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

Ladies and gentlemen, good day, and welcome to the Q3 FY '21 Earnings Conference Call of Karnataka Bank 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. Thank you, and over to you, sir.

Yes. Thanks, Sujitha. Good evening to all. On behalf of Monarch Networth, we welcome you all for this earnings con call of Karnataka Bank. Today, we actually have with us the entire management team of Karnataka Bank, starting with the MD and CEO, Mr. Mahabaleshwara M. S.; the CFO, Mr. Muralidhar K. Rao; COO, Mr. Balachandra Y. V. and other senior management team. Without taking much of your time, I will hand over the call to Mahabaleshwara sir for their opening remarks followed by a Q&A session. Thank you, and over to you, sir.

Thank you, and good evening to all of you. First of all, let me wish you all a very Happy New Year 2021. So this is the earnings con call of Karnataka Bank for Q3 FY '21. Friends, I'm happy to flag off the banking sector Q3 earnings season with a good result. Yes, it was a tough period, but encouraging results in tough time. Entire industry, as you all know, is affected by COVID-19 pandemic. But the economic prescription of Karnataka Bank for COVID-19 pandemic was conserve, consolidate and emerge stronger. At very early onset of COVID-19 pandemic during the month of February and March itself, we had taken abundant precautionary measures by -- and mainly to ensure that we would have a very smooth sailing of this difficult period. That is why we had focused more on bottom line. Of course, in some of the areas also, we had able to safeguard our top line as well. So this has abundantly reflected in the first 2 quarterly results, and this is something like further consolidating our position in the Q3 result. As you all know, the net profit has shown a 9.94% growth during this 3-months period at INR 135.38 crores from INR 123.14 crores about a year back, whereas for the 9 months period of the current year it is at INR 451.20 crores with a growth rate of 11.55%. Last year, that is the year ended March '20, for the entire year, our net profit was INR 431.78 crores. So this year, we had already crossed that, which is at INR 451.20 crores. Operating profit, current quarter, it has slightly come down by 12.72% to INR 437.97 crores. But for the 9 months period, there is a growth rate of 27.68% at INR 1,615.44 crores from INR 1,265.23 crores. The main reason for the lower operating profit, especially during Q3, is mainly due to lower trading profit and higher superannuation benefits. Otherwise, for the 9-month period, it has grown at a rate of 27.68%. Interest income almost flat. In fact, there is a slight decline by 1.61% for this quarter. And for 9 months period, it is down by just 0.43%. Whereas, interest expenses have significantly come down by 11.88% during the current quarter at INR 981.45 crores against INR 1,113.80 crores about a year back. And for 9 months period, interest expenses has come down by 7.31%. NII has shown a healthy growth at 20.94% to INR 614.05 crores from INR 507.75 crores. For the 9 months period ended, it has shown a growth of 14.85%. Other income has come down because trading profit has also come down. Whereas the total income is slightly down during this quarter by 6.27% to INR 1,868.62 crores. However, for the 9 months period, total income is up by 4.33%. However, total expenditure is down by 4.10% during this 3-months period to INR 1,430.65 crores. And for the entire 9-months period, our expenditure is down by 2.35% to INR 4,321.33 crores. This is mainly because of the reduction in the interest expenses, as I said, which is at 11.88%, and also other miscellaneous expenses reduction. The cost containment measures, whatever that we had initiated in the month of February and March, that has continued to yield the expected result during these 9 months period. Net interest margin is at a high level of 3.26% for this quarter, that is the Q3. Whereas last year, that is December 2019 quarter, it was at 2.83%. So 2.83% to 3.26%, there is a significant jump. And for the 9 months period ended, it was at 2.82%. Now it is at 3.07%. So having a NIM of above 3% was 1 of our long-term objective. We have been able to achieve it, and most probably we'll be able to sustain this also going forward. Return on asset is at 0.64% as against 0.60% last year. And for the entire 9-months period, it is at 0.71% against 0.67% last year. Return on equity has also shown a upward traction from 8.15% last December to 8.28% during the current December 3 months period. For the 9 months period, it was at 9.05%. Now it is at 9.56%. Gross NPA has come down to 3.16%, and whereas net NPA is at 1.74%. This is by giving effect the interim order of the Supreme Court. We had also calculated what would have been the position had there not been interim restraint order of the honorable Supreme Court. So my NPA would have been up by INR 337.23 crores during this December '20 had there not been SC restraint order. During September '20 around INR 90.15 crores would have been the addition. So September '20, INR 90.15 crores; December '20, INR 337.23 crores. So total addition would have been INR 427.38 crores to the GNPA. So that would have taken our GNPA percentage to 3.95% from the existing 3.16%. But we had -- as of December 2019, our GNPA was 4.99%. So about a year back, GNPA, it was at 4.99%. Now even if had there not been SC order, the GNPA would have been 3.95%. So this itself shows that the portfolio has not deteriorated, number one. Number two, rather, it has further [ sell down ]. Similarly, NPA also, NNPA presently it is at 1.74%. Again, with the SC order and without SC order also