Suryoday Small Finance Bank Limited (SURYODAY) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q4 FY '24 and FY '24 Earnings Conference Call of Suryoday Small Finance Bank Limited, hosted by PhillipCapital PCG [ deck ]. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aman from PhillipCapital India Private Limited. Thank you, and over to you, sir.

Thank you, [ Manoja ] Good morning, everyone. On behalf of PhillipCapital Private Client Group, I welcome you all to the Q4 FY '24 and FY '24 earnings conference call of Suryoday Small Finance Bank Limited. From the management we have Mr. Baskar Babu Ramachandran, Managing Director and CEO; Hemant Shah, Executive Director; Mr. Kanishka Chaudhary, Chief Financial Officer; and Mr. Himadri Das, Investor Relations. I now hand over the conference to Mr. Ramachandran for his opening remarks, and we will then open the floor for the question-and-answer session. Over to you, Mr. Ramachandran.

Thank you, Aman. Good morning, everybody. On behalf of Suryoday Small Finance Bank, I extend a warm welcome to our Q4 and FY '24 earnings conference call. I trust that everyone has had the opportunity to review the presentation for the quarter and for full year ending March 31, 2024, which was uploaded on the stock exchanges. Now let me provide an overview of Suryoday's key operational and financial metrics as of Q4 and FY '24. On the business performance, on gross advances front, the bank's gross advances stood at INR 8,650 crores in FY '24 as compared to INR 6,114 crores in FY '23, an increase of 41.5% year-on-year. The growth is primarily driven by increased disbursements across Inclusive Finance, Commercial Vehicle and Mortgages segment. We are happy to share that Vikas Loan, the individual loan portfolio offered to banks graduating JLG customers, has surpassed INR 2,600 crores of AUM and now contributes over 53% of the Inclusive Finance portfolio. We have over 4.3 lakh Vikas Loan customers as of now. On the disbursement front, our bank disbursement for the full year rose by 36.1% to INR 6,919 crores as compared to corresponding previous period last year. The disbursement during Q4 FY '24 stood at INR 2,340 crores, a growth of 38.6% year-on-year. Vikas Loan disbursement almost doubled to INR 2,523 crores in FY '24 as compared to INR 1,270 crores in FY '23. On the deposits and borrowing front, our deposits witnessed a growth of 50.5% to INR 7,777 crores in FY '24 against INR 5,167 crores in FY '23. The CASA ratio has increased from 17.1% in FY '23 to 20.1% in FY '24. We continued to focus on building a sticky and granular retail deposit book. The retail deposits as a percentage overall deposits currently stand at 78.8% in FY '24 versus 73.1% during FY '23. Our borrowings at the end of March '24 formed approximately 20% of the total liabilities. The majority of which is from refinancing institutions, SIDBI and NABARD. On the distribution front, our bank has a network of 695 branches, of which 109 branches were liability focused, while 392 branches were asset focused, and the balance comprises of rural centers. The bank continues to invest in expanding the branch network, coupled with increasing depth in the existing branch network through competitive service offerings. On asset quality, our bank's gross nonperforming assets have reduced to 2.8% in FY '24 from 3.1% in FY '23, and the net nonperforming assets has decreased to 0.8% in FY '24 compared to 1.5% in FY '23. Our bank will continue to cover the eligible unsecured portfolio under the CGFMU scheme to mitigate any unforeseen risks. On the earnings update, our net interest income stood at INR 962.2 crores as compared to INR 746.6 crores, an increase of 28.9% year-on-year. Our net income stood at INR 1,181.6 crores as compared to INR 844 crores, an increase of 40% year-on-year. Our yield has improved to 20.2% in FY '24 from 19.3% for FY '23. NIM has increased from 9.5% in FY '23 to 9.8% in FY '24. Our cost of funds have increased from 6.7% in FY '23 to 7.3% in FY '24. Our cost to income, excluding CGFMU investment, stood at 57.1% as compared to 60% in FY '23. Cost to income, including CGFMU expenses, stood at 61.6%. On the CRAR front, we continue to remain well capitalized with our CRAR at 28.4%, which is well above the regulated requirement. We continue to invest in our people infrastructure with focus on employees' well-being and believe this is key to serving our customers meaningfully. We continue to invest in technology and is the key enabler for our controls and growth. Going forward, our strategy would be to transition from predominantly being a micro lender to becoming a micro banker for low-income households with a sharper focus on going deeper into our existing geographies and continuing to provide holistic banking services to our customers. Going granular on both the lending and deposit side would be a key enabler to achieving our core strategy. Let me thank all of you for participating in the call. And over to you, Aman.

