The Karnataka Bank Limited (KTKBANK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to The Karnataka Bank Limited Q2 FY '21 Earnings Conference Call hosted by Monarch Networth Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aalok Shah from Monarch Networth Capital Limited. Thank you, and over to you, sir.

Yes. Thanks, Shezan. Good evening. You were on your line for long time from its original schedule in a con-call time. We have with us the entire management team of Karnataka Bank represented by Mr. Mahabaleshwara M. S., the MD and CEO; and other senior members of the bank to discuss on their Q1 F -- Q2 FY '21 results and business outlook. Without taking much of your time, I will hand over the call to the management team for their opening remarks, followed by the outlook on the business. Thank you, and over to you, sir.

Yes. Thank you, Aalok, and thanks to all the investors and analysts who had shown a keen interest in Karnataka Bank's con call. I'm also extremely sorry, I have to keep you waiting for about 30, 35 minutes, which was beyond our control also because of some COVID-19 related, transmission-related issues. But of course there was COVID-19 impact either on our bank or on our results that let us be assured. I have been focusing more on the sustainable and consistent quarterly results. I'm very happy that we have been able to keep up to -- live up to our reputation. And I'm also happy to share with you that this time, Karnataka Bank had the proud privilege of flagging off of banking sector earnings because we are the first bank to come out with the quarterly results, and other banks would also -- I'm sure would follow very shortly. This time, you might have noticed that we have already incorporated our subsidiary, KBL Services Limited. So that being the case, we have the both the stand-alone balance sheet as well as the consolidated balance sheet. However, there is no change because the subsidiary is -- has not yet commenced its business, likely to commence its business during the Q3 of the current year or at the most, Q4. So this being the case, let me now, since our balance sheet -- I mean part of the result is already uploaded to the stock exchanges, I can also share this informations with you. The first and foremost is that the net profit of the bank has shown a growth of 12.77%. Corresponding this year, it is INR 119.44 crores for the quarter ended September. Last year same quarter, it was INR 105.91 crores. So for the first 6 months, so September half year ended, it is at INR 315.82 crores. Whereas last September 2019, for the first 6 months, it was at INR 281.33 crores. So on the 6 months basis, it was 12.26% growth. And this particular quarter-to-quarter, it was 12.77%. You may be aware that last full year, our net profit was INR 431.78 crores for the full year. Whereas for the half year, during the current year, it is at 315.82% (sic) [ INR 315.82 crores ]. Operating profit has also shown a growth of 21.04%. This quarter compared to the last year September quarter, whereas for the first half year, it has shown a growth of 54.23%. Last September 2019 first 6 months, it was at INR 763.44 crores, whereas the current year, it is INR 1,177.47 crores. Interest income, there is almost a same level. It is INR 1,603.71 crores. Last year, it was INR 1,629 crores. So a small decline of -- by 1.59%. Whereas we have been able to maintain the expenditure, interest expenditure, it has shown a decline of 9.03%. So last year, our interest expenditure was INR 1,130.92 crores during this quarter, and it has now come down to INR 1,028.84 crores. As a result, our NII, net interest income, during this particular quarter has grown up at a rate of 15.27%. That means the last September 2019 quarter ended, it was at INR 498.72 crores. Now it is at INR 574.87 crores. Of course, other income -- of course, trading profit, there is a good growth. Last September 2019, it was only INR 39.32 crores. This year -- this quarter it is INR 155.18 crores. So as a result, our other income also went up by 20.91%. Total income, it has gone up by just 1.64%, INR 1,902 crores versus INR 1,933.52 crores. Total expenditure, we have been able to reduce by 3.75%. Last year, it was INR 1,488.98 crores. This quarter, it is only INR 1,433.09 crores. So expenditure is well maintained. Income level, it is maintained at the previous level. And of course, there is a trading profit advantage also. As a result of all these things, our net interest margin, which all along, we have been hoping to take it to above 3%. So this quarter, it has reached a level of 3.08%. But for the first half year, it is at 2.99%. Last year, during this quarter, NIM was at 2.82% as against 2.82%. Now it is at 3.02% for this quarter. But for the full half year, it is at 2.99% as against last year's 2.80%. Return on asset also increased, improved to 0.56% during this quarter. Overall, for the first half year, it is at 0.75% as against the 0.70%. Return on equity also, current quarter it is at 7.45%. But for the full half year, it is at 10.15% as against 9.59%. NPA, there is no much traction. Traction in the sense, addition is very much limited. So as a result, our gross NPA is at 3.97% as against last year's 4.78%. And March, it was at 4.82% and June, it was at 4.64%. So now it is below 4%, it is at 3.97%. We have been focusing more on furthering