we have calculated it would have been 2.42% instead of 1.74%. Last year, December 2019, it was 3.75%. So this is latest positions of the NPAs. And the credit cost for the current quarter, it is at 0.32%. And for the entire 9 months, it is at 1.30%. Provision coverage ratio has reached a new high of 80.51%, 80.51%. It is an all-time high for Karnataka Bank. Last year, by December 2019, it was at 59.34%. And by March '20, it was at 64.70%. So it has now reached a level of 80.51%. Cost-to-income ratio during the current quarter, it is at 50.63%, whereas for the 9 months period, it is at 43.24%. Capital adequacy ratio has now improved on account of reduction in risk-weighted assets and also slight improvement in Tier 1, Tier 2 capital. So as a result, the capital adequacy ratio has improved to 13.83% from the year ended 12.88%, earnings March '20 from that level to 13.83%. And recovery in return of accounts has been 1 of the best in the recent time. Because last year, during this quarter, we had recovered about INR 9.43 crores in the technically written-off accounts. Whereas this year, it is at INR 26.86 crores. So for the entire 9 months period, last year, we had been able to recover under the TWO accounts INR 36.21 crores. This year, it is INR 55.46 crores. So turnover of the -- business turnover of the bank is flat at INR 1,27,014 crores. That means a nominal growth rate of 0.59%. Deposits also almost at the same level with a nominal growth rate of 3.46%. However, the advances have shown a declining trend by 3.14%. It is at INR 53,187 crores. However, last time also I had mentioned it. We have been focusing on the retail and mid-corporate advances. And so as to minimize our dependence on the large corporate borrowers. So this time, what happened is retail and mid-corporate advances, that is up -- the retail is up to INR 5 crores and the mid-corporate is INR 5 crores to INR 100 crores. So this has grown at a rate of 9.75%. Whereas the large corporate advances, there is a degrowth to an extent of 40.41%. That is the reason in the terminal advances there is a degrowth but we had grown where we were expecting to grow. And as a result, as of now, less than INR 5 crore portfolio, that is the retail portfolio, is at 51.16% of the total advances. So about a year back, it was at 46.11%. And the mid-corporate advances, that is INR 5 crores to INR 100 crores, it was at 28.25% of the loan book. Now it is at 32.82% of the loan book. Whereas the large corporates, that is INR 100 crores and above, it was constituting 25.19% of the loan book about a year back. Now it constitutes 15.55% of the loan book. So there is a major realignment of our advances portfolio. This will further continue during the Q4 also. And that is why next year, there would be a further growth in the retail and mid-corporate because that is our -- that will continue to be our focus area. In the liability side, even though the growth in the overall deposit is 3.46%, we have been able to record a 13.57% growth in CASA. The low-cost funds have grown by 13.57%. As a result, now the CASA constitutes a new high of 30.07%, 30.07% of the total deposits. So never in the past, we have been able to achieve this level. So at present, it is an all-time high of CASA, that is at 30.07%. Of course, yield on advances is at 9.39%. Last year, December 2019, it was at 9.45%. So there is a slight reduction because of the competitive rate of interest and continuous reduction in the MCLR over a period of time. Cost of deposit has come down significantly from 6.02% to 5.14%. As a result, the interest spread is again at a high of 4.25%. It was at 3.43% about a year back. The restructured advances, we have INR 689.80 crores as of now. So INR 503.74 crores about a year back. And the digital transaction, which has been 1 of the focus area under our transformation journey, KBL VIKAAS, so this has reached at present 88.77%. So most probably by March '21, I'm confident of taking it to a level of around 90% of the total transactions. Similarly, our digital loan sanctions initiative taken up in association with our Digital Center of Excellence, DCoE, at Bengaluru. We have already focused on digital sanction of majority of the retail loans, especially the home loans, car loans, 2-wheeler loan, salaried plus loans and various MSME loans and personal loans also. So MSME, working capital as well as the investment loans. Everything is now brought under the digital sanction. So at present, on an average, about 65% to 70% of the daily sanctions under each of this portfolio is being done under the digital sanction. So that has helped us in huge efficiency improvement in every aspects. So we will further strengthen this digital loan sanction initiatives. And as far as the outlook, yes, we will continue to be cautious because that is the -- I mean, that is the requirement of the present day. And we will continue to focus on our trusted business principle of conserve, consolidate and emerge stronger. And we will continue to strive hard to have a healthy growth and to further strengthen the fundamentals. So consistency has been the hallmark of our performance all along. So we will continue to be too focused on that consistency factor. So with this, let me now welcome the questions from our well-wishers as well as the analysts. Thank you. Yes. Presentation on this, the financial results. It is already uploaded in our website, a detailed presentation, and we have also furnished this presentation part to both the exchanges that is BSE and NSE. So you can have an access for this presentation -- management presentation on the financial results either from our website or through the exchange website. Yes. Thank you.