[Operator Instructions] The first question is from the line of Shailesh Kanani from Centrum Broking.

Sir, congratulations on excellent performance. Sir, I had few questions. First is on concentration risk. Sir, any plans to reduce the exposure to top 3 states because on a year-on-year basis, still at 66% the concentration seems to be high. So if you can highlight any strategy with that.

Yes, Shailesh, I mean that is something that we will work on for progressive improvement, right? So on a year-on-year basis, we have had a little over 2% improvement. And I think this year will be crucial for us to improve that mix.

Shailesh, as you hopefully understand covered with the CGFMU, which mitigates substantial at least in terms of balancing of an unsecured to secured in a meaningful manner.

Sir, can you throw some light on the CGFMU cover, how is that expense shape up for next year? And in case of where you will start getting recoveries from this piece, is it expected in FY '25? And how will we work, can you just give little bit of detail for that?

Yes. So we are now eligible for making claims for the first set of cover that we did about a year back, right? And we would want to see that we are able to make our first claim in this quarter itself. Just to -- one, test our housekeeping in terms of how we have been able to earmark the customers as well as maintain the documentation as is required for the program. So that's the way that things stand today. I think we have a very program level approach for the CGFMU scheme. We don't cherrypick. We are very clear that in so far as our JLG customer portfolio and the Vikas Loan customer portfolio is concerned, we will continue to [ ensure ] them. And as things stand today, more than 90% of the portfolio is insured.

Sir, can you just quantify that? So when we say the first tranche is eligible or the first coverage is eligible for claim in the first quarter. So can you just quantify that what will that tranche which has been covered? And what is the expected on recovery side?

I'll take. Amount which would be eligible for claim under the CGFMU scheme would be about INR 44 crores, INR 45 crores worth of NPA of which, 72.75% as per the scheme is something what we would be making the claim on again for the recovery.

So that's a very decent sum. So that is expected in first quarter itself next year in FY '25?

Yes, that's what we are targeting, Shailesh. So for this financial year, we would look to make claims -- drop claims somewhere in the region of INR 45 crores to INR 50 crores. And as for the program parameters, about 70% of the claim that is made by us gets paid back to us.

Shailesh, there's a credit insurance scheme, we are -- our credit parameters continue to be as well without the cover. And our insurance premium, which we pay in the years may be higher than the claims that we make, but the intent was to really cover that one-off instance which keeps happening 4 or 5 years, at least based on historical trends. We do not want to really have the portfolio open ended. And the purpose of the cover is for that, not necessarily the cost-benefit analysis in the short term.

Fair enough. Sir, and on the expense front, how do we see the expense for the next year? The second part of my question on CGFMU.

So I think with the way that we see the book growing, our expense on CGFMU will be somewhere in the range of INR 70 crores to INR 80 crores. That's what we have in mind for the time being.

And sir, if you can give us the guidance for FY '25 as well in line with that?

Sorry, can you repeat that again, please?

Yes. So can you give some guidance for FY '25 in terms of growth in advances, deposits, CASA?

Yes, you can refer to the last page of the investor deck that we have put up. So in terms of loan book, we are talking about a 30%, 35% of growth. And in terms of deposits, we intend to have somewhere around a 40%, 45% kind of a growth. Keeping in mind that we have made a regulatory commitment to improve our CD ratio to 100% by the end of the financial year.

