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

Good day, ladies and gentlemen, and a very warm welcome to the Karnataka Bank Limited Q1 FY '22 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, Aalok.

Yes. Thanks, Ali. Good evening to all on behalf of Monarch Networth. We welcome you for Karnataka Bank's Q1 FY '22 earnings con call. From the bank side today, we have the MD and CEO, Mr. Mahabaleshwara M. S.; the COO, Mr. Balachandra Y V; the CFO, Mr. Muralidhar Krishna Rao; and the CBO, Mr. Gokuldas Pai; and other senior management team. Without taking much of the time, I will request Mahabaleshwara sir for his initial comments, post which we can take the Q&A session. Thank you, and over to you, sir.

Thank you, Aalok, and good afternoon, all of you. And thank you very much for your participation. As in the past, this quarter also post many challenges, especially in the areas of growth management, asset quality management, employee health management, et cetera. Nevertheless, in spite of the tough situation, Karnataka Bank remained profitable. As far as the growth is concerned, we have been able to reverse the negative trend, as our June position has improved compared to the March position of 2021. So there is a positive traction, both in the advances side as well as in the deposit side. However, going forward, I'm confident that especially during this second quarter of the current financial year, there will be a significant improvement, as the NTB customers' credit inquiry is on the increase. Now as far as the asset quality is concerned, it has also further improved, as could be seen from the NPA numbers, both in absolute terms as well as in percentage terms, and also in gross NPA as well as net NPA. You all might have seen the detailed analysis that we have uploaded in our website, wherein the gross NPA was at 4.91% as of March '21, and now it is at 4.82%. During March '21, in absolute numbers, it was at INR 2,588.41 crores. And now it has slightly improved to INR 2,549.06 crores. About a year back, this was at INR 2,557.64 crores. And of course, percentage wise, it was 4.64%. As far as the net NPA is concerned, it was at 3.18%. That is sequential previous quarter, that is March '21, and now it is at 3%. In terms of absolute numbers, it is INR 1,642.10 crores, and now it is at INR 1,552.95 crore. About a year back, that is, as of June '20, the net NPA was at 3.01%, and in terms of absolute numbers, it was at INR 1,630.65 crores. So as a result, the slippage ratio, which was at 2.25% as of March 2021, you may be aware of the fact that there was a standstill clause for the first 3 quarters, and as a result, all the NPAs were recognized during March '21, and hence, the slippage ratio was also higher at 2.25%. Nevertheless, as against that, the slippage ratio for the current quarter is 0.83%. We had a gross slippage of INR 414.24 crores during this current quarter. As against this -- as against March '21, INR 1,175.92 crores. And as against this INR 414.24 crores, the reduction is INR 453.58 crores. Of that, recovery is -- by recovery, it is INR 270.38 crores and technical write-off is INR 180.82 crores. And the credit cost also remained at a lower level of 0.45% during this current quarter, whereas in the previous quarter, it was 0.67%, and 1 year back, it was at 0.80%. So provision coverage ratio has also further improved to 72.24% from 70.05% as of March '21, and 67.93% as of June '20. Of course, our capital to -- CAR, Capital Adequacy Ratio, is at 14.58%, excluding the current quarter profit. If the current quarter profit is also taken into account, it would be 14.79%. And of course, stress is never, not only in terms of the NPA, but also in terms of some SMA accounts. The SMA1 account, in -- during March '21, it was INR 2,181 crores, and it remained at almost same level, that is INR 2,608 crore as of June '21. SMA2, March '21, INR 1,393 crore, and as of June '21, it is INR 2,246 crores. So when we say SMA1 and SMA2, it includes all types of accounts that is the borrower wise. That means both the main account as well as the related accounts, and below INR 5 crores, also