[Operator Instructions] The first question is from the line of Jai Mundhra from B&K.

Sir, I have a question from slide number where we have given the moratorium journey, I mean, movement of moratorium book. So December 2020, we have around 1.74% of advances into moratorium, right? So that roughly translates to INR 900 crores.

Yes.

So what is this number, sir? I mean, are these account, which -- I mean, what is this number of INR 900 crores?

Yes. This includes some of the accounts which have been already identified for the OTR related things. So OTR under both MSME as well as the general advances.

Okay. But these are -- so if they are not paying, then they should be in pro forma slippages, right?

Correct, correct. So that means September, October, November. So in that 3 months period, this 1.74%, they have not yet paid. But whereas from December onwards, some -- I mean, recovery is happening. But anyhow, a majority of these accounts are also identified for the OTR related provisions -- OTR related treatments. So from that angle, once they make the payment, they will also continue to be performing advances. So in that moratorium book, even though, of course, it was at 51%, came down to 11%. Now as of December, it is at 1.74%. Going forward, I think around 50% would come out of it, around 40% to 50% may turn to NPA. That is what we had factored in for the future that is the Q4 probable NPA numbers also.

Right. No. So sir, the question is our pro forma slippages, as you had given in the slide that is around INR 300 crores -- INR 400 crores -- roughly INR 400 crores.

Yes.

INR 427 crores.

Yes. INR 427.38 crores. In that, the September figure is INR 90.15 crores, December quarter is INR 337.23 crores.

Right. So sir, this number -- I mean this entire INR 900 crores should be pro forma slippages, right, because they are in moratorium?

No, no, no. They are within 3 months. They are pro forma -- see, it has crossed 90 days DPD. So that is why it is called -- otherwise, it would have been treated as NPA. What we have done is, see, we have not treated this as NPA. You would know the reason. But we have identified these accounts and started making upfront provision also. See, now for the COVID-19 itself, I have about INR 150 crores upward provision -- upfront provision already made. So this pro forma NPA, INR 427.38 crores, this is -- also would have been treated as NPA, but for the honorable Supreme Court interim order. So that is what I said. Had we included it, our GNPA would have been 3.95% instead of 3.16%. We have not yet treated it as NPA, but we have started making provision. That is reflected in the standard advances provision.

Right. Yes. Okay. And sir, if you can quantify the SMA number for our bank, SMA0, SMA1, SMA2 as of December.

Okay. SMA2 INR 342 crores, SMA2.

Okay. And sir, if you have the SMA0 and 1 also?

Right now, we don't have. Next time, we'll incorporate that.

Sure, sir. And the last question, sir, is on restructuring. We have given, I think, the data in the presentation that we have identified INR 1,029 crores as restructuring. So these are the accounts where you have received the intimation. And you may -- and these may be implemented by fourth quarter. Is that the understanding?

Yes. Yes.

And this is over and above INR 689 crores, right, which is already there?

MSME, which is INR 689 crores. Yes, correct, correct, correct. Yes. Yes. See, earlier I had told that our OTR book could be in the range of 1% to 2% of our total advances. So most probably, it will be -- no, 2% to 4% I had said. So it would be within that limit only, OTR book.

Your next question is from the line of Kishan Gupta from CD Equisearch.

