has been less. And -- but we have a very healthy pipeline, almost INR 4,83,000 crores, consisting of INR 2,22,000 crores which is sanctioned, almost 800 proposals and INR 2,61,000 crores under process. And our hope is that a substantial part of this will get disbursed. Last year also, last quarter saw a lot of growth much more than this year. And the better part is that this year we have been disbursing through the year. So we've been able to get the full interest income. So hopefully, the target which we had internally of corporate credit, which is upwards of 10%, 12%, we will be able to achieve that.

Good evening, everyone. Ajmera sahab that covers the corporate part. But on the retail part, if you look at our PER, which includes REHBU, we have been growing fairly strong as -- actually, on -- I must say that we are on track. Whatever we had in mind is getting, and I do not see any reason why we should actually go down in this -- in the next coming 2 months also. We have seen fairly good growth. Agriculture has been at around 15-odd percent year-on-year. Even Q-o-Q is good. SME is around almost touching 19% year-on-year, good. REHBU also in the vicinity of 14% to 15%. I think we are on track.

Sir, when we are talking about SME now recently in the budget, both the investment limit and turnover limit have been either 2.5x and 2x. So now there is a lot of opportunity in MSME sector will increase. Because some of the mid-corp, I mean, they will come under MSME and we will get the benefit of MSME. At the same time, that noncollateral CGTMSE has also increased from INR 2 crores to INR 5 crores, now INR 5 crores to INR 10 crores. So there you see some major growth coming in?

Yes. What would actually happen is rather than new growth coming in, that may also happen.

And existing...

But then there would be a reclassification of some of what we already have as exposures. Some of the larger ones may get covered under this. But then definitely, this will benefit not only the -- our clients, but us also in a way, in case we get the priority sector benefit out of this, that will be good for us.

But this is likely next year, not so much in the last year.

Yes, it starts FY '26 onwards.

But on the PSL front, what Vinay has mentioned, one is the micro enterprises definition is also modified. That means there is a subsector of micro credit, which needed to be achieved and partly will be taken from there in our PSL category. And as you mentioned, some of the mid-corporates will move to medium enterprises, and that also will happen to the PSL. But there are several other MSME levers which have been provided. One is the classification, other is the CGTMSE cover increased and export-oriented units investing INR 20 crores is also will be covered by the CGTMSE guarantee. So I think this 18% growth rate -- and just -- I'll take 2 minutes on the SME front. We have completely revamped the way the SME funding is done in the bank. We have introduced a cash flow-based lending through our business rule engine today. We have extensively used our database, both internal as well as external and used the GST data, income tax data and balance sheet data and the account data and created this rule engine. Today, we are able to give disbursement if it is guaranteed by CGTMSE in 3 days to 4 days. I think that turnaround time improvement has also contributed to improved performance on the SME. This is what I wanted to tell you.

Sir, a small question on the SMA numbers. If you see, last time SMA-1 had increased to INR 11,891 crores. And you said that, that time that many of which is already recovered. So SMA-1 number is okay, INR 2,128 crores. It has -- I mean, come down substantially. But SMA-2 numbers have gone up to INR 7,424 crores from INR 1,840 crores. Is it that some of that those SMA-1 has come to SMA-2 -- and going forward....

No, no, I'll answer that.

Because though the overall figure is the same, but SMA-2 has increased substantially now.

SMA-2, there was only one major account which has become SMA-2 on 31st December. Has it been fully rectified? And if you adjust that number, it is coming to 3,700 or something, SMA-2 numbers. And this account has been regularized fully, fully in the sense that proactively, they paid the advance payment also going forward. So the risk of that account again falling in the SMA-2 category is not there. So that way, I think the SMA-2 is not a big concern at all.

I'll come back again in the second round. Permit on the international account I wanted to ask something but will ask later.

This is Akshay from Autonomous. So, sir, I have 2 questions. One on your margins. So your margins have dropped by around 13 basis points sequentially. So if you can explain what is driving this 13 basis points. So your advances -- yields on advances have dropped by around 8 to 10 basis points. So what's driving this? And on the cost of deposits front, on a calculated basis, it seems to have increased by around 7, 8 basis points and around 20 basis points in the last 2 quarters. So while you have increased interest rates on the shorter tenure buckets over the last few quarters, so like where do you see the cost of deposits stabilizing going ahead?