the balance sheet, strengthening the balance sheet. And with the accelerated provision and all. So as a result, our net NPA is now at 2.21%. This was a year back, that is as of September 2019, it was at 3.48%. And as at year-end, that is March '20, it was 3.08%. And as of June '20, it was at 3.01%, now it is at 2.21%. Provision coverage ratio was one thing which has been engaging our attention. So you may be aware that as of March '20, we had taken it to a level of 64.70%. And as of June '20, we have further improved to 67.93% and now as of September '20, we have further consolidated the position. And now it is at an all-time high of 75.44%. So this is one area we have been focusing on since last 2 years. Now it is at 75.44%. Cost-to-income ratio is -- has also almost stabilized at 44.68% as against the last September position of 46.41%. Of course, CR ER, it is at 13.08%. With the Tier 1, 11.08% and Tier 2, 2.00%. This is excluding the current half year net profit. So if an academic interest, if you add back that INR 315.82 crores of current year net profit, the CR ER would be at 13.68%. And of course, turnover -- business turnover is INR 1,27,027 crores within a growth rate of -- moderate growth of around 2.73%. Deposits also have shown a very nominal growth of 3.90%, with INR 72,929 crores. Advances, if you look at the terminal figure, there is a muted growth of 1.18%. But you all know that we have been focusing more on the retail and mid-corporate advances. Retail is up to INR 9 crores. So in our case, the retail advances, that is up to INR 5 crores, not INR 9 crores, up to INR 5 crores, this particular book, the retail loan book of the bank has recorded a year-on-year growth of 9%. And we have been also focusing more on the mid corporate, that is a ticket size of INR 5 crores to INR 100 crores this has given us a good growth of 15%. So -- and my corporate book, that is above INR 100 crores, wherein our earning was also comparatively lower. So we have been focusing on reducing that exposure. So there is a degrowth of around 31%. So in the retail, the growth is at around 9%, mid-corporate, 15%. So our realignment of advances portfolio. That we are focusing. And I'm very confident that we'll be able to take it forward as well. CASA is one area which has been engaging our attention continuously. So the CASA share in that total deposit, it was at 27.41% about a year back. Now it has further improved to 29.17%. Yield on advances also, now it is at 9.40%. Cost of deposit has reduced considerably to 5.38% from 6.17% about a year back. So as a result, our interest spread, which was at 3.52% about a year back has now further improved to 4.02%. So -- and yes, these are some of the performance highlights. And our moratorium book, which was at 51% as of June 2009 -- June 2020. So there has been a very good impressive traction. And as on September, the moratorium book is reduced to 11.40%. And the majority of the recovery everything -- recovery activities, it has started in the month of September only. So during this particular 1 month, there has been a very positive traction. So now it is at 11.4% of the loan book. I'm very confident that going forward, I think within another next 2 months, we should be -- our confidence level is that we should be able to bring it to below 1% by December '20. And the other important development that has happened in the bank is we have been focusing on bringing and -- I mean, strengthening our Board also by bringing imminent personalities to the Board. So about 2 months back, we have onboarded 2 new directors. One is Mr. Justice AV Chandrashekar, who is the retired High Court judge of Karnataka. He has joined our Board and another personality is Mr. Pradeep Kumar Panja, who is the former Managing Director of State Bank of India. So he has also joined our Board. Today, in our Board meeting -- yes, today, also, we have just examined another candidate, and I will disclose that with you very shortly. So it is with an intention to further strengthen the Board. Regarding our KBL VIKAAS, the transformation exercise. So it is going on as per the schedule. So a lot of process improvement all such things have already been done. Our loan sanction, we are now doing up to INR 5 crores. Majority of the products sanction, it is on the digital journey. And that is gaining pace also. And some of the products are like home loan, car loan and salaried loan and all around 70% to 75% of the daily sanctions under these loans are now covered under the digital journey. So that is the response that we are getting for this particular product. And we are having the festive season also. There is credit-related campaign as well as CASA campaign has also been initiated. So we are -- we will continue to focus more on the retail and mid corporates. Of course, going forward, definitely, we should be able to protect our bottom line. Current year, I'm not focusing big on the bottom line -- I mean, top line. Top line may be at the same level. I'm not focusing for a big growth in the overall business. But definitely, we will be able to continue our first 2 quarters' performance as far as the bottom line and other financial parameters are concerned. So I'm looking forward for a sustainable and consistent third and fourth quarter. With this brief introduction, let me now answer your specific questions.