I want to understand why this gross NPA -- how this gross NPAs come down from some INR 2,200 crores in September quarter to some INR 1,700 crores this time?

Recovery. The recovery and technical write-off, the -- our -- this -- about recovery was INR 90.90 crores. Technical write-off was INR 390.64 crores. And others around INR 2.09 crores recovery. Total it has come down by INR 482.23 crores.

So basically, how much was the slippage?

Slippage was just INR 1.40 crores. Virtually, there was no slippage because of the honorable Supreme Court interim order.

And why this technical write-off of INR 391 crores, which accounts?

No. See, wherever the 100% cost is made so that is the general accounting technical write-off only, not write-off from the books. So gradually, subsequently, there will be recovery from that portfolio. It would straight away go to the profit and loss account. So this year also, that is what I said. In the technical written-off account itself around INR 26.86 crores during this quarter alone there was recovery. For the 3 months, there was a recovery of INR 55.46 crores.

So what was the nature of these INR 391 crores write-off? Which sort of accounts essentially?

Across the advances portfolio, so can you tell me which -- provision. Only where provision is fully made, we are writing it off from that piece. But however, recovery efforts continue.

And what is the competitive advantage of Karnataka Bank in your regional markets, the Southern markets?

I didn't get you.

So basically, since you're competing against other banks in your region, and you tend to have a very strong presence in South. So what is your competitive advantage there?

I don't think we are competing only at South. We are competing at all the areas. Even though our number of branches are more in the Southern area, in fact, the Northern district -- the Northern states, especially Delhi NCR and all are giving good business to us. The area of our dominance, especially in the sector, it is the MSME sector, home loan sector, gold loan sector and, of course, agricultural sector. This year, the gold loan has grown at a rate of 32.40%. Home loans are at a rate of around 7.96%. MSME has been the focus area. This has grown at a rate of 18.46%. Agriculture across India, it has grown at a rate of 12.25%. So these are the areas which has given -- the sectors, which has given the growth. And if these sectors will also any particular state, we don't differentiate. So as long as that fulfills our credit policy requirements we continue to lend.

So do you have some special team working or some -- for these sectors basically?

Yes. See, under our transformation journey, what we had done is we had created a separate credit marketing vertical. And at all the 14 regional offices, we have regional sales executives under whom the credit marketing officers are also functioning. So this is the special focus area. So they have been given the sector prioritization list. So the area where we would like to have the growth, that is being focused by them, especially in the mid-corporate, retail and the MSME advances. So on a weekly basis, there would be interaction with them, daily dashboard, digital dashboard is also there. And the head office, the credit marketing GM, he is also interacting with the potential clients through the Webex mode as of now. So concerted effort is being made in the identified area to have a healthy growth.

And what's your advances growth target for next year?

Next year not yet finalized. Definitely, it will be in the double-digit. So for the financial year '22, we are yet to finalize, but it will be in the double digit. Even in the current year also, as I said, yes in the identified area, that is the retail and mid-corporates, we have all -- we have grown almost at 10%. That is 5.75%. So that will continue to be our focus area for the ensuing years as well.

Yes. But given that other banks also, where they are focusing on certain areas like HDFC Bank is focusing more on like corporates now. So they are -- when they are focusing on a particular area, they are able to grow at -- still at around 20% advances, but...

But large corporates are not our focus area. I have told you that our focus area is retail and mid-corporates.

I know. But overall, your advance growth is not in line with what other private sector banks are doing.

That is what I said. I think you got it correct. We have been realigning our portfolio. Because in the past, our experience with the large corporate advances was not satisfactory, not on the expected line. So that is why a major realignment of the advances portfolio. That is what we had attempted during the current year without compromising the bottom line. And we have also by experience noted that the yield on advances from the retail and the mid-corporate is very much on the expected line compared to the large corporates, wherein the yield on advances is not on the expected line because of the high interest rate bargaining power that they have. So we don't have that type of cheap funds to lend at a lower rate.

[Operator Instructions] The next question is from the line of Bunty Chawla from IDBI.

So if I go correctly, we -- after this, if we don't consider the pro forma Supreme Court, so INR 437 crores you have said has been the fresh slippages in Q2 and Q3 total addition, right? And secondly, you said...

We said INR 427.38 crores.

INR 427 crores. Okay. Okay. INR 427 crores. Secondly, you said, you have given the presentation, INR 1,030 crores, which are eligible under onetime restructuring...

OTR.