So in that, if you can color -- give me a color of unsecured and secured in that piece of 30%, 35% growth. How would that look by end of FY '25?

So today, my secured book is about 41%. And by the end of next year, we would want to be around 45%.

Fair enough. Sir, couple of more questions from my side, if I may. Sir, there is some marginal decline in terms of collection efficiency for our Vikas Loan in this quarter, one EMI adjusted. Anything to read into it, especially when we are hearing from many players that collection is taking -- collection efforts -- more efforts are required on collection side. So anything if you would like to highlight about the quality or collection efforts or anything?

See, we do recognize that the book has grown almost 2x as compared to last year to INR 2,600-odd crores. And as a matter of fact, this is now the biggest part of the portfolio today, which obviously means that we now need to augment our organization. So we are already in the process of recreating our collection organization where given that these are individual borrowers, we will have a collection mechanism commensurate to the portfolio size. So we are rebuilding our entire collection organization, which caters specifically to the increasing number of VL customers.

So basically, right now, we are not seeing any stress in terms of collection efficiency and that is what I wanted over the time? Anything to highlight?

Yes, not at this -- nothing at this particular point in time.

Okay. Sir just last question. Sir, on customer addition, I think we are a little bit of on lower side as compared to our growth in general for advances. How do we see that? And what is the strategy going ahead for FY '25 on that front?

Shailesh we added around close to 70 branches in a year. The intent is to really kind of increase at least the new customer acquisition of 40,000 to 50,000, which you are seeing a traction. But however, we continue to be prudent in terms of acquiring new to credit customers. And as far as the new to bank customer where regulatory norms allow us to kind of acquire customers even if they have relationship with 2 or 3 MFI/banks on that front. We continue to focus in terms of the overall indebtedness, not beyond around INR 6,000 to INR 7,000, including our installment.

Yes. And just to give you a bit of a color, Shailesh, in the microfinance book, we have added 122,000 customers in Q4, and this number was 90-odd-thousand in Q3.

The next question is from the line of Dhruv Shah from Ambika Finance.

Congratulations on a very strong set of numbers. Sir, I just have one question and that's on your ROI guidance. Because in last couple of quarters, we have been mentioning that we want to inch about 2.5%, 2.6%, and you're still guiding for 2.2%. Because if I'm not wrong in the analyst meet also, you were saying that we want to reach at 3%. So if you can just guide us why the ROI guidance is still around 2.2%.

What we are really looking at is in terms of look at the ROA. KC to add later, is that this is net of CGFMU, which is approximately closer to around 30 to 40 basis points. That comes around closer to 2.6%. And if you impute that in terms of ROE from 12.9%, it will be around closer to 15.5%, 15.6%. We are also equally cognizant of the fact that as a responsible industry in the low-income households, our intent would be to kind of go down the pricing and kind of keeping -- making sure that we pick the right customers and to the extent customer will be the pivot on which we will do it. So we are not excessively focused in terms of high ROA, ROE. We are looking at in the medium term, long-term basis, a steady state ROE of 14% to 16%. You may say that probably there's a partial shift in terms of chasing a very high ROE or ROA to saying that can it be meaningful and a very consistent ROA of anywhere between around 2.3% to 2.6%. But more importantly, from an ROE point of view, consistent 14% to 16%, 16.5%, inching up by 25 to 50 basis points on a quarter-on-quarter basis. Over to KC to add.

Yes. I mean at this particular point in time, we would look to target an ROA of around 2.25% or a little over that, given that we may want to offer slightly better pricing, especially for the second cycle VL customers, right? So our VL program started in a big way about 18 months ago. So many of these customers will be coming up for the second cycle, and we would want to give them a better pricing based on the kind of credit performance that they have had.

Just one follow-up on this. Since we are growing at 30%, 35% and our ROE is still at 14% to 16%, we will be consuming a lot of capital this year and next year. So where will be the right capital adequacy you will look to raise funds? Like around 20% will be the right place where you think that we have to raise money?