[Operator Instructions] The first question is from the line of Mahrukh Adajania from Elara Capital.

Yes. Sir, my first question was on your loan growth and so that...

Ma'am, this is the operator. Sorry to interrupt you. May we request that you please increase the volume of your phone.

Please speak a bit louder ma'am.

Can you hear me now?

Yes. I can hear you, but your voice is little bit feeble.

Okay. Now?

Better.

Sir, so my first question was that what is driving the mid-corporate growth? Which sectors in mid corporates are seeking loans from you?

Yes. See, this time basically, it is the MSME sector ma'am. MSME sector. For us, it is in between INR 5 crores to INR 100 crores ticket size. So in the MSME alone, we have had a 17.02% growth. So that is a one thing which is driving our mid corporate. And as far as retail sector is concerned, there is a very good traction under the gold loans. Under the gold loans, we have had a 23.97% growth. Of course, that was our priority area also, followed by home loans, which has shown a traction of 13.81%, and of course, agriculture sector is doing well. You know we have nearly 40%, 42% of our branches in the rural and semi-urban area. So there, since the monsoon has been very good. And the activities at the field level, agricultural activities had also picked up, we have seen a growth of around 22.07% in the agricultural sector.

Okay. Got it, sir. But sir...

Yes. And there was -- you may be aware of the fact that government had also come out with the guaranteed emergency credit line, GECL.

Correct, sir.

So that also has shown a good traction.

So the MSME growth is largely driven by ECLGS or you are taking that as separate?

Both. Both. Both.

Both. Your non-ECLGS also and ECLGS also?

Yes, yes, yes.

And sir, what was your disbursements under the ECLGS?

Under there around INR 1,600 crores.

Disbursement?

Yes. Sanction was to the tune of around INR 1,750 crores, around INR 1,600 crores already stands disbursed.

[Operator Instructions] The next question is from the line of [ Deepak Mehta ], individual investor.

Yes, sir. So my question is around digital banking. So what is the strategy and what is the development on digital banking side?

Thank you very much for raising the very pertaining question. Digital banking is gaining very, very impressive traction. It was my dream to take it to a level of 90% of our transaction under the digital transaction. We are very nearer to that. So as of September 2020, our digital transaction has reached a level of 88.36%. So now only around less than 12% of the daily transactions are happening through the branch channel, around more than 88% is now happening through the digital channel, most probably by December end, we should be able to achieve -- reach our dream figure of 90%.

Okay, sir. Okay. So this will indirectly result into...

And not only this services, that is AT -- I mean, IB and mobile banking. We have also started digital lending also. So onboarding of the customers through our website. That is what I said, the digital loan sanction journey. So that is getting very good momentum so that has helped me to improve the efficiency of the loan delivery system as well as my own staff efficiency, to a great extent. And our underwriting -- loan underwriting capabilities have also improved manifold. So those are all the natural advantages of the transformation exercise.

Okay. And my second question is around the consolidation in the private sector banking. So is there any talk or any interest for some other large banks for acquiring or maybe buying this -- your company?

As of now, no such things, as of now, no such things.

Okay.

We are on our own. And as I said, we are committed for our identity, and we will continue to focus on all the fundamental parameters, which would give the required strength to Karnataka Bank.

Okay. So suppose in case if we get any interest. So either -- then also, we will, as a group, we are not interested?

As I said, this is our stated policy. We will continue to focus on our identity.

Okay. Okay. And for rest of the year, sir, how you see the advances and loan growth?

Yes. Advances, that is what I said. The top line growth may not be there, but we are in the process of realigning our portfolio. So we will continue to focus on the retail advances as well as the mid corporates. There in the retail advances, I am confident of having an 8% plus growth. And in the mid corporates, we are focusing on about 15% plus growth. But it may not translate into the overall advances improvement but -- because there may be some reduction in the corporate advances also. So that is what we have been focusing for the current year.

The next question is from the line of Naishi Shah from Acko.

So I just wanted to know regarding the collection efficiencies that you all have seen over the last few months. Because you said that the recovery has picked up more in September. So what would be the collection efficiency as on September end?

Collection efficiency, it all started during September and -- September 1. So to begin with, we were focusing on our moratorium book. So as I said, the moratorium book of our bank, as of June, it was at 51% of the total loan book. So now September, there has been a very good recovery as far as the September this dues are concerned. So as a result, not only in this morat book, but also other general advances also. It has reached an efficiency level -- if you want to quantify it, I think it could be around 70% to 75%. But October also, we are seeing very good traction in the collection also. So yes, COVID-19, I'm not saying we have totally weathered away that impact, we are very cautious and very carefully navigating through this situation. So I think October and November, if you are able to sustain this collection efficiency, what we have seen in September, I think that is what -- that is why I'm very confident that by December end in this morat book itself, we will be having less than 1% exposure.