Which is approximately 1.92% of the advances. And thirdly, you have given on the moratorium book movement of moratorium book, which is 1.72%. So if I calculate on the book, it comes around INR 925 crores something like current. So if I add INR 427 crores plus INR 1,030 crores plus INR 925 crores these all together so it...

No, no, no. Moratorium book, it is already subdued under the OTR book.

Okay. You are saying this 1.74%, which is INR 925 crores, is a part of INR 1,030 crores?

Correct. Yes. Going forward, moratorium book may not pose a severe problem. As I typically said, majority of those accounts are [ usually trading ] on the onetime restructuring, wherever it is [Technical Difficulty]

Okay. So this comes to around approximately 2.75% adding this one-time restructuring as well as fresh slippages of INR 427 crores. So can we say this 2.7% or approximately 3% is the only impact on the asset quality front could be due to the COVID-19, which has come around now? Nothing actually out of...

OTR is going to be the slippage. OTR is going to be addressed -- in terms of restructuring, it will continue to be a standard advance. Only the provision requirement is there. OTR for the MSME -- I mean 5% provisioning is required. And for the other general advances, 10% provisioning is required. And this entire provision we have already front loaded in the current quarter itself. So even if there is some portion of this -- identified account slips to NPA, the hit on the purchase, if any, it is already up.

Okay. So that was on the P&L part. I'm trying to understand if on a conservative basis, we assume this, this was the maximum impact we got from the COVID-19. Now if NPA also occurs will come from the INR 1,030 crores kind of restructuring, if some of the account does not repay properly?

Yes. If you want to call it as an worst-case scenario, you can have your judgment.

Okay. Okay. So maximum, we can say, on a worst-case scenario, 3% is the maximum impact we have got from this COVID-19 situation. Nothing or no specific other accounts under SMA1 or SMA2 are -- not we have recognized yet. Do we see any specific out of this to -- other than this would come into an NPA part in FY '22 kind of a thing?

Yes. See, what we had calculated is the slippage ratio, 1%. Last year 3.75%. So current year, once the assets classification are the -- this is health of the advance is probably recognized by March '21, the slippage ratio may not be more than 1% to 1.5%.

Right.

That is what we had estimated, worst-case scenario.

So can you -- same number can you give guidance for FY '22, how much slippages we have estimated or our rough guess kind of a thing?

For the entire year, our estimated...

FY '22 full year.

For the FY '22, we have not yet done. FY '21, it may not be more than 1.5%.

Okay. And sir, for -- as you said, INR 1,030 crores is the OTR kind of a thing. So 10% provisioning we have already been provided through P&L. Nothing will come in Q4, right, you're saying?

Yes, yes. Not only that. See, OTR identified accounts we have provided. Even this INR 427 crores, which is not identified as NPA, but kept under exclusion. For that also, we have made the provision generally on the IRAC norms basis. That provision is also absorbed during this quarter itself. But it is all reflecting under the standard advances provision. Actually the provision hit is already observed, part of the incentives.

That was very helpful, sir. On the provision coverage, you have given with pro forma slippages stands at 75.09%, right? So going forward, how should we see -- should we expect still this number should increase or it will remain at 75%? How should we...

How it will increase? You would please understand. Because additional NPA is going to be gratified in the March '21. Naturally, they have an adverse impact on provision coverage ratio. So even though now on pro forma, it is at 75.09% and actual is 80.51%. So by March '21, it will slightly come down. But in that it will settle above 70%.

Above 70%.

Not below 70%. There will be a reduction, pull down because of the [Technical Difficulty] by March '21. So my -- I'm confident that it will settle above 70%.

Okay. Okay. And sir, lastly from my side. The net interest margin, you have given the number, it has almost improved more than 3%. Is this number, net interest margin, includes interest reversal?

Not net NPA, net interest margins.

No, no, no. Yes, yes, NIM, I am speaking on net interest margin. Does this number includes interest reversal, if the performance slippages has been offered?

Yes, yes.

Okay. So it includes interest reversal.

We have interest reverse -- I mean reversal on that INR 427 crores, whatever that we have identified, we have given the eligible interest from that particular portfolio.

Okay. Okay. Okay. So that was very helpful. And if you can share any guidance on the same net interest margin. How one should see for the full year '21, '22? If anything you can share on that.

We will try to come up to your expectation.

Sorry, sir?

We will try to come up to your expectation, which is above 3% because this high that we have reached, 3.07% for the [Technical Difficulty] period, 3.26% for this quarter. So going forward, I'm confident for a positive traction. Definitely, above 3%, be conservative.