Our comfort -- I mean capital adequacy ratio earlier was around 25%, when we were 100% unsecured. As we shift the balance from unsecured to secured, as KC guided from 41% to 45%, we will be comfortable anywhere in the region of around 20%. KC?

Yes. I mean I think that's the kind of horizon we will have in mind. We should be able to raise capital when we are inching towards that 20% number.

So that will be at least 1.5 years away according to you?

Yes. I mean in terms of an event, yes it will be anywhere between 15 to 18 months away.

The next question is from the line of Anil Tulsiram from ContrarianValue Edge.

Sir, my first question is on secured loans. I guess the weighted average yield for our secured loan book is around 11% to 12%, and our cost of funding is around 7.5%. And the overall OpEx is 5.5%. So even if I assume 3% for secured loans, our ROA is less than 1% on secured loans. So do we have any plans to increase the yields on secured loans by going up the curve, whatever? Yes.

Anil, I think, no, the intent is to really grow a very strong mortgage portfolio and specifically focused on LAP targeted on business customers. On the long-term basis, there are multi-products including liabilities raising from these customers. So it is little more strategic than -- and the cost of operations for mortgages drops down substantially at a good base. Currently, we have INR 1,600 crores, including micro mortgages, which INR 235 crores at this point of time of the INR 1,600 crores. We think that around INR 2,500 crores, it will give a very decent ROE of around closer to -- little above 11%. But from a long-term business perspective and also from a strategic point of view of having a balanced portfolio as a bank, we would continue to operate in this range, not really increase the pricing because it was a change of mix from looking at a near prime as far as the mortgages are concerned, except in micro mortgages, where it will be predominantly NTC and 1 graduated JLG customers.

And sir, coming to the ROA guidance, if we look for next 3 to 4 years sustainable ROA, will it be still around 2.5% or you will aim around 3% the ROA guidance?

No. Given the way we would want to increase the mix of our secured book, we would want to be range bound to 2.3% to 2.5%, right? So that's the kind of a horizon that we have in mind.

Is this because of the pressure from the RBI to reduce the interest rates to the customers, the revised ROA guidance?

Not really. So what we are kind of what we're really looking at is in terms of one on our own, which is what we in fact Board had instructed earlier, is that as Vikas Loan stabilizes [indiscernible] in Vikas Loan is that there is no pressure on the customer to pay on behalf of anybody else, whether it's half installment or one installment. So initially, the cost of operations for Vikas Loan is higher, was higher as KC mentioned, as we have more and more seasoned customers who are paying on their own. As a bank, our intent was really go down on the pricing path in terms of reducing it from current 28% to around closer to around 24% over the next 1 year. There is an imputed risk because we are dealing with individual customers. So collection efforts required will be higher in terms of given a marginal set as the Shailesh asked at this point of time, while we do not see, we want to create a robust secondary collection infrastructure even for good customers. So that's for me and over to you, KC.

No, I would tend to agree with you.

And what we are investing this year and which we have started investing quite a bit back is to ensure that all our borrowing customers do not continue to be only borrowing customers from Suryoday. We wanted -- our main focus in terms of PMJJBY, PMSBY and basic term insurance, not from a purpose of cross-sell or commission but in terms of ensuring that we have a far higher stickiness and the customers are overall financially comfortable. That would mean more investment from us, but we may not earn anything out of PMJJBY PMSBY. The investment per customer would be closer to around INR 50 to INR 100. We are building this architecture. We've already done. So while we have piloted it, the intent is to really cover the customer and the eligible spouses under these government insurance schemes. So to that extent there will be a little increase expenses, which we would consider as more of the investment.

Got it. And sir, coming to CGFMU, I was under the impression that we will be able to claim only once the NPA on the -- whatever the book we insured is beyond 3%. So how are we eligible to make claim in the current year itself?

No. So there are 2 prerequisites for this, right? So your first claim should be only after 12 months of your having insured a portfolio. And the second is that the claim accounts should be NPA for a period of 6 months. So if those 2 criteria are met, then you would be able to make a claim under the program.