Okay, sir. Sir, another follow-up...

Very positive signs are there from the field level.

Okay. Great, sir. Sir, another question. What is the state of the bank in terms of its liquidity and ALM position for the next 1 year or the next 3 months?

No, as of...

Yes, 1 minute. I would request my COO, Mr. Balachandra to address this thing.

Bank is closely monitoring the liquidity position. From the beginning of this financial year, we are, in fact, having adequate liquidity, if you are comparing our LCR rate, et cetera, it is more than that 250%. Even the actual liquidity in the system also, it is very, very comfortable. Going forward also, we are not foreseeing any stress in terms of the liquidity.

Liquidity and all, it is also being very closely observed by the -- I mean, monitored by the regulator also. So you may be aware that earlier, it was at 100% LCR, liquidity coverage ratio. They had then during -- on account of COVID, they had reduced it to 80%. So we are at a very comfortable LCR position. Liquidity is not an issue. [Technical Difficulty] Yes. Hello?

Please go ahead. Yes.

Yes. Any other questions? Hello. Any other questions?

No. That's it. That's it.

The next question is from the line of [ Yashwanth ], retail investor.

So it's good that we could see that the moratorium has come down to 11%...

Yes, yes, a relief for us also.

All right. And out of that I just want to...

But we cannot relax now.

Exactly. That's where I'm -- that's where my question is.

We have to be on our toes.

Yes. I mean what -- are there any restructuring of loans which has happened in the month of September?

Yes. September, our restructured loan book, it has gone up by around INR 43 crores compared to June. Our restructured advances was INR 601.23 crores as of June. Now it is at INR 644.57 crores. So this -- under the OTR of Reserve Bank of India, we are evaluating the position so their MSME restructure is permitted up to March '21. Other advances, we have to identify the accounts, which are below 30 DPDs, 30 days past due. They are eligible. So we are identifying those accounts, and they have to be restructured by December 2021. I mean, December 2020, not '21. Yes, yes. So we are in the process of identifying those eligible accounts. And we will -- thereafter, immediately, we will contact the respective borrowers, and we will take up that exercise.

Okay. And my next question is with respect to the QIP. So I -- I mean, you have mentioned that this particular financial year, your -- I mean, there would be moderate growth on the top line. So will there be any need of a QIP in that case?

Sir, we are evaluating that. See, since the top line growth would be muted and the fresh credit exposure, you might have seen the RBI announcement also. They have further eased the -- this risk-weighted assets. They have linked it to the LTV and other things. So that will have a favorable impact on the risk-weighted assets and eventually on the capital adequacy ratio also. So that is why we are continuously evaluating it. So as of now, our capital adequacy ratio stands at 13.08%. So internally, we have a policy of maintaining at least 1% over and above the regulatory capital. So this is well above that now. And if you add back the current year's half yearly profit of INR 315.82 crores, this is notional number I'm sharing with you. The capital adequacy ratio would further improve to 13.68%. So going forward because QIP, the validity is up to March '21. So we will be -- now immediately our risk and capital management committee of the Board will also meet and they will reassess the risk-weighted assets as well as the projections for the current year and also the morat book impact and also the OTR-related impact, everything will be discussed spread bear. And I will be approaching my board. And if there are any possibility of further capital, we will take a call. As of now, I can -- I'm comfortable with the present capital adequacy ratio. And all along, if you look at the 3 years -- 10 years history of Karnataka Bank, all along, we have been able to maintain a capital adequacy ratio varying from 12% to 13.33%. So last year, as I said, March '20, it was 12.66% prior to that, it was a 13.17% capital adequacy ratio. And March '18, 12.04%, March '17, 13.30%, then prior to that 12.03%, 12.41%, 13.20%, 13.22%, 12.84%, 13.33%. So 12% to 13% is generally, we have been maintained. We are continuously evaluating it, sir. We will take a call. Growth-oriented capital may not be required. But anyhow, we are continuously evaluating.

Okay. And last question, which pretty much every investor is worried about, about the share price. And I have heard in the previous call also, even you have mentioned that you're depressed because of the share price not going up. So yes, I see that -- I mean, every alternate year, we are either issuing shares to raise the capital and infrastructure bonus shares it could be rights everything, right? So is there any plan of buyback of shares?