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

Hello? Yes. So like in the previous -- in Q2 results, you all mentioned that you'll have been actively growing your retail book as well as the gold loan book under the retail. So could you give us an idea of how much this has grown in this quarter?

Yes. Gold loan has shown a growth rate of 32.40%; home loans, 7.96%; MSME advances, 18.46%; agricultural advances, 12.25%. So as a result, our retail advances is now presently at 51.16% of the loan book, which was at 46.11% about a year back. And the mid-corporate loan book is 32.82% of the total loan book, which was at 28.25% about a year back. On the large corporates, we have scaled it down to 15.55% of the loan book from the 1 year back number of 25.19%. So going forward, I think we will be able to sustain these numbers. So retail would be somewhere around 50% to 52%. And the mid-corporate around 32% to 33% and large corporate below 15%.

Okay. Sir, another question. So in the Q2 results, you'll also mentioned that the focus will be on growing the CASA, and it is expected to reach 20% by March 2021.

Correct. Correct.

So you all have already reached the target right now. So are you all looking at an increase in this in the upcoming quarter?

Yes, yes. See, of course, first, we'll continue because we had already clocked a growth rate of 13.57% in the CASA. That is the reason why we have been able to reach 30.07% of the total deposits under CASA. So we are optimistic of taking it to a level of around 31%, 32% in another 1 year. Because by that time, the retail term deposit growth will also be there. So we have to balance that. But for me, anything above 30% because we don't have -- we don't get any institutional support, government institutional support for the CASA. It is all from the general public. There has been very good support from the general public, and that is the reason why our -- in fact our SB has grown at a rate of -- SB growth rate -- yes. SB has grown at a rate of 13.37%. Current account at a rate of 14.21%. So CASA actually 13.57%. We will try to sustain these numbers. Going forward, it may not deteriorate, but definitely, it will slightly further improve.

Okay. And sir, could you just give us an idea about the liquidity, probably the 1-year ALM numbers or the liquidity coverage ratio?

One second. Yes.

Our NPR is, in fact, is very comfortable at around 250%. So we are not foreseeing any challenges in managing the liquidity. We have adequate liquidity also. Deposit growth is there, as already explained in the beginning. Advance growth overall is muted. So in the credit side and the retail and the mid corporate, there is a traction, but overall, it is a muted growth. Therefore, we have adequate liquidity in the system.

Okay, sir. Sir, another thing. Are you all looking for any borrowing in the market in the upcoming quarter?

Market borrowing in what sense? This is...

NCDs or something or CD?

No, no, no.

We will rather focus on the core deposits. We will focus on the core deposit to support our lending efforts.

The next question is from the line of [ Manish Dhariwal from Perisheri Capital ].

Sir, very good presentation. Sir, I basically wanted to understand the competition intensity that you are facing at the ground level. See, 1 of the earlier participants also touched upon this. See, who is the competition for you on the ground? Meaning HDFC Bank is very aggressive. You also mentioned that their cost is also very low. So they are able to compete on the basis of the costing trend. So what is -- how are you able to sustain in this market and record the growth rates of 52%? And what is the -- so basically, the fear is that what can be the impact on the quality of this advance?

I don't want to call it as a competition, but there are challenges. Whenever there is a challenge, there is opportunity also. And we are a household name. See, it is not a new bank, which is in existence for the last just 5 years or 10 years, wanted to have a mark and all. It is not like that. We are there in this financial business market for the last 97 years. We have our own niche area. So that is the reason I said when we thought of improving the CASA. You may be aware of the fact that about 10 years back, our CASA was hovering around 20% to 22% only. So -- and this is all from the general public point of view. So that type of niche market is there, and we are focusing -- catering into both areas. And 2 things. One is field level good quality service. Second 1 is ably helped by the digital products. These have been the advantages of Karnataka Bank. And going forward, we will further strengthen both these things. My staff -- 8,200 plus staff at the field level. They are trying their level best to extend the excellent customer service and, of course, ably assisted by many of our products and services supported by the digital -- in the digital platform. So keeping that in mind, both the asset side as well as the liability side, we have identified the priority areas. That is what we call as sector prioritization. Say for the current year, definitely, it was the gold loan portfolio, which has grown at a rate of 32.40%. Still, there is a very good scope for that. And of course, home loan, we had grown at about 20%, 22% plus last year. So this year, it has moderated because my total loan book of the home loan we wanted to have at around 16%. Last time, we had already crossed that. So we wanted to stabilize at that particular level. MSME has been another area, wherein the growth has been quite satisfactory at double-digit at 18.46%. So we have identified this area. We have branches, rural, semiurban, urban and metro branches. So those branches are given the specific target and the target sector also. So this is the strength of Karnataka Bank because, as you know, we have more than 11 million customers as of now. So the customer onboarding is continuously going on. And when once the customer is onboarded for the current or the SB account, then, naturally, there will be lot many cross-selling opportunities also. And all those things are being in cash right now.