above INR 5 crores. Here, during the current season, you may be aware that the entire country was under the lockdown and only during the last 15 days of the quarter, that is, the first quarter, the lockdown was gradually reduced, and we had limited time for the renewal of the working capital. So in the SMA2 portfolio, if you make a further analysis, almost 50% of that is on account of nonrenewal at that particular point of time, which was subsequently renewed. So -- and we had limited time also, both the restructuring and the renewal related accounts. So that is the reason why there is a slight increase in case of SMA2 compared to March '21 and June '21. But now the position is almost at March '21 level. And further, as far as the profitability is concerned, operating profit has gone up by 7.96% compared to the previous -- sequential quarter. And on year-on-year basis, there is a decline to an extent of 38.82%. This is mainly on account of the reduction in the trading profit. Last year current quarter, we had trading profit of INR 355.37 crores, whereas in the current quarter, it is only INR 35.34 crores. So in spite of that, the operating profit is down by just 38.82% on a year-on-year basis, whereas on quarter-to-quarter, sequential quarter, it is up by 7.96%. Similar trend is also observed in net profit, whereas March '21, our net profit was INR 31.36 crores, and June '21, it is INR 106.08 crores, compared to INR 196.38 crores, about a year back, that is, June '20. So year-on-year variation is minus 45.98%, whereas quarter-to-quarter variation is plus 238.28%. Then digital areas, the digital transactions, which was at 90% as of March '21 has further improved to 91.63%. And retail digital underwriting, in almost all areas, it is having a positive traction, and KBL VIKAAS 2.0, that is the KBL Next initiative to emerge as the digital bank of the future. That is also where that particular initiative is also very much on traction. Further, our own wholly owned subsidiary that is KBL Services Limited, so that is also now effectively functioning. So our departments have started inventing for the business associates because KBL Services is going to help us in cost-efficient business support area. So that is a business support as well as the cost effectiveness. That is the main objective of KBL Services Limited. And going forward, I'm very confident that it will be a win-win model for both Karnataka Bank as well as for our subsidiaries in having a cost-effective banking model asset. Then, in yesterday's Board meeting, the Board also discussed about the need for the capital augmentation, especially through the QAP model, wherein a suitable -- few of suitable institutional investors likely to be onboarded. And it has already -- we have already indicated that up to INR 15 crores of equity shares. To that extent, we may think of QAP, but definitely not in 1 branch or so. The timing, tranche size, et cetera, it will be decided after the conclusion of our AGM, which is scheduled for second of 2nd of September, 2021. And going forward, definitely the priority for the bank, the growth management and the asset quality management. And on both the front, I'm very much optimistic because the growth momentum has already taken off during the first quarter of the current financial year. Asset quality concern is also effectively addressed. And hence, the net interest margin -- income, NII, which has shown a robust 25.19% growth during this quarter. And year-on-year also, it is positive at 7.41%. Definitely, it is going to be further improved, #1. #2, NIM also. So it was at 2.41% as of March '21 as against 2.89% as of June '20. Now it is at 2.98%. So our dream, as I in the past also, had mentioned while interacting with you people, our first effort is to take it to a level of 3% and above. I'm seeing that is not too far as far as the current year's performance is concerned. Definitely, we should be able to achieve the NIM at a very reasonable level, the expected level in the very near future. So with these few opening remarks, so let us open this session for the interactions. Over to you, the Operator.