The yield on advances has not deteriorated. We held on to the yield on advances. If you see, I think it is year-on-year marginally a basis point increased. So we held on to the yield on advances. The cost of resources definitely has gone, majorly contributed by the cost of deposits. And cost of deposits year-on-year has increased as well as sequentially marginally increased. The margin compression was a combination of this cost of resources going up and also the treasury gains not being there as much as it was there in the Q2. But our core focus on qualitative advances growth continues to be there. So our guidance is that the NIM would be higher than 3% and the ROE, ROA will be 1% and more than 15% is the guidance we are sticking to it. So I don't think on the yield on advances, we are not compromising on that. In fact, in many cases, we are letting go of some of the loans where we feel that pricing is not acceptable. So let me tell you that. And the SMEs generally is more profitable than the corporate advances. And our growth rate in SME is likely to give some yield pickup on the average yield on advances.

Sir, and your borrowings have increased sharply quarter-on-quarter. Is it refinanced?

No, the borrowings are basically market borrowings, and that is the liquidity adjustments essentially. And the time mismatch of the cash flows. Normally, if you see there is a huge amount of inflows into the banking system, particularly SBI because the salary accounts what we have a large number in the last 2 days of the month and first 2, 3 days of the month. And then you have greater outflow starting from the 15th of the month because of the advanced payment of taxes, GST payments. So these cash flow mismatches will lead to some market borrowing. And also, you see the investments also happening at the same time. So this is basically a treasury function.

And lastly, on asset quality. Your credit costs have been abnormally low in the range of 0.2%, 0.3%, 0.4%, pick a number. When do you see them normalizing upwards like other banks are seeing? And specifically on Xpress credits? So your Xpress credit GNPAs have increased from 0.77% in March '24 to around 1.11% as of today. So like what's driving that?

So first, Xpress credit, I think there is a base effect there. I think denominator effect, not base effect because the growth rate has come down in the Xpress credit. But there's no unusual quality issues there. So we are hopeful that this Xpress credit growth rate, which is now in the single digits will come back to double digit going forward, including this quarter we are expecting, so which will -- gross NPA percentage will definitely come down. There's no great concern in terms of the asset quality. The concern is in terms of -- we moved completely to a digital mode of lending. I think in the last quarter also, we did mention that we want to make this process more efficient in terms of the Xpress credit loan because it is a very substantial portfolio in the retail personal loan other than home loans now. So that has now stabilized, and we hope to get the benefit of that stabilization of the digitalization, which has happened in this segment. And there is definitely an impact of overall sentiment of the unsecured personal loan in the system. We are not an exception. But we have the ability to come back to double-digit growth in the current -- hopefully, in the current quarter, if not in the current quarter, definitely in the next quarter. And that is where you see the uptick in the GNPA, but it's not a great concern for us.

The actual increase in terms of number is just INR 408 crores.

And on credit cost? Overall bank credit cost?

Bank credit cost, yes, yes. I think we are all riding a benevolent asset cycle now, asset quality cycle. Hopefully, it will -- I think I'm a little confident that this asset quality would be maintained because we focused heavily on process improvement. And as I said, some of the credit we do not underwrite. If you see on -- this is not the first time we are talking about the asset quality being good. In the last 5 years, we have consistently shown the improvement in the asset quality. If you ask me if it is bottomed out, I think there is only so much we can bring down when you are operating at INR 40 lakh crore advances level. But I feel that our guidance in credit cost of 50 basis points holds good through the cycles.

Understood. And sir, lastly, on other provisions. So there's a negative number of INR 800 crores, INR 900 crores. So what's that?

Which one?

Other provisions.

Yes, Saloni.

Other provision, I think just one second, sir.

We'll give you separately.

Just a second. Just 1 minute. I think that's one account, if I remember.

I think then there is 1 account where standard asset provision was made and it was not required to be made now. So that has been reversed. But we'll give you the details later.

Just one second, I'll give you, sir. There was, no, don't name.

No.

There is one account, there's a reversal.

Yes, Mahrukh?