Fantastic, fantastic, sir. So basically, sir, what is our medium-term to long-term target on the return on equity?

I'm aiming to have it at least 1%. So -- ROE. ROE should be double-digit at a very short-term and ROA also should cross 1%, like I said, within a year or 2 years because NIM we have been able to accomplish. When that is done, these 2 areas also should follow. So NIM was not at a comfortable level. Now we have been able to at least take it above 3%. So I think ROA and ROE should also follow. Because once our NPA problem eases out, which has definitely eased out during the current year, even if we include the exclusion accounts and all such things, it is very much under control. Because, as I said, GNPA was at 4.99% last year by this time. So now even with that, it is below 3-point -- 3.95%, below 4%. So asset quality definitely has shown a positive traction. So this will have a very, very favorable impact on all these things, ROA, ROE, everything.

So basically, meaning with the retail loans in the Indian economy rising and consistently increasing because every bank and NBFCs are focusing on that segment, you're not foreseeing that there could be a challenge in the quality of advances to this sector?

Quality issue, at the entry-level itself, we have now addressed. See, the digital loan sanction mode what we are doing, it has a lot many business rule engine, BRE we call it as. And that has been strengthening our filter. So setting a criteria is also further strengthened. So that is why the quality issue now we have been able to effectively address at entry-level itself. But anyhow, we are facing a low spot on the collections also. I have already strengthened the collection mechanism. So all these things put together, we should be able to continue to grow at a very decent rate.

[Operator Instructions]

Yes. Madam, we shall take another 1 or 2 questions.

Sure, sir. The next question is from the line of [ Siji Philip from Axis Securities ].

I just wanted to ask on this employee cost. Do we have any one-off during this quarter?

Employee cost, what happened, superannuation benefit has gone up. That is the only thing. Otherwise, salary, even though this 11th Bipartite settlement is signed, we have already disbursed the arrears also because the entire arrears on a graded additional basis right from the last 2.5 years we have been making additional provision. So that additional provision in the first, whatever that we had made, that was sufficient to give the arrears everything. However, superannuation benefit, it keeps on varying depending on the yield level. But for that, there was no variation.

Okay. And sir, 1 more on this breakup in the retail loan book. Can you give that? How is the growth in each of the segment?

Yes. Retail loan book, overall, that is below INR 5 crores, it has grown at 7.31% and the mid-corporate loan book, 13.75%, all -- both put together at 9.75%. Under the retail loan, the major contributor was the gold loan at 32.40% and home loans at 7.96% and agricultural advances at around 12.25%.

Okay. Yes. That's all from my side.

And of course, car loan has grown at a rate of around 5% and all.

The next question is from the line of [ Sudhir Mahajan ], an individual investor.

Lovely results. And I'm very, very happy that something is now moving the way we were expecting it to move.

So this is a New Year gift for all our well-wishers like you.

Sir, I just want a couple of questions. One is this NCLT referred cases. We have about INR 1,400 crores, which is stuck there. And what is the status of that? And what do you probably think will be the recovery on that?

You know, Mr. [ Sudhir ], many of the NCLTs -- they have not functioned for the last 90 days -- 9 months, for the last 9 months. So when once I think they start resuming their day-to-day hearing, majority of these accounts are likely to be resolved. However, we have, as of now, INR 1,408.17 crores portfolio, which are the accounts referred to NCLT. However, we have been making good provision also, INR 1,357.92 crores, that is 96.42% provision is there. So in the future as and when the resolution happens definitely gives us the sort of a hidden reserve for the bank. Going forward, it will definitely add to our P&L account also.

So what do you think you could have a recovery on? Just a ballpark figure.

I'm optimistic always, 100%.

I know that, sir. I know. I'm just trying to -- say, whether it's going to be 50%, 30%, 25%, 30%, about approximately.