[Operator Instructions] First question is from the line of [ Raja Jain ], an individual investor.

I have a couple of questions. See, your results are pretty decent compared to what other banks have reported. But the stock price is not reflecting that. I've been holding your company shares from last 2, 3 years. But the stock fails to perform. Is the management looking to actively to address this issue?

The performance is in my hand. Stock movement is not in -- neither in my hand, nor in our hand. So -- but I'm definitely optimistic. I'm also sharing my concern with you also. So going forward, apart from improving the fundamentals, improving the growth story, because as you have rightly pointed out, the asset quality is one thing which really stands out compared to almost all other banks which have announced the result. In that area, I'm very confident there is no sudden unexpected surprises going forward also. And in fact, all the big ticket advances of INR 100 crores and above, adequate provision is already made, and I'm not seeing any stress in that sector of my advances also. So that being the case, coupled with, the Board has also now decided to go for the QAP. So when a few of the institutional investors are onboarded, I'm sure that the stock market is likely to respond positively. Let us be optimistic. I'm -- we are all working towards that only.

The next question is from the line of [ Sudhir Mahajan ], an Individual Investor.

Congratulations. I'm very happy with the results.

Thank you.

We could do better and I am sure we will do better under your leadership.

Thank you, sir. Thank you.

Sir, but this enabling resolution on this capital expansion, I hope it's not going to be at the expense of existing shareholders by onboarding people at 0.3%, 0.4% of the book value, #1. And maybe if you could talk about that, it would be nice. And then I could ask you the second question.

No, please continue with your second question as well, Sudhir Ji.

Sir, I would like you to talk about the digital thing, what we are trying to aim and what have we achieved? And maybe if you have benchmarked with any of the other banks and how -- what -- where are we compared to say, ICICI or Kotak or someone in that digital journey?

Okay. So first one is your apprehension regarding onboarding of the institutional investors at a low book -- I mean, price of -- 03%, price to book. Yes, that is a call which we have to take, really, because without the digital -- I mean, the onboarding of the institutional investors, what would be the share price movement? Because in the past, we have seen that in spite of the sustainable and consistent good results, the share market has not reacted favorably in favor of our institute -- investors. So this was also deliberated at length in various forum also, because if you look at the investors' profile in the shareholding of Karnataka Bank, the institutional investors amount, that share, is a little bit on a lower side. So compared to the other peer groups. So considering that, we may have to take a call. That is why I said the timing and the tranche size would be decided by the Board in due course by duly taking care of the interest of all the stakeholders. That is #1. Second one is digital journey. In the past also, I have made it very clear about the thought process at Karnataka Bank. See, the current century, the first decade, it belonged to all about the core banking solution, wherein the Karnataka bank was one of the pioneers in adopting the core banking solution in its early period itself. The second decade of the current century, it all belonged to the alternate delivery channel, wherein a lot many mobile banking, Internet banking, POS and ATM related services got expanded. And definitely, the third decade of the current century, it belongs to digital underwriting of the loan. So considering that in our KBL Vikas transformation journey, we had laid a solid foundation towards this digital journey. And not only that, this digital initiative is going to drive the banking as far as the third decade of the current century is concerned. So from that angle, we had already started our digital center of excellence at Bengaluru, and the asset underwriting has started. And in each and every area of banking, may it be the banking products of the business departments or even the banking solutions of the support department, we want to have an end-to-end digital solution. So keeping that in mind, we have started our KBL Vikas 2.0 under the concept of KBL Next. So now your question is, how are you going to benchmark with the leader, the so-called leader. You have named a few banks. Definitely, going forward, the bank's digital journey would not only compare well with these well-established leaders in the bank, and I'm also confident that in few of the areas, we are going to create a new benchmark in the digital journey. That is the confidence and the preparedness that Karnataka Bank has at present. Yes, this is an area where all the banks are catching up. I'm very well aware of that. But you can be assured that your banks will not lag behind as far as the digital initiatives are concerned. Thank you.

The next question is from the line of Suraj Das from B&K Securities.

So the first question is, sir, roughly, if you can give us some color on the slippages breakup that has happened in this quarter, which is roughly around INR 400 odd crores. So what are the primary segments here?

Yes. See, agriculture slippage is around INR 43.25 crores; and CRE -- residential housing is INR 6.81 crores; education, INR 1.64 crore; and housing, that is, housing loans, around INR 58 crores. Then mortgage loans, around INR 18.45 crores; MSMEs, around INR 255.46 crores; and vehicle loans, around INR 10.67 crores. And all others, INR 3.95 crores, and personal loans, INR 7.18 crores. All put together, around INR 409.67 crores. And all these slippages are in the below INR 50 crores category. Not a single account slips in the ticket size of above INR 50 crores.

And the same on the restructuring side, so roughly, in this quarter, we have, I mean, restructured additional, something around INR 1,000 crores. So again, what are the major contributors here? And also...