Sir, I had a couple of questions. Firstly, would be -- sir, I had a couple of questions. Firstly, on your NIM outlook, you did give that you will maintain NIMs at 3%. Now if rates are cut, of course, everyone is expecting a shadow rate cycle, but -- rate cut cycle. But if rates are cut for every 25 or say 50 basis points rate cut, any sensitivity that you could give on your margins, say, on a whole year basis? That's my first question.

Yes.

And then I have a question on this ForEx income. It's a little low this time. Obviously, your fee income is very good, but your ForEx income is low. So is there any reclassification from ForEx to fees?

No, no. On the ForEx, I think there's an MTM loss. Do you mean your growth rate in the ForEx?

Yes, the absolute amount of ForEx income, yes.

ForEx income is on account of MTM, right?

Yes, I can submit, sir. Sir referred to MTM losses in the ForEx exposures. I think in the U.S. dollar reference rates, whether the U.S. interest rates or modified MIBOR, we have experienced a kind of adverse movement as compared to the kind of positions what we have in derivatives. That has resulted in a mark-to-market kind of losses in Q3 as compared to Q2. But we have also seen with the corrections in the rates, we have seen again recouping of those losses as well. So these are more like a transitory. But of course, we are hopeful of this trend will continue so that the contribution of treasury will be better in Q4.

Got it. And sir, on the NIM thing?

On the NIM, see, I think if it is a shallow rate cut, as you are saying, Mahrukh, I don't think we will have major impact because the repo-linked rates loans are low in our book. I think it's about...

28%.

28%. And if it is 25 basis rate cut, I think we may not have more than 2 or 2, 3 basis points. And even assuming that some transmission will happen through the deposits also, which means that the impact on NIM is unlikely to be significant. So if it is any higher rate cut, I think we may have to look at how we manage on the resources side.

Got it. And sir, on OpEx, would you like to call out anything in terms of contribution to employees because actuarial provisions have gone up, but that's just an interest rate function?

] Yes. No, there's nothing significant on that.

And sir, just one last question on life insurance. So there was a -- FM, Madam FM had raised some concern that your conclave only about the way life insurance is sold. Would you -- so is your bancassurance impacted by that? Or you are already compliant and there will be no impact from that? This time, of course, it's been good, the cross-sell revenues. But just what do you think on the outlook on bancassurance given the comments that FM has made recently?

I think the emphasis is more on right selling. And I think we have done quite a lot of work in terms of ensuring that the products which are sold from banca channel are appropriately sold. The measures include both at our level as well as at the SBI Life level. For instance, life insurance companies are not required to have an internal ombudsman, but we have constituted an internal ombudsman in SBI Life to look at any of such complaints or cancellations which are happening to go deeper into it. And the free lookup period and cancellations, all these things are looked into very seriously to see that are there any forced selling or misselling happening. And some of these complaints which come, our level of -- number of complaints is very limited in SBI, on the SBI Life. And those complaints are also examined by the internal ombudsman in SBI. So we put lot of checks and balances to ensure that. And another thing I want to tell you, I think I must have told earlier also, every product, whether it is life insurance or any other JV product, which is sold from SBI, that product appropriateness is approved by none other than MD in the bank. No product can be sold at the counters of SBI without approval of the MD, who is responsible for the retail banking. So I think we are making a lot of efforts to see that the right selling happens there. And obviously, the concern is in terms of how do we increase the right selling part.

I'll just add that the complaint numbers as defined given by IRDA for us are the lowest in the industry. So therefore, while concerns are noted, but at the same time, I think we are doing what we can, both the company and us. I don't see we have too much of a challenge in that sense.

Okay. Got it. Sir, just one last question. Basically on loan growth. So you've given a corporate sanctions and disbursal pipeline. Would you have a very rough idea on how much of it is CapEx and how much of it is general working capital?

We have, I think it's -- we can put 50-50. And the CapEx is significant. I think the most pipeline, what he has spoken is essentially coming from the CapEx.

The entire pipeline...

Most of the pipeline. Most of the pipeline is coming from the CapEx.