No. As of now, no such proposal is there. See, my responsibility basically is to keep on strengthening the fundamentals and also reach out to the good investors like you as well as the institutional investors with the correct position about the bank. So if you look at the -- all the last consistently, my predecessor during -- Mr. Jayaram Bhat's period as well as during the last 3.5 years, my period also. We have been focusing on that. And I was also sharing this capital adequacy ratio for the last 10 years. And if you look at even the NIM also, of course, it was -- it varied from 2.15% to 2.84%, 2.93%. Now it has reached a level of 3.08%. I think what are all the market expectations from the fundamentals point of view, a NIM of above 3%, return on asset now it is at 0.75% going forward, definitely, it will reach 1%. ROE of around 12% plus and a very qualitative credit portfolio and a very comfortable provision coverage ratio and cost-to-income ratio, I think all those things, we are in the process of having our own new benchmark. So that we will continue to focus. And I'm sure this good performance will be definitely taken note of by the stock market. I'm now optimistic. I'm not depressed.

[ Mr. Yashwanth ], may we request that you return to the question queue for follow-up questions as there are several participants waiting for their turn. We'll take the next question from the line of Nikhil Rungta from Nippon India Mutual Fund.

Yes. Sir, in the last call, you had given a moratorium breakup based on the sector as well, like agri, corporate, MSME and retail. Can you just give like how would be the moratorium percentage in these respective things?

This time last year since that figure was substantial, I thought of giving the breakup. Now it has already come down to 11%. So that is why we may not share the breakup overall. And as I said, going forward, also, it would come down.

So average would be in the range of 10% to 15% across all 3, 4 sectors. Can I presume that?

Below that, I think there is no other individual sector, which would have more than 15%. No other sector. Definitely, you can presume like that.

Okay. Okay. And sir, what would be our moratorium? Basically, what I want to know is, in the retail segment on the moratorium side, what's the feedback which we are getting from the customers? I mean, is it because they want to hold more cash and hence, they have taken moratorium or unable to pay right now? Or there is a genuine difficulty why they cannot repay right now?

All the reasons. All the 3, whatever that you had, it is there. So what I did is, I have asked my field-level functionary to educate the customers on the moratorium as well as its cost burden. So that has helped customers to understand the impact of the moratorium on the cost. And there has been a positive traction on account of this educative sort of initiatives that is taken by the bank. See, no doubt we'll be extending it -- the loan period by 6 to 10 months or, in some cases, even up to 15 months all such things because of the moratorium. But there will be -- it comes with an additional cost. So by and large, those overall cost conscious and are capable of making good of this. They have responded for that positively.

Okay. And sir, lastly, on this moratorium thing, you have already indicated that this 11%, you expect it to bring it down to 1% odd level by December itself. So this would be primarily through recovery, you think it will come down to 1%? Or you believe that there would be slippages from the team as well?

Slippage could be there. See, my one, I mean, assessment is that for December quarter, there could be delinquency or slippage to an extent of 0.5% to 0.6% of our loan book, including the -- including from the moratorium book as well. Because now itself, the -- for September quarter, there was a slippage of around INR 90 crores, which we could not mark it because of the Supreme Court this pending requisition at the Supreme Court. Anyhow, what we have done is internally, yes, we have identified those accounts. Once the court gives a -- I mean, a mandate on that particular thing, we will be marching it. But I have already provided as per the -- I have already started providing as per the IRAC norms for that. So that even if this INR 90 crores, if it becomes NPA by December, there will not be any hit on the profit and loss account. That much care we have taken while finalizing the September balance sheet.

The next question is from the line of Parameswaran from Jefferies.

Hello? Sir. Am I audible?

Yes.

Yes. So my question is, you said that the moratorium book is at 11% as of September. So coming in by that because the moratorium extended in August.

Yes. September recovery, you have accounted for in all those accounts who have availed the moratorium benefit.

Sir, sorry to interrupt you. This is the operator. Mr. Parameswaran [Technical Difficulty] is coming.

Yes.

If there is a recovery, in that morat book during the September. So then -- or if there is no recovery, we have treated it as continuing. If there is a recovery as per the original repayment schedule, we have treated it as -- we have started servicing the dues.

Okay. Okay. So what -- so if you could answer, what was the morat book as of August? And it has become 11% now. So what was the morat book as of August in percentage term?

The highest was [Technical Difficulty] as of June. Then gradually, it has started declining, but significant decline we have seen in the month of September. The same trend is continuing in the month of October as well.

So this 30% becoming 11% was entirely repayments, sir?