Yeah, yeah, during this quarter, the restructuring is INR 924 crore. It was about -- below 1.80% of our total loan book. In fact, last time during the con call, I remember that we are expecting -- I remember that I have mentioned, we are expecting the restructuring in the range of around 5% to 6%. But this restructuring exercise is not yet over. You may be aware that we have to -- we have time for invocation of restructuring up to September '21. And by December '21, this exercise has to be completed. And going forward, there is -- in the past, also, our experience is that people preferred for repayment than the restructuring option. So I'm optimistic that that trend would continue. And of course, definitely, it would be well within the original estimate.

So that is roughly around 5%, 6%, you are estimating it. I mean it will turn restructuring to be in that range.

Under the Restructuring Framework 2 of Reserve Bank of India.

So under resolution 2.0. Got it.

We are closely watching. In fact, on day-to-day basis I'm also getting the digital dashboard. We are closely watching the position of the restructured advances. And the SMA portfolio, as well as the NPA. So that type of strict oversight is put in place. And that is the result. I should say that that is a result because not only me, all the top executives, even the regional heads, get this data and immediate action also follow. It is not that once it slips to NPA, we are getting the data. About 10 days in advance also, early warning system, that mechanism is also there. So that is why effective monitoring is there. And definitely, it is going to help us a lot in containing the stress in the portfolio.

Sir, we had exposure to one of the large coffee accounts as well. So if you can update us about the status of that account.

Yes, our -- during this quarter, I mean during the third month and the fourth month, there has been a recovery of around INR 17 crores. So even though we had provided 100% for that particular account, INR 17 crores recovery is there. And within another 2 to 4 months, there is an indication that that entire amount is going to be recovered. We have adequate security also for that. But we are confident that some things are moving in right direction. So I'm expecting full recovery within another 2 to 3 months period.

The next question is from the line of Subhankar Ojha from SKS Capital.

So just wanted to get a sense of this Board resolution of issuance of up to INR 15 crores shares. So this is almost 30% dilution, roughly. So are you ready for more seat in that case? You get such a large dilution?

First one is, INR 15 crores is the upper limit. So we don't consequently go to...

Yeah, so that will be on a fully diluted, it will be almost 30% plus?

Yeah. So this is the upper limit. The chances of going for the full INR 15 crores may not be there. But as a safety -- enabling provision that is made. And the terms and conditions, I don't think we can discuss on this platform, because the appropriate time depending on the mutual acceptability and all such things. As I said, the guiding principle for us is the stakeholders' value creation. So from that

It seems the line for the management is disconnected. Please allow me a moment to reconnect... [Technical Difficulty]

See what I was referring is, keeping in mind the larger interest of all the stakeholders, bank will take a call at appropriate time. So all the term and conditions of the QAP, whatever it may be, so it will be -- with -- through that, we'll be able to protect the interest of all.

The next question is from the line of [ Pooja Ahuja ] from Monarch Networth Capital Limited.

So firstly, I wanted to understand on the restructuring, what kind of provisions we have made on the restructured portfolio? And in general, in the past, what percentage of the restructured book have you seen slipping into NPAs? That's my first question.

Yeah, in the past -- see, this time while attempting restructuring, we have taken abundant precaution to ensure that only those accounts, which are -- which fulfill the requirement of the Restructuring Framework 2, and which are really going to be viable, we have taken utmost care of restructuring that only. That is the reason why we have seen about INR 414 crores slippage during the current year. So which are not viable and where we are not sure, we have not gone for the restructuring. Keeping that in mind, the future slippage from the restructure would be minimum. Even though at present, this is in the range of 9% to 10% as of now. And as far as your second question -- I mean first part of your question, the provision held for the restructuring. So at present, we have INR 432.38 crores. This much of provision we are holding. This amounts to 16.10% of the total restructured portfolio. The restructured portfolio, it was at INR 1,738.41 crores as of March '21, and the current restructuring added together, the total restructuring portfolio is INR 2,685. So our restructuring provision for that is 16.10%.

Sir, on your SMA1 and SMA2 book, so historically, what percentage of that has normally slipped to NPA? If you could show some light there.