Chairman, excellent performance on all parameters when we look at whether ROE or ROA or cost to income. Last quarter we discussed about retail credit. Corporate credit, you have performed excellent. And overall credit also near the lower end of the guidance, 14%. Retail, we have seen there's a slight downtick, 11.6%, mainly due to maybe lower growth in auto loans of 10%. Now there were certain reasons for that. Would like to know the strategy because apparently this Q4 should be the best quarter for the auto loans where we can much more, can make up the growth in retail. Gold, you have performed excellent. What is your strategy for that? And particularly, looking at the -- would like to have your observations on the multiplier of the post-budget strategic liquidity push given by the Finance Minister. What would be the impact on demand growth and retail? So once retail credit goes up, our NIMs automatically can improve substantially and also the profitability. So this is one. Second observation was our valuations, when you look at your slides with the consolidated financials, 22% plus operating profit growth, excellent performance from your -- our AMC, SBI Caps in general. It is actually -- it needs to be highlighted much more. It is there in the slides. When you look at it, we have never seen any bank in Q3 give such reported numbers in terms of all parameters. So your observations, particularly on the demand multiplier, how you see it kicking off in overall credit demand, whether retail or corporate? And also the retail lending push where there was a slight uptick -- downtick in the overall credit growth of 11.67%? And what is the potential of going to 15% to 20% home loans are on track, and there's a further push also on the -- in the budget for the housing sector in a big way. And with this, I wish you all the best. I'm Manoj Alimchandani.

[Foreign Language] So let me just disintegrate that and try to answer the individual questions. I think the first thing what you mentioned in terms of budget proposals definitely are value accretive to the banking industry, particularly for State Bank of India because much of these segments which are getting benefited out of the budget announcement, both on the tax cuts as well as on the demand push, particularly on the SME and agriculture side, they are our strong points. So we would definitely get benefit out of that. And then the savings potential, it is estimated that 20% of the deposits are held by the senior citizens. And if TDS benefit is given to them, we hope that most of their savings would come to banking system. And we hold a majority of that market share in the senior citizen category. The second point which you mentioned in terms of consumption, our economic research department estimates that the consumption multiplier is 3x. So if there is a savings surplus because of the tax rebates or exemption of tax up to certain income level. So definitely, that would be having a consumption multiplier of 3x, if any savings. A part of savings probably would go to consumption and some part will come to bank deposits. We'll get benefited out of that. And a part essentially will go to the investment because the behavior of the customers has changed. So that is on the budget proposals, both in terms of the credit side, the consumption demand is going to spur the personal loan segment. And our personal loan segment today is at the lowest level, 2.84% credit growth rate because, as I mentioned, we wanted to make systemic improvements, which we have done. And the second thing is that the overall system impact on the unsecured personal loans also had affected us. But this consumption demand is definitely going to result in growth in the Xpress credit, that is our unsecured personal loans. Auto loans, I beg to differ from you. I think we have done extremely well, 10% year-on-year growth rate. And today, 1.24 lakh loan portfolio is the market leadership in the auto loans. And Q3 has been a phenomenally good quarter. It normally happens that October because of the marriage festivals and all, has been a good quarter. I only hope that it gets repeated in the Q4 also because, as you said, Q4 generally is a good quarter, but we have had an excellent Q3 in the auto loans. Hopefully, we'll maintain that growth rate. Home loans, yes, 14% to 15% is creditable one. And as we speak, we have reached a home loan portfolio of INR 8 trillion. I think that is the largest home loan portfolio in the market. And with the best asset quality, 76 basis points is our NPA percentage here. And which means that the segment is going to witness further growth. When the whole retail loans is based on what is called EMI to NMI ratio. As the net monthly income grows, I think their ability to support higher EMIs is there. And hopefully, the people borrow more, but more meaningfully. That is what we are trying to do. And you did ask something about -- I think broadly, I answered your question, right? Subsidiaries..

Subsidiaries and intrinsic value.

Yes, yes. I think most of the time you have to tell us why we are not getting the value.

That's why I shared some other ones.

Now we can move to the next, please.

Okay. If there's no one, can I ask one question? Just wanted to understand, does each department have its own P&L in the sense that when you're doing your corporate pricing, you will be pricing in some credit costs. Now they're actually much lower than what you might have priced in. Would you use those benefits to maybe subsidize retail loans? Or corporate P&L is separate, retail is separate?