Yes, definitely. Repayments has to be there. Otherwise, no question of treating it as out of moratorium.

And this 11%, you have not got any repayments at all since the beginning of corona?

11.4% of the total loan book so that we are expecting this 6 months -- at the next month as such. So our recovery hubs at the respective regional office level, they have already started contacting all these borrowers, and there is a positive response from them also.

The next question is from the line of Ojasvi Khicha from TCG Asset Management.

Yes. Am I audible?

Yes, sir. Please. Please.

Okay. So in last quarter call, you mentioned about certain NPA cases, which was recognized on a proactive basis about INR 160 crores, INR 170 odd crores primarily because of COVID reasons. So if you could update on the progress of those accounts? And also, is there any addition to that pool?

For that book, during the current quarter, there is no addition. And recovery progress -- recovery is happening. In fact, in 1 account, we have been able to recover about INR 42 crores cash recovery. So resolutions are happening. So going -- most probably, we should be able to -- because almost all those [Technical Difficulty]

Ladies and gentlemen, the line for the management has got disconnected. Please hold while we reconnect them. Thank you. [Technical Difficulty] Ladies and gentlemen, thank you for patiently waiting. The line for the management is reconnected. Thank you, and over to you, sir.

Yes. See, recovery in all the accounts, not only those accounts, but even in other accounts also, it is happening. We have been focusing on the recovery of NPA and also even the technical write-off accounts. In fact, in that technical write-off book also during this particular quarter, that is the second quarter, we have been able to recover about INR 23 crores. Last year, corresponding quarter, it was INR 18 crores. And this year, the NPA recovery, excluding this technical write-off, the cash recovery itself is INR 156 crores, whereas last year corresponding quarter, it was INR 146 crores. We were thinking that because of the COVID-19 and all, the resolution of the NPAs mainly in terms of the recovery and all would get affected. But the figures are telling the other story. So those -- of course, we are continuously contacting all these NPA borrowers also, understanding their position, financial position and also their willingness to pay the loans and all. So -- and a good number of borrowers, I should say that they have come forward for OTS. So that is the silver line in the recovery trend.

Okay. And second question is on provisioning coverage. What is your internal target, where do you want it to take it by end of this fiscal year?

Yes, there were 2 issues, all along, of course, this was the apt question of all the investors as well as the analyst. All along, we were having a PCR of ranging from 52% to 59%. That was mainly on -- perhaps because we were strictly going as per the IRAC norms. We were not focusing on accelerated provision. So since last 2 years, we thought that, yes, we will go for the accelerated provision also. And yes, and this is -- as a result, our provision coverage ratio as of March, it has improved to 64.70%. Now as I said, it is at an all-time high of 75.44%. My and my team, including my CFO; and various accounts team who are responsible for balance sheet preparation and all. We are confident that by March end, by March '21, we should be able to figure out our bank in 1 among those banks who have a PCR of more than 80%.

Got it. Okay. Then last question on restructuring itself. I believe earlier during the call, you mentioned restructured advances by value is about INR 644 odd crore. Right? So I mean, my question is, was that specific to only MSME sector? Or was it the overall -- on the overall book?

It was from MSME sector only, yes. Yes, that is yet to be -- see, RBI has announced OTR, one-time restructuring, that is yet to be selected. So this is from the MSME sector -- portfolio only.

Understood. Anything on corporate, sir, any proposal -- restructuring proposals that you have received or under evaluation on the corporate?

Yes, 2 proposals, I'm expecting to an extent of around INR 500 crores.

Okay. Put together, right?

Banking sector is aware of those 2 accounts. So we are also expecting about 2 proposals only.

The next question is from the line of Bhavik Shah from B&K Securities.

Sir, I have 2 questions, sir. Sir, of the 11% of the loans who have not paid since lockdown. How much do you expect them to be -- to come from restructuring?

Out of that -- see, out of that, about 2% may come to the restructuring. What I'm expecting is that, that is -- that 11% is engaging our continuous attention, so we are identifying the accounts also. Not more than 2% may opt for OTR.

Okay. And sir, you mentioned that the slippages would be around 0.6% for fourth quarter. So sir, do you expect the other 8% to 9% of the loans from that 11% to normalize over the period of next 2 quarters?

Yes.

Okay. And sir, those 2 -- sir, you mentioned about 2 industries where -- the 2 accounts where restructuring proposal has already come to you over INR 500 crores. Sir, can you name the sectors?

One is trading. Another one is...

Is it a lead-based group?

Pardon?

Is it a lead-based group or anything?