Just to add to what KC said, the 3% that you are referring to, I believe, is the first loss 3%. That is not on the portfolio loss. That is on the amount which has become NPA. So suppose INR 100 is the amount of NPA, INR 3 is the first loss which has to be borne by the member lending institution. And then out of the balance, INR 97, the loss proportion is -- or rather the guarantee proportion is 75% of that. So when we said 72.75% that was taken into consideration the INR 97 into 75%.

3% of the first loss.

After taking into consideration the breakup.

[Operator Instructions] The next question is from the line of Deepak Poddar from Sapphire Capital.

Am I audible, sir?

Yes.

Yes, please, you are.

Sir, I joined a bit late so please excuse me if I'm repeating the question. In terms of provision, was there any additional provision we did this quarter because our gross NPA declined, right? In spite of that, even our PCR ratio has gone up to 71%. So was that the thought process behind the higher provisions? So some light on that would be helpful. .

Yes. So we have tweaked a little bit a couple of our policies in so far as provisioning is concerned, which has certainly helped in improving our PCR numbers. So for example, for the unsecured microfinance book, going forward on a regular basis, moment an account becomes NPA, we will be making 50% provision, right. So which is the reason why you'll see that in the P&L, we have taken about INR 40-odd crores of specific provisions relating to NPA, and that has certainly helped us improve our PCR.

And we intend to keep this 70% kind of a PCR going forward as well?

Yes, it will be our endeavor to stay very close to that number. As you are aware, when we started the year, we were a little under 50% and took us a year to reach to this number as we had guided right throughout the year. So going forward, we would stay very much close to that 70% number and as a matter of fact, even try to improve it.

So that's a prudent policy. I mean that's very good, actually. And so what do we see the -- what do you -- we see in terms of credit cost in FY '25?

Well, very difficult to predict, right? But I mean, if you ask me, my opinion would be that I would want to be at the same stage where we are today for this financial year, which has been somewhere in the range of 1.5% to 1.8%.

1.5% to 1.8% of credit cost outlook.

Correct. Yes.

And my third question is on your ROA. So you did mention that in the medium term, we are looking at 2.3% to 2.5%. So one of the major reason is that we want to increase our secured book mix where ideally your NIMs would be on the lower end as compared to what we are seeing currently, right?

Yes, that's true. So our being able to stick to a 2.3% ROA and also improve the mix is contingent on a few things that we would need to do. So like Baskar indicated, micro-LAP and micro-mortgage is something that we would need to grow in a big way. Some of the other products like providing funding to merchants is something that we would need to start building up in a big way. And importantly, bancassurance business is something that we are really looking forward to build so that we can see significant growth in our fee business.

Okay. understood. And in 2, 3 years, what would our target? I think FY '25, you mentioned 45% in terms of secured book. So where do you want to reach in 2, 3 years?

Yes. So that's the kind of mix we are targeting at this particular point in time, and our endeavor will be to be closer to the two quarter or a little better than that in terms of ROA.

So sorry. I was just trying to understand the secured book mix. So currently...

So like I said, secured book today is 41%. We would want it to be around 45% in about 3 years' time.

In about?

In about 2 to 3 years' time, we would want to have a secured book, which is in excess of 45%.

Okay. In 2 to 3 years around 45%, right?

If I -- the intent is pickup of scaleup starts in micro-mortgages, the ideal percentage we would like to go and then kind of stabilize there would be a little above 50% for secure, and that will also be part of that will be secured funding to our inclusive finance customers.

Okay. Okay, understood. And then my last question is on -- I mean, because of this election and all, are we seeing any kind of slowdown in any region or kind of any stress in any particular region?

We haven't, and we haven't to an extent, not heard anything from the market or from our peers. So one, I think it is a phased-out elections, and we haven't really seen or heard anything.

And not even a slowdown? I mean, are we slowing any disbursement in any particular region because of this event?