Things will add to the profit. Let us hope for the best. See my principle is like this. You prepare for the worst and hope for the best. That's all.

True, true, true.

So we have -- if you go through each and every business numbers as well as our earnings number, if you further make a granular analysis, you will come to know. We have already absorbed almost all the future shock, that is, we have prepared ourselves well for the worst-case scenario. So in this NCLT also, even if the entire 100%, let us say, the worst-case scenario is not going to be recovered, it is already front-loaded and there is no impact on the future balance sheet. So whatever the recovery that happens, it is all going to help us in further getting -- declaring good profit as well as strengthening our further balance sheet.

Sir, one last question. Sir, in the last 10 years, approximately, your -- our bank, not yours, it's our bank, has generated about INR 10,000 crores to INR 11,000 crores of profit. Okay. Could you just tell me where the -- okay, INR 1,000 crores has gone into dividends and INR 1,000 crores is collected back from the shareholders. So that evens out. So I find there's something wrong somewhere either with the market giving us valuations that's giving us a valuation of INR 2,000 crores, whereas the bank has generated about INR 11,000 crores in the last 10 years. Could you just give me a ball figure where is this money gone in, sir?

Our net worth, which was at INR 2,429 crores about 10 years back, is now at INR 6,600 crores. So of this net worth of INR 6,600 crores, our equity capital is INR 311 crores.

Correct.

And of course, this is a part of our annual profit as well as the share -- whenever that we had issued the shares, the premium, everything is there.

But that in the share that you've given.

Yes. And going forward also. So this -- and by and large, I think you may be aware that around 70%, 72% of our annual profit is being flowed back apart from distribution of the dividend. So this all is there in terms of results. And of course, wherever the provision requirement is there, that is also taken care of well in advance.

Yes. No, I was just trying to just make a point that out of this INR 10,000 crores, INR 11,000 crores, our net worth has gone up by INR 4,000 crores. About INR 2,000 crores, INR 3,000 crores has gone into this thing. So -- but these are all the hidden thing of this bank. But I don't know why we are not able to bring this out.

See, what -- you yourself have said, in INR 1,000 crores plus I have in NCLT related accounts. And in the SR portfolio, we have about INR 140 crores. And in technically written-off accounts, we have about INR 2,000 crores -- yes, around INR 3,000 crores. See, this year also TWO recovery, even though it is tickling, it has slightly improved. So in future, these are all the hidden sources. Let us try to encash it.

Sir, what were the recoveries this year? So I didn't hear it properly, this year, in this quarter?

Recovery under which head?

Total recoveries.

Yes. Total recovery was INR 90.90 crores.

Okay. Sir for this gold loan, what is the real number? I don't want to see the quantum of rise, but what was the underlying number, sir?

It is now forming about -- what is the percentage. This is 4.57% of our total advances now.

So that comes about INR 2,500 crores...

About a year back, it was constituting 3.17% of the total loan book. Now it is 4.57% of total loan book.

That's about INR 2,500 crores. Is that -- am I correct?

INR 2,470 crores.

And gold loans, are they not much better yielding and secure than a lot of other things? A lot of banks have actually -- see now, the Manappurams and all these guys are borrowing from you and lending out.

So that is why we have started direct lending. There is money, no doubt. But there are risks. It is also a fraud-prone area. So we have taken abundant precaution. So 2x, dual appraisal and all such things. So that is why we have now gone ahead in this front in a reasonably aggressive manner.

Sir, about your credit cards and other things, how are you planning to -- this thing. Could that be another halwa money? Like some of the other banks make a lot of money from the credit card?

Credit card, individually, we have not launched any credit card from Karnataka Bank. But a co-branded credit card in association with State Bank of India is already launched. So that is SBI co-branded credit card of Karnataka Bank. So there, the response is very good, and we will further focus in expanding that portfolio.

How does it help the bank?

No. There sourcing commission we are getting without any this asset related -- credit risk is not there. Only sourcing commission we will get.

Yes, but the halwa is all going to SBI. We don't get any of the halwa.

No, some small portion we are getting compared to the...

Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to Mr. Aalok Shah for closing comments.

Yes. Thank you, Mahabaleshwara sir and the entire Karnataka Bank for the detailed presentation. Thank you, all. You can now shut down. Thank you. Have a great day.

Thank you. Thank you. Thanks to all of you. Once again, Happy New Year 2021 to each 1 of you. 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.