I don't call it P&L, but we have certain broad contours or guardrails that underpricing does not happen across the product segments. In corporate credit, we have what is called risk-adjusted return on capital, and that's a benchmark 20%. And they have to really justify if they are not getting 20% on any of the exposure. On a portfolio basis, we are able to maintain that 20% risk-adjusted return on capital on the corporate side. As far as retail is concerned, it is a little more complicated because you can't look at the pricing on a stand-alone basis. The home loan customer brings me a CASA, he will borrow in other products. So we look at what is the product per consumer and whether it is creating value. While some of these retail products, some of them are high ROE product like home loans and some of them are high ROA product like express credit. So we need to balance the portfolio in terms of how -- what is our best outcome. And in case of gold loan, for instance, is a high ROE because it's had any -- no capital allocation at all. So while the product level P&L is not there, businesses always have a business mix at the retail side, corporate side, that what is that risk-adjusted return on capital they're looking at. In fact, we have risk-adjusted return capital for each product also. Yes.

But what if you exceed that? Let's say, corporate banking is making 25% RAROC hypothetically. That extra 5% would you invest in retail? That's my question.

No, no. I think it's all a combination. But we are also trying to bring a discipline among the business units by allocating what is called risk-weighted assets. If they are exceeding that RWA, they have to take permission from one of the committees, so that we have monitoring of the RWA allocation and they have to justify why they are taking the RWA. And last time also, we made a presentation on risk -- return on risk-weighted assets is something what we focus on the business unit level.

Fair enough. Sir, my second question is just broadly for you all and PSU banks have not really invested much in branch network over the last 5, 7 years. And over the last 2 years, you all have deployed excess liquidity to grow loans faster than deposits. Now LCRs are similar to private sector banks. Is there a case to be made that deposit growth for PSU banks can pick up to, let's say, 12%, 13% without a rate war?

We are not getting into the rate war. I think earlier also, I said that the customers -- we have a big franchise of deposits and deposit mobilization for SBI is a franchise activity. And obviously, customers expect to be compensated properly. And that is how the rates are aligned to the market. A lot of times, people ask me when you have such a CD ratio, why do you want to mobilize deposits? I think it's to be understood from that context. So -- and the branch network, you mentioned something about branch network. I think today we have the largest branch network. But it is not stopping us to grow in terms of the expansion. We have 500 to 600 branches every year to be opened, especially in areas where our presence is not there, particularly in the new colonies which are coming up, our new metro agglomerations which are happening, but we don't have the presence. We are coming up there. So our branch network is not stopped. And we are also enhancing the branch ability to service the customers, both in terms of wherever the potential is there, give additional staff there and also use our feet on street, outsourced feet on street to strengthen their ability to service the customers. I think a lot of effort is going on in terms of customer outreach.

Due to paucity of time...

If I may just supplement that. We already have reached a figure as of yesterday, 22,800 branches. That means in this financial year, we have opened 277 as of now. And the plan is to touch 400, for sure, and maybe around 425 to 430. We do not want to open hole in the wall sort of branches. So we take some time to -- all the surveys are done, potential has been appraised, now the premises and that's taking a little bit of time.

Due to paucity of time, we'll be able to take one more question, followed by a few questions coming in through the online webcast, which will be addressed by the Chairman sir. One question, please.

Yes. Sir, the question was particularly on MCLR. So last time we indicated that there is some repricing, which is still left of the MCLR loans. So how much are we done with? And you mentioned like there is still room to increase the MCLR if there is a need to protect the margins. And we have seen that decline in margins coming through over the past couple of quarters. So how much of repricing is left and any kind of a change in MCLR, which we would look forward to? Definitely, there will be a rate cut, but still our stance on the overall MCLR rate?

So 35 basis points, still there is a room for increasing the MCLR. But as you mentioned, if there's a rate cut, optically, we cannot increase the MCLR. We will definitely look at the competitive environment, which is emerging. But I think the rate cut also would help us in terms of reducing the cost of resources, particularly movement of interest rates, if not immediately, there should be some monetary transmission happening going forward. So the margins will stabilize, as I mentioned, 3% above. We still are sticking to that. And you asked something else also.