That's an ongoing activity. We keep evaluating the bottom 25 branches and keep slowing down, and we keep tightening the policies. That's our prudent risk management practice.

The next question is from the line of [ Pulavarthi Saikiran ] an individual investor.

Am I audible?

Very well, Sai.

Sir, just one question on like in the asset quality side. If I look at it, one, we have already ECLGS covered and over and above that, we are also taking CGFMU. And over and above that, we are also taking conservative provisioning of 50% immediately after it becomes an NPA. So if I look at on a sustainable basis on in terms of the P&L impact, if the credit or the GNPAs are below 3% then typically, the CGFMU plus the provision charges in the P&L should be equal to only the CGFMU cost. Is our understanding right, sir?

You want to take KC?

Yes, I mean, assuming that we don't have the kind of I mean moderated flow forwards. That's what we would ideally like to target.

Sai, also the fact is that till now our base year was '23, FY '23. FY '24, over the -- whatever, you can call it, a cooling period. So first claim of what we covered in the base year, which is FY '23, we can make a claim, and CGFMU as you're aware and as we have discussed, it'll be once in a year claim only. Once the flow starts coming in, in terms of our NPA coverage and 72.5% as Kanishka explained, so to an extent, our investment in CGFMU while this year, it could be closer to INR 75 crores, INR 80 crores, net-net if you take also the inflow that is coming out of it, it will get normalized starting probably from this financial year.

Yes. That's what I understand the thing. So essentially, the cyclicality, which you would have seen in the credit cost historically will not be going forward considering the CGFMU plus probably some sort of an ECLGS, is our understanding that primary on MFI book?

I believer the same, yes.

Got it, sir. Got it. And the second question sir, in terms of the capital consumption with the guarantee being there. Would you like to see some benefits from the capital as well, sir?

No. So today if you look at the composition of our book, our risk-weighted assets are around 77%, which very closely approximates to the 75% risk weight that we carry for our MFI business, right, which is about 60% of what we have today. I think there are 2 things that we need to keep in mind as we go forward, which is that if we are doing more of home loan kind of business, our risks weights will be somewhere around 35% to 40%. But if we do more of LAP, it carries a risk weight of 75%. So we would need to have the right mix of the 2 or start evaluating when we need to raise capital, if we foresee that LAP is the predominant business for us. And we are trying to price our products accordingly given the capital consumption involved.

My question is that because you have got an MFI book and also got it guaranteed from CGFMU, will there be any benefit of risk weights coming down from 75% for the MFI book because 100% of the MFI book is CGFMU that will come down from 75% lower or it will still carry 75%?

No. At this particular point in time, we have not exercised the option of carrying a lower risk weight. We can always do that. We can have around a 15% benefit. But for the time being, we are not -- we are being cautious and not exercising that.

Okay. If you choose to exercise that option, that will come down from 75% to 60%. Is my understanding right?

No, no, no. To the extent of the cover that you have, right, up to a level of 15%, assuming that your credit losses are well within that, then that's the benefit that you enjoy.

So, Sai some put it out the 15% of the coverage, which is on a INR 5,000 crore portfolio, we have say full coverage. INR 750 crores can be risk-weighted at 0. So which means that...

Understood. That's what I thought so. Yes. That's what I thought so, sir. Because MFI book, anyways, you will go to 100% CGFMU cover within a quarter or 2 once this happens. And if you choose to what I can say, option, that MFI book, which currently is carrying 75% risk weight, we can go down to 60%. That's what is -- is my understanding right, sir?

I wouldn't know that mathematically needed but if you say 100% is covered, 15%, which is a credit loss can be risk weighted at 0 instead of 75%. Overall, on current portfolio balance, the capital adequacy can probably go up by around 2%, 2% to 3% max.

The next question is from the line of [ Prabhu Dayal ] from Yash Investments.

Okay. [Foreign Language]

So I think we will take about a year to be eligible [Foreign Language] to fulfill all the criteria for being eligible to apply for being a universal bank. .