No, not from that group. One is from the trading, another one is from infra.

Okay. And sir, with respect to the OTS change, sir, has there been a change of haircut pre COVID and now?

I didn't get your question, Mr. Shah.

Sir, in onetime settlement schemes?

Not settlement, onetime restructuring.

Yes, sir, I understand that. But sir, you mentioned that there have been recoveries through OTS also.

Now, that OTS is different. That OTS I referred is pertaining to my NPA portfolio and the technically written off portfolio. Write-off portfolio will be there, no?

Yes, sir.

That is what I was referring. In that write-off portfolio, we have been able to recover about 20 -- 22. Yes, what was the recovered? INR 22.71 crores. NPA, also there is OTS, onetime settlement. As a result, we have been able to recover about INR 156 crores under the NPA alone.

Okay. Sir, that's it from my side.

So what I was highlighting is that even during the COVID-19, NPA recovery is very much on the track. That was my point.

Right, sir. But sir, so there must be a difference in the amount of haircut, right? Sort of like Pre COVID?

No, no, no. Here, what happens, these are all assets at my -- about 93% of my loan book is fully secured. When the security is there, especially for those secured assets in the noncorporate sector, the haircut would be very minimal.

Okay, sir. And sir, one last question. So with respect to the RBI's explanation on reducing the risk weight for home loans. Sir, to what extent on a ballpark figure would that reduce our CET1?

No. There, what happens, these are the exemption even for the advances -- fresh advances that we are making effective from 1st of October. Because that reduction is not applicable for the existing loan book. So that all depends on what would be our growth in that particular sector. It depends on that like that, not our existing loan book.

Okay. And sir, just 2, 3 data points, because of specificated outlook. So can you just give me the treasury gain amount slippages upgrades and write offs?

Yes. Treasury -- yes. As I said -- yes, this time, it is INR 155.18 crores as compared to INR 39.32 crores as of September 2019.

Okay. Sir, slippage, recovery and write-offs during the quarter?

Recovery is 1 -- this is from the NPA portfolio, recovery is INR 156.03 crores and the technical write-off is INR 171.64 crores.

Okay, sir. And sir, slippages?

Now slippage is very, very minimum, INR 3.97 crores only.

The next question is from the line of Himanshu Upadhyay from PGIM India.

Yes. Aalok, sir. Shall we have 1 or 2 last questions and conclude by 5:30? Mr. Aalok?

Yes, sir, we can do that. We'll take up.

I will take another 1 or 2 questions.

Right, sir. We'll take the next question from the line of Himanshu Upadhyay from PGIM India.

Congratulations on decent results or good results it seems.

Thank you. Thank you so much. It is in a very most difficult situation. That is why it is very special for all of us.

Yes, yes, yes, I agree. There are 2, 3 things which I wanted to understand. One is on the fee income, okay. I missed some initial part. But when we look at our fee income, the fall in this quarter is much higher than last quarter or Y-o-Y? What would be the specific reason and what are the components where the fall has been sharper? And what is the outlook on this?

Yes. Fee income, 2 things has affected. 1 is, as you have seen, the overall loan book growth is not there. That is also 1 of the reasons. But the second is 1 where the customers also have resorted for maximum concession, which we have also considered sympathetically. So that is why there has been some de-growth in the fee book. And going forward, I think it is expected. The second most important thing is, from our ATM transactions for the first 3 months all the ATM transactions were made free because of the COVID-19. And that has also adversely affected the fee income. But that was a very special situation. So as I said, we have been able to make good of that by -- in other areas. See our interest expenses have come down very significantly. So these are some of the things wherein we have considered sympathetically to -- yes...

And 1 more question was on your net interest margin, which is pretty high or good, I would say. In the -- so we have seen cost of deposits also fall down. Do you think the situation or the numbers can remain like this on the net interest margin? And 1 of the things was there was a lot of churn of the clients also from 1 place to the other, okay. And the NBFCs or others would drop the rate and take the client. Is the situation continuing? Or do you think the higher net interest margin is because of lower customer churn also? And you are able to get better terms, how are you looking at the...