So I said like MCLR repricing is done, whatever rate hike has been affected since past 6 months. Are we done or this will be towards like post December...

No, no, it is yet to come.

No, no, it's yet to come.

Next quarter you will see the impact.

The effect will take time.

Okay. So repricing benefit will be reflected in the last quarter.

Because see, most of the repricing of loans happen reset date. Reset dates are generally 6 months MCLR, so that means every 6 months it gets. And also people come -- there are 12 months resetting also in case of working capital limits when they come for review. I think couple of questions we'll take quickly and then we'll go to the online.

Sir, on margins, I think we need more debate, like particularly on the margins front, the quarter-on-quarter sequential drop that we have seen, is it also to be seen from that there were lower interest on recovery during the current quarter or there was some penal interest rate impact, which actually came through in the quarter? Or is it all explained by the higher cost of funds?

No, no, predominantly explained by the cost of resources.

In that case, how do we see the next quarter's margin because the cost of funds are not going down any time. And if basically there is a rate cut, obviously, at least on the 28% of the portfolio, we'll pass it on if there is a rate.

So that 28% pass on will not really be impacting in a significant manner if it is a shallow rate cut. In terms of cost of resources, there is a conscious effort to increase the savings bank portfolio and increase the CASA. And probably the deposit mix will be undergoing change. We are making a great effort in that direction. And that is one way of bringing down the cost. You're right, I think in terms of yield on advances, we are broadly maintaining this level. But we are also focusing on other income. See, if you see the margins also got impacted because of the treasury losses, which we are not accounting for that things will be better now. But as MD mentioned, some of them -- those losses have been reversed in the current quarter. So the combination of focus on the low-cost deposits, a combination backed by some treasury reversals of losses. But more importantly, I think we'll be focusing on -- if you see -- just show the other income slide where I think every lever of other income other than the treasury gains, you are not showing there, right? Okay. So yes, I think it's in the book. Slide #17, if you see, every noninterest income lever has been utilized. We are going to focus on that. And Q4 generally is good in terms of the other income.

But sir, how will the treasury gains impact your margins? Like is it possible for you to explain that?

Yes, yes. So in terms of MTMs, whatever we have booked in Q3, they are reversed, they're all in the FVTPL, HFT category. So they are all routed through the P&L only.

No, no, I'm just talking about the margins. How does it basically impact...

No, ultimately, if the P&L is not right, net profit increases. So it will -- in terms of NIMs, it will not. ROA definitely...

In terms of NIM, it will not.

ROA definitely will improve. Yes.

Yes. So second, my question is that on your Xpress credit. So there is a slowdown, which basically you have done. Is it all to do with the digital shift that you're doing? Or is it that on the ground you are seeing some overleveraging concerns? Because a lot of channel checks suggest that even in the government employees account in the northern states and all, there are a lot of overleveraging which has happened. And that be the case, is that a conscious call to slow down our growth a little bit now, accelerate later on once the overleveraging concerns are out, the delinquency levels. Is it possible for you to share because you don't put that into the SMA-1 and 2 buckets? Any early signs of the SMA, SMA-1 pool actually going up into the retail segment?

We are not seeing any significant overleverage, as we mentioned, at least in the information which is available, the overleverage is not seen. If you ask me, the slowdown is only on account of technology movement, digitalization, I mentioned that the overall softening of unsecured credit is also reflected in our books, but not definitely in terms of the concerns on the overleverage of the customers. We might have taken some conscious decision that we -- if the whole system is not growing so fast, we didn't want to grow the way we were growing earlier, 30%, 33% CAGR is unlikely to return. But we have the potential to make it double digit. I can definitely say that.

So in this, we were kind of preempting the market. This slowdown has started happening recently last 2 quarters. We were seeing some deviations coming in the scheme where people were like sell rates somewhere around. And to check that, we kind of made it stricter. The deviations were to be approved by a higher authority. So a combination of those checks and other things slowed this down. And now as it shifts into digital, it will become much more easier. That's why the Chairman is saying it will be much better coming -- going forward.