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language] beyond micro-lending, it is our micro-banking bank [Foreign Language] can we make an impact for the society 1% of the Indian population [Foreign Language].

[Foreign Language]

[Foreign Language]

Next 2 years. .

Yes.

Branch expansion [Foreign Language] plan for next 2 years?

[Foreign Language]

The next question is from the line of Pritesh Bumb from DAM Capital.

Congrats on a very good set of numbers. I had 2 questions. One is basically on a -- if you have not answered on this, cost of funds and cost of deposits this quarter, it's been a little better. What has been the reason? And what will be the trajectory ahead?

I think given how things are playing out, we would want to see our cost of funds stabilize at this level. You would note that in Q3 as well, we were at similar levels, right? What we have done as a bank is that we have -- we are constantly reviewing the various modes of financing available to us. For example, for the last 2 quarters, we have been actively looking at the IBPC market, which does provide us with SLTRO, which provides us with a 2% interest plus surcharge. But at the same time, we are conscious of the fact that a component of our financing is SLTRO financing, which came to us at 4%. And that financing will retire and mature by December of this year. So it is important for us to be able to find and substitute, and the primary substitute for that will be the growth in the CASA.

Okay. Second question was on your cost to income. This quarter, we've seen very stable, but we were in the range of something like 50% to 60% maybe around 62%. But what do you see -- how do you see it going ahead for you given that there is some expansion going to happen? But overall, how do you feel that number can pan out? And that is also an important factor for ROA improvement?

So if you look for this year, our cost to income, including the CGFMU expenses was 60%, and excluding it was 57%. Our ambition is that for the next year, our cost of income, cost to income, including CGFMU, will be in the region of 57%.

So will this now CGF -- the insurance premiums which we used to pay on the previous book. Now that is more or less over. So that's why we'll get the benefit. Is that correct?

So it's become the norm, right? So we insured for the first time last year, and we will continue doing that. So the improvement that you see from 60% to 57% is something that's largely accountable to -- attributable to the growth in the book and the operating leverage.

The next follow-up question is from the line of Shailesh from Centrum Broking.

Sir, just 2 questions. The SLTRO part, what is the quantum of that, which is we are going to repay in December 2024?

INR 750 crores.

INR 750 crores. And just one question with respect to our noninterest income. It has really grown, right, sequential, which is also, there's a huge jump. So is there any one-off? And what will be the consistent run rate for FY '25, can you just throw some light on that?

So the quarter-on-quarter growth that you see is largely on account of the higher disbursements that we have done. This quarter, we did around INR 2,400 crores, right? And of that INR 1,000 crores was from Vikas Loan, where we have processing fee of 2.5%, right? And even on the JLG book, we make around 1.7%, right? So all of that has certainly helped us improve our other income on a quarter-on-quarter basis.

So basically, it's business as usual, there is no one-off impact, and that is expected to continue as the book grows?

Correct. There's no one-offs involved in this case.

The next follow-up question is from the line of Anil Tulsiram from ContrarianValue Edge.

Sir, just one more question on CGFMU. Unfortunately, in a bad year, if our NPA reaches 20% on unsecured book, how much we get from the scheme CGFMU?

God forbid, for the reason that even in the worst of COVID, I think we actually didn't really kind of reach that level except for a spiking off in one odd quarters. So the maximum coverage, I think, Sandeep you can explain...

The maximum on our portfolio cover basis will be 15% of the amount which is disbursed. So obviously, I mean, this is a rundown. It may become a little higher percentage in terms of what can be claimed. But obviously, we don't believe we would want to reach to that level.

Okay. And we get 100% of the 15%, right?

No. We get 72.75% of the claim that you make.

Okay. And sir, now that we reduced our ROA guidance, will we also adjust our advances growth? Or we want to grow over a long term, 3 to 4 years of our 30%, 35% or a little lower? What would you think?

No. We will continue to -- I mean, we see ourselves growing in this range at this particular point in time. The ROI moderation, as you talk of is largely on account of the mix change that we seek to achieve, first from 41% to 45% and then hopefully, 50% over a 3-year period.