No, slippage is from SMA2, generally. So right now, I don't have a number, Ma'am. Let me look into that, also.

Also, my last question was on your CASA, sir, just some sense on where do we see CASA book growing? And what percentage -- CASA percentage are we targeting? Do we have any number in mind?

Yeah, CASA, it is at 30.82%. Our original target was to cross 30% that we had already crossed comfortably. Going forward, it should be in the range of 33% to 35%. Now because this government business, provision is also made available to the private sector banks also. So we are in a position to encash that opportunity. So it will get further consolidated. My rough estimation is that it could be in the range of 33% to 35% in couple of years. 14% is the present CASA growth rate. 14.06% Y-o-Y.

The next question is from the line of Rishikesh from RoboCapital.

Sir, my question was, if you could give your guidance on credit costs for this year and next year on an absolute terms?

Credit, we are expecting to grow at above 15%, because during this particular quarter, that is, the Q1 of FY '22, we have seen positive traction in the credit side. And I'm optimistic that the credit growth will further pick up in the remaining 9 months period. So that is why we are optimistic of 15% plus growth.

Sir, my question was related to credit cost.

Credit cost, not credit growth. Okay. Credit cost would remain because last year, for the entire year, it was 2.37%. So it should be below 2% during the current quarter -- current year.

And next year, sir?

Next year, let us discuss during the next first quarter. It may show this trend, which is coming down also.

So sir, around, if we can say below to around INR 1,000 crores to INR 1,100 crores type of provisions, you are saying?

Yeah. Percentage wise, it could be like that. It would be below INR 1,000 crores.

The next question is from the line of Priyadarshi Srivastava from Monarch Networth Capital.

Sir, I wanted to know what is the growth that you see in the retail and SME space, sir?

Yes. See, retail, the growth rate -- for the current financial year, we have seen a growth rate of 4.58% in retail, and 4.49% in the mid-corporate sector. Growth rate, especially in this [indiscernible] that is, retail up to INR 5 crores and the mid-corporates in between INR 5 crores to INR 100 crores will get further -- move to double digits during the current second quarter. And that is why I said we will be focusing more on these 2 sectors rather than the large corporates. And here also, the areas that what we have selected is, the MSMEs showed a year-on-year growth of 20.76%. And of course, the gold loan, which has shown a growth of 40.81%. And the equipment loans to the contractors, which has seen a growth of 32.42%. And also the agricultural advances, which has shown 4.09%. So these are the areas which are likely to contribute significantly going forward also. So as I said, definitely, current year, the credit growth could be in the range of 15% plus.

Sir, what is your call on the provision -- how much accelerated provisions are created, sir?

Yeah. Accelerated provision, we have been making since the last 2 to 3 years. That is the reason why our provision coverage ratio has improved to 72.24%. And again, this is an all-time high. And since the operating profit is likely to keep the current trend of moving northwards, we will also accelerate the provision as the need be. And so as to have a healthy provision coverage ratio still, to further improve it. So that is the reason why I said the credit cost could be in the range of 2%. Otherwise, if you just look into the slippages, and provide the provision, the credit cost would not be in that range, but we still want to improve the provision coverage ratio or even maintained at this level. That would be the sole reason. So going forward, these numbers will look attractive.

[Operator Instructions] Next question is from the line of [ Riya from CG Philip ].

I just wanted [Technical Difficulty] those have been included in the restructuring this time.

Madam, can you please repeat your question? In between slightly there was disturbance.

Sir, I wanted more color on the restructuring book, as in, the -- what sectors have been included in the restructuring book?

We restructured our -- as I said, the opening balance was INR 1,738.41 crores, and now it is INR 2,685. The major areas of restructuring, one is MSME, retail and small business, that is the major area. So sector wise -- yeah, right now, I don't have. But this is mainly from the -- and 1 major account in a large corporate, it was in the trading sector, about INR 300 crores plus. That was the restructure in the major -- large corporate, that was the only account. Apart from that, all in the areas of retail and mid-corporates only. INR 900-plus crores, total.

That is in retail?

Mainly from retail and mid corporates.