So that would like -- sorry, to pick it up, right? Because I mean, now that you have slowed down...

It's already picking up.

Okay. And thing on the -- your risk intensity. If you look at the RWA intensity actually is going up despite you growing your corporate book this quarter. Any thoughts on the capital raising? There is a change in management, so we just want to hear your views.

No, change in management does not change the approach. So I think that is always on our radar. As I mentioned, a lot of people ask me, either you remove this line or raise the capital. So the timing, we are still working in terms of we are engaging at various levels. So let us see. Yes.

So the risk weight actually has increased primarily because of the investments in that category.

So the investment RWAs have gone up, not on the credit RWAs. And investment is a conscious decision to add some growth in that segment and then take advantage of the movement. So we'll take on the web. There was one question from Mr. Rakesh Kumar. "What was the reason for the shortfall in FX-related income?" I think we have answered that question. "And what are the reasons for write-back of standard asset provision?" Also I think was answered, but I'll just repeat. The sharp fall in ForEx-related income is due to MTM loss on derivative transactions, which was mainly because of appreciation, USD-INR rates. Write-back of standard asset provision is due to a large corporate COVID restructured account exiting from restructured standard. And question from Mr. Parvesh. "What would be the bank's approach towards AI?" I think our approach to AI is essentially we would like to do have an enterprise-level AI. There are quite a few use cases we have identified. And these use cases range from personalization, hyperpersonalization to staff learning, staff knowledge base and the risk management. I think the whole range of use cases have been identified. In fact, yesterday, or day before yesterday, we just launched Ask SBI, which is the repository of information for all the staff members using the GenAI. And this is going to improve their ability to answer the customer queries on the counter. And also this Ask SBI, what we have introduced, we'll also give them step by step. We are trying to give them the standard operating procedure for any question the customer have or any customer need. And we have a very strong analytics team, which is working on other use cases. And road map for the adoption of GenAI has been created and the broader AI road map of the bank is there. And we probably were the first bank to introduce a policy on responsible AI even before the regulator have spoken about. Question from Mr. Gaurav Kumar Panda. "Even after expected good Q3 for SBI, is the low growth rate of low-cost deposit and slowdown in overall deposit a concern for the future?" I still feel that the overall deposit growth rate has been robust, 9.8% on a basis of INR 45 lakh, INR 50 lakh crore deposits. We have done fairly well on that. It's only the deposit mix, which I mentioned that we would be concentrating on increasing the low-cost profile of the deposits. And so just to answer, I think the customer preference to move to lock in the higher rate of interest in the term deposits has changed the composition. But if you notice current account, we have grown 14%. I think we are -- we have not got the market share numbers, but I think we are still on the flag pole position in terms of the current accounts. Our effort on CASA will continue. [ Jatin Parashar ], deposit attracting initiatives and schemes, I think we have definitely spoke a lot on the deposit mobilization effort. But I just would like to ask Vinay in terms of the focused efforts in terms of the deposit mobilization.

Couple of things which we are looking at, particularly let me talk about CASA in terms of CA as well as SA first. CA, we had taken a lot of initiatives in the last 1, 1.5 years, which was started by Mr. Rana. And these initiatives, particularly with the sort of sniper attack, we were looking at some of the institutions basically, which could give us more and more balances apart from -- so we have also variants in these current accounts which give us more balances. And if you really look at it, when the efficiency in the financial system goes up, the current account balances go down, right? And this is what we observed otherwise even in the industry. And this is what we are trying to tackle. And you see the result of those efforts in that 14% Y-o-Y. Now if you look at the savings bank, again, we would have loved to be much higher in the Y-o-Y growth. But then it is actually not too bad if you look at the numbers, which have -- and there is also a behavioral shift pattern that is seen because of the higher interest rates which the term deposits offer. And it is observed that whenever there is a gap between the savings bank interest rate and the term deposits because of the higher interest rate scenario, naturally there is a shift. There is a temptation for the balance holders to shift to the term deposits, and that is exactly what we are seeing. You also see that in the growth in the term deposits, right? So it's not actually the balances leaving the bank, it's actually shifting and across the industry. Apart from that, we are now also opening -- the Chairman recently had launched 2 products basically for the term deposits, but we want to increase the engagement with the existing clients and new clients, which would eventually get us more savings bank and CASA deposits. I mean I can list out a few more, but I think in the interest of time, I stop here.