Sir, but this mix we were guiding earlier also, right, then all of a sudden, I'm just unable to understand all of sudden why we are reducing the guidance from 3% to 2.5%. Earlier also we were clear about the mix change. Mix change strategy is not new.

True Anil. And what kind of when you look at it, predominantly, we get closer to around 16 lakh active Inclusive Finance customers. And Vikas Loan has been at this point of time, as we speak, has given us experience in terms of looking at a real holistic banking for our customers. So we are not excessively kind of now switching over in terms of how can we really maximize. Even if the customers were willing to pay 30% in Vikas Loan and whatever, our intent is to really kind of responsibly take it as you ask. There has been -- at this point of time, we have had no regulatory requirement or regulatory nudge. But being responsible in this segment, we really felt that we have to be long-term respectable bank, creating an impact, which is our intent is 1% to positive impact on the Indian population, which is around closer to 35 lakh households. We drilled back and we said, can we on our own, be responsible in terms of going down from 28 itself to around 24 but the 3-year guide, which we are not probably qualified and disclosed it, but that's the intent. So can we be a solid steady state, 14% to 16% even with CGFMU focusing on income-generating loans and focusing on the other side in terms of secure a substantially lower credit loss, which means that we are not going to do there as well in terms of only NTC. So there will be a little different profile of our segment from a risk management point of view. And here is where we would like to kind of put it. So overall, ROA is a factor, ROA and ROE, the factor is in terms of the leverage. So as the mix goes up, otherwise earlier as the NBFC MFI, we are leveraged no more than 3, maximum we go to 4, we raise capital. As the balance becomes 50%, 50% approximately, our intent is that ROA is around 2.1%, 2.2%, 2.3%, 2.5%, and an ROE of on a consistent basis, around 15% to 16%, and inching up maximum to around 17%.

Okay, sir. And my last question is on the liability side. Over the next 2 to 3 years, what are the additional initiatives you want to take to increase your retail book?

So I think, first, our main focus is to continue and build our retail granular book, which I think has been demonstrated over the last 1 year. Secondly, we have launched -- a soft launch under our premium banking program. So this quarter, you'll see a formal launch on the same happening. And we've also have widened our focus on the value-generating segments such as stock and institutional business. Further, I think we would like to continue this journey in the space of digital banking through either our own video banking or partnerships. And of course, the focus on getting deeper into existing geographies and also looking at leveraging our microfinance centers and higher locations.

Please, go ahead and add anything.

So to add on to this, digital banking, we're going to strengthen. We've already seen early success in that, we'll build on that. And micro banking is another journey which we started, which we clearly see that's where while initially, it's going to be a little bit of heavy lifting that will be required, but that's what we see as a sustainable growth coming in the next 3 to 5 years. Over and above the strengthening of the retail deposits and the granular deposits that we are targeting.

The last question is on the tech initiative over the next 2 to 3 years, what the tech initiative, can you elaborate that also?

So as a bank, we have invested heavily on the back end and middleware. We are one of the early ones to move to TIBCO. Indeed, we have done INR 250 crores of investment in the peak of COVID. And we have done -- we have strengthened our entire middleware. We are API -- our entire middleware is API-first middleware. So micro services enabled architecture. So we haven't done much of investments on the front end and that experience so far in the past few years. Now the next 2 years is going to be, complete focus is on the customer as a digital first customer friendly and RPA, robotic process automation. And we will be simplifying the process for the customer. That's our primary focus.

Hemant?

Yes. Just to add what has been mentioned, I think it would be more in terms of the front end typically a good CRM and all other stuff which we really want to take it up because when the back end of the middleware is in line and then now we can leverage further better on that to make sure that the better customer experience and customer journeys, including the digital path can be built up.

[Operator Instructions] As there are no further questions, I hand over the call to management for closing comments.

Thank you. We thank you all for taking time out to attend our conference call and look forward. Thank you very much.

Thank you. On behalf of PhillipCapital India Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.