[Operator Instructions] Next question is from the line of Aalok Shah from Monarch Networth.

Sir, a couple of questions from my side before I hand it to some of the other participants. We've seen some of the banks struggle with their gold loan portfolio, especially in terms of NPAs. What has been your experience here? That's my first question, sir. And can I take up the other questions as well, sir, before...

Please, please, please.

The second question, sir, here, is that you've talked about INR 400 odd crores of slippages. And if I understand that right, none of that slippages are from accounts above INR 50 crores of exposure. So that goes to so that it's more granular in nature. Would that be the right understanding?

Correct. Correct, correct.

And third...

See...

Yes, sir. Please, sir.

See, as far as gold loan is concerned, in that particular sector, our NPA as well -- that is, the slippage, NPA is at 0.34% of the portfolio. So here, what happens, once the NPA happens, the recovery as well as the auction, it takes about 2 to 3 months. That is why NPA percent is at the bare minimum level. And we also have this system of regular follow-up, once the account slips to stress category, then immediately, the parties are contacted and accounts is recovered. So if -- even after 90 days, if it remains as overdue, then we go for the auctioning process. So it is very much under control as far as the gold loan portfolio is concerned.

So sir, basically, what we've been hearing from some of the neighbor banks in the regions of your operation is that they have been facing lot of challenges on the gold loan portfolio, significant increase in NPA. And what I understand here is that that's not the picture with -- in case of Karnataka Bank?

Yeah. See here, 2 things, one is as far as maintaining the LTB, and it's a follow-up, regular follow-up. So we are keeping a close tab on the LTB breaches if any, and appropriate corrective measure is initiated then and there. The second one is our ETB customers as well as the NTB customers. So ETB customers, we know their history. And the NTB customers, these are all the new customers, and we have a separate follow-up mechanism for them also. So that's on the portfolio, as I said, even though it is growing at a [indiscernible] percent plus rate as of now, 40.81%, we are very optimistic of its health. That is why we are determined to take it to a level of 10% of our overall loan book. Now it is at around 5.5%. So that is the reason why we are optimistic on that particular portfolio. You may be aware of the fact that about 40%, 48% of our branches are in the rural and sub-urban area, where there is very good growth for the gold loans. So that we are now properly utilizing that opportunity to grow the loan book.

Sir, you -- so my next question here is that you've talked about credit cost as a guidance for FY '22. With the kind of run rate on slippages that we have seen, would you want to put a number to it, on the slippages front for FY '22?

FY '22, someone made an estimation, no? It could be in the range of INR 1,000 crores to INR 1,100 crores, something like that. So going forward, I think, definitely, that would be a number definitely worth achieving, less than that. Let us see.

[Operator Instructions]. The next question is from the line of [ Yash Tantawadia ], an individual investor.

So I just have a couple of questions and a couple of suggestions, but I'll just start. I just heard about this coffee account? Can I know the full value of the coffee account that you're optimistic on recovery?

Please repeat.

You just -- like, one of the questions -- people just asked about the coffee account.

Correct.

Yeah. What was the total exposure of the coffee account that you're optimistic on recovery?

Recovery, 100% is expected. We have already recovered INR 17 crores during the M3 and M4 of the current year. And within another 2 to 3 months, we are optimistic of recovering the full amount.

Yes, what is the full amount?

This is having about 120 -- it was having about INR 120 crores exposure. Now in the range of INR 113 crores -- no, INR 103 crores.

Yeah. So also, you have met a lot of institutional investors. So what has been their response and what are the concerns on this bank.

Response is quite positive. That is why we want to go ahead with that. They are all very happy about the fundamentals of the bank. So they have -- many of them have even started making their own due diligence as per the information available in the public domain. So satisfied, but we will take a call as appropriate.

Also, are there any plans of Karnataka Bank entering into the credit card business?

We are -- co-branded credit card, we are already into that. We have tied up with the State Bank of India. And since last 2 years, we are issuing a credit card. And our credit card base has already nearing a lakh.