So next question, Ruchi Jain. "What SBI is doing to cater Gen Z?" I think one data point I would like to give you that contrary to what people believe, 36% of our customer base is less than 30 years old. And apart from that, there's a lot of effort in terms of hyper-personalization, which we are trying to do and increase the digital offerings. And we have a large number of digitally onboarded customers now, digital natives, what we call. And in -- I think sometime during July, we will be launching our MarTech marketing technology, which would further enhance our ability to gamify the products and hyper-personalize the offerings. So I'm sure the Gen Z will continue to be there with us. I think we are attracting enough, and we need to make them more interactive with us. Ashutosh Mishra, reason for ForEx income drop, I think we have already explained this. Deepak Gupta, "SME loan growth of 9% quarter-on-quarter in current quarter has been very strong. Is this sustainable?" We are doing quite a few things on the SME. I think I mentioned about the BRE. Business rule engine in the last 9 months of its launch, we have done more than INR 35,000 crores worth of loans disbursed to the BRE. And our TAT has improved, and the announcements which are made in the budget in terms of both export promotion, SME recategorization and SME CGTMSE cover being increased, all these are -- we are confident that we'll be able to maintain this growth rate. Sunita Thakur, "What are the reasons for increase in credit costs and why year-on-year basis? Give us some break. Credit costs has increased for 9 months year-on basis from 0.25% to 0.37% in December '24 mainly on account of increase in aging provision. But I think the 9-month credit cost 0.24% is one of the best in the industry. Rakesh Kumar, "What was the reason for the sharp fall in FX-related income? What are the reasons for write-back of standard asset provision and other?" The question related to FX-related income, I suggest my treasury really have to work on foreign exchange. Everybody seems to be concerned on that. But I think it's transitory, hopefully, things will be reversed. Reasons for write-back of standard asset provision, we have already explained that one large corporate COVID restructured account has been upgraded now. "What would be the bank's approach towards AI?" I think we've already answered this question. Thank you very much.

I trust all the questions have been...

[indiscernible] my voice is loud that without mic only.

We are able to hear you.

I mean you heard me. So some color on the international book. It's a very -- in fact of the size of a smaller public sector bank, the international book itself.

I'll give some initial remarks and then you can supplement. One is the international book, as you mentioned, reached a stage, we have crossed INR 6 trillion in the customer credit. It's a fairly large book and 15% contribution to advances size. But the portfolio is a very balanced portfolio. We have equal proportion of local credit, ECBs and trade finance. And all these product segments which we operate in, we don't take very long-term exposures in the international book. In the trade finance, while we primarily focus on our relationship back home in India, we have participated in the global supply chains across the globe. So the supply chains, we'll have to see the trade finance, we will take a call, how these tariffs are going to shift the supply chain financing, which is primarily concentrated in the U.S. So we'll have to see how it is going to play out. But our international operations are extremely flexible. You have noticed in the last 4, 5 quarters that if you want to ramp up, we are able to ramp up. If you want to reduce, we are able to reduce.

Sir, just to supplement, Chairman sir, there is an ability of our international banking group to play a complementary role to the domestic. So that means we are aware of the margins, et cetera. It has improved. Generally, the margins in international banking group also move in line with the trajectory, interest rate trajectory. But one advantage of IBG operations is like just from the data, what was presented in the deck, while the yields have come down by 32 basis points over a quarter, the NIM has compressed only by 8 basis points. So that basically shows our ability to raise resources at a competitive price. And also, we'll be locking into the margin. So only the lag effect can be there in future in terms of having a very marginal impact on the bottom line even when the rates come down, but it won't be very, very significant.

I trust all the questions have been addressed. We'll be happy to respond to other questions in offline mode. Let me end the evening with thanking Chairman sir, MD sirs, DMD Madam, top management team, analysts, investors, ladies and gentlemen. We thank you all for taking time out of your schedule and joining us for this event. To round off this evening, we request you all present here to join us for high tea, which is arranged just outside this hall. Thank you. Thank you so much.