Yes. I got your point. NIM would -- I think it would stabilize at slightly above 3%. That is for the entire year as such. And the cost of deposit, of course, this particular quarter, it has come down to 5.38%. But for the first 6 months, it is at 5.54% and going forward, it will further come down because we have further slashed the interest rate because of our comfortable liquidity. And for the next 6 months, I'm not foreseeing any significant increase in the cost of deposit. And there could be a slight decrease in the yield on advance. But most probably, we -- as I said, we should be hold on to a spread of 4%. So I think -- yes. And as I said, we will be focusing more on CASA also. That would also help us in further reducing the cost of deposit as well. And the churn of the customers especially from the NBFC and all. Now what happened that underwriting the procedure or the process because almost all have adopted the -- almost the same procedures of looking into the bureau score, their past track record, analysis of their own bank statement, all such things. So that being the case, I -- my observation at the field level is customers would like to stick on to the bank, which they have been dealing for quite long period. And another good thing that is happening at the field level is because of consolidation of the nationalized banks, we are getting some very good customers from other banks as such. So that is 1 of the reasons why our -- I said there is a very good traction in the mid corporates, between INR 5 crores to INR 100 crores ticket size. These are some of the well-established clients of other banks also because of the service level and other things, they have preferred a bank with an established track record in the service -- customer service and other affiliated things. So...

One last question. The deposits have grown by 4%. And our, I would say CASA has also improved, okay. But we are not able to see the exact presentation or it is -- can you share what is the growth on the CASA and term deposits and the break up between them in last year?

Yes. CASA. Our CASA growth is 10.56%, growth rate. And the CASA share, it has improved to 29 -- 29.17%. Earlier, it was at 27.41%. We will upload our detailed presentation to our website shortly.

Okay. And do you think that the traction of growth on CASA will remain here because the advances would be lower growth this year. So CASA will improve further here?

Yes. Yes, that's what I said. I am aiming for a 30% CASA share by March '21. All our actions are focused on that. Let us see because in the first half year, we have been fairly successful in that journey and I'm confident that during the second half also because the first half was affected by COVID. Second half, let us say, there will be a lot of relaxations and all. And we have had a tab-based FD accounts onboarding activity, and I have a dedicated CASA marketing officer team across India in each of the regions, there is a CASA regional sales executive. So these -- I mean, infrastructure, we have now put in. So we should be able to encash that opportunity.

We'll wait for the presentation.

Yes, sure, sure, sure.

The next question is from the line of Girish Raj.

Let this be the last question. Hello?

Yes, sir. From the line of Girish Raj from Essel Mutual Fund. Mr. Girish Raj, your line is in talk mode. [Operator Instructions] As there is no response from the current participant, I have muted the line. We'll take the last question from the line of Gaurav Jani from Centrum Broking.

Congrats on good set of numbers. Sir, just wanted some clarity on the moratorium portfolio. So are we to understand that the number that has come down from 51% to 11%. So these customers would have started paying 1 EMI in September, and that is how we have classified from 51% to 11% coming to this...

Perfectly correct.

Sure. And sir, in terms of treasury, if I may ask you, for the second half, any sort of unutilized treasury gain portfolio we're sitting on? Or this is what we have maximum recognized for the full year?

It is there. It all also depending on the yield movement as well. So if an opportunity exists, then we may further gain this. Otherwise, we cannot predict treasury is income, especially this trading profit also. Fortunately, since last 1 year, we have been very successful. We are keeping our fingers crossed.

Sure. And sir, last question from my end. This quarter, have we made any additional provisions basis COVID or this was only NPA provision?

Not to the COVID, but NPA, I have made some accelerated provision also.

Sure, sure.

COVID related, the INR 97 crores provision, which we had as of June, that is still intact.

Thank you. Ladies and gentlemen, due to time constraint, we'll take that as a last question. I would now like to hand the conference over to Mr. Aalok Shah for closing comments.

Yes. Sir, do you have any closing comments, Mahabaleshwara, sir?

Yes. While during my opening remarks, I was referring to our efforts in strengthening the Board of our Bank. So today, our Board, on the recommendation of the NRC has been very pleased to induct 1 more additional director under the independent category. She is Madam Uma Shankar. She would be joining our Board effective from 1st of November 2020. She is the former Executive Director of Reserve Bank of India. So she would be joining our bank. She's a retired Executive Director from Reserve Bank of India. She is presently staying at -- residing at Bengaluru, and we are pleased to have her on our Board effective from 1st of November. With that, our Board would be having somewhere around 80%, 82% as independent directors, and 2 women directors as against the minimum requirement of 1. So this is 1 thing which I would like to share with you all. Thank you one and all for having again the keen interest. Let us keep meeting. So either personally or through the web, whatever it maybe. And wish you all hail and healthy life as well as all the best to each 1 of you. Thank you.

Yes. Thank you, sir. On behalf of Monarch Networth, we thank you all for joining on to this call. Have a great evening. Thank you.

Thank you. On behalf of Monarch Networth Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.