Also, on the gold loan front, how are you planning to expand on that? Because I'm seeing a very big gold loan opportunity, especially in ruler India right now.

Sir, about 1.5 years back, our gold loan portfolio was in the range of 2.5% to 3%. Now it has already passed 5% of the loan book, and in couple of years, most probably by June 2022 itself, we will be able to take it to a level of minimum 10%. That is, as far as the growth is concerned. But equally important for us is its quality. So considering the stress in the general economy, we are keeping a close watch on it. That is why we are trying our level best to ensure that all the gold advances are well between the LTB and they are properly serviced, and stress is totally minimized. Stress as well as the slippages. And during the first quarter, we have been able to adhere to that and forward the system that whatever that we have put in place, both for gold loan sanction, as well as the gold loan monitoring, I'm sure we are moving in the right direction.

Also, this time, when I saw the results of Mahindra and Bajaj Finance, they had a lot of stress on their car loans, auto loans. Are you facing -- what percentage of your book is on auto loans? And what kind of stress are you seeing there?

In the car loan, we have 3.32% NPA. And of course, it is constituting -- the car loan portfolio asset, it is contributing 2.32% of our GBC. So the -- see, as I said, in all the sectors, not only in the car loan, even if you look into the girl -- housing loan or even the MSME sector or the cascade loan, it just appears to be very much under control, both in terms of slippage as well as in SMA accounts.

This quarter, there has been some tax adjustment. That's why the net profit has come to INR 106 crores. Can you explain that?

Sir, please repeat your question.

This quarter there has been a tax expense adjustment. That's why the net profit has come to INR 106 crores. Can you explain that?

Yes. Because what we have done is that, we have done INR 230 crores provision for NPA. We have also done around INR 182 crore write-off and standard advance provision has also been done. So all these 3 are eligible for deduction under income of tax. Total these 3 summed together worth out INR 500 crores. So to get a deduction on that, incomes tax deduction is available, and hence, there's a write-back of tax.

Also one more question, sir. The book value of your bank is, I think, around INR 216 to INR 217 right now, right?

Yeah, it's right. Book value is INR 217.

So the stock is trading -- as of today's closing is clearing at 0.26 of price-to-book value ratio. So I just had -- actually, Moneycontrol, if you're aware of an application called Moneycontrol, they are displaying the book value as INR 39.41. So I just wanted you to take a note of that because I have already e-mailed them several times, but there has been no response.

Yes. We will take it up. Sorry. Yes, sir. Thank you.

The next question is from the line of Suraj Das from B&K Securities.

So it's just a follow-up question. So sir, you said, in this quarter, you had roughly around INR 6.81 crores in the CRE book. So can I get the corresponding exposure of the CRE book? Because last quarter, if I remember it correctly, it was something around INR 2,200 crore. So what is the loan book here in this quarter?

CRE -- commercial real estate loan book size is INR 4,924 crores, which is constituting around 9.31% of the GBC.

Sir, the book has almost doubled, I mean, Q-o-Q basis, because last quarter -- based on the last quarter disclosure, the CRE book was at INR 2,177 crores. And right now, it is 4,935 crores.

No...

So is there -- has been a reclassification of some sort of that?

That was LRD, that is, the lease rental discount, that maybe what you are referring. LRD, that was LRD. See, what you are referring is the lease rental discount. But this commercial real estate for the current quarter, so this is -- yeah, last March '21, it was INR 4,923.72 crores. It is at same level, almost at the same level.

And sir, I actually missed the last point of the slippages breakup. So you said INR 10.67 crores from which segment, if I -- if you can repeat that slippages breakup again once again?

INR 10.64 crores, I didn't tell. Yeah, INR 10.67 crores is vehicle loans. Various vehicle loans.

The next question is from the line of [ Srinivas Rao from Karnataka Bank ].

What is the bottom line guidance for FY '22?

Bottom loan...

Bottom line. Profit.

So it could be at the same level because you have to factor in the treasury income that we got during the last year. So if it is on the same line, then it could be -- there could be a very significant jump in the bottom line. Otherwise, it could be on the same line because it is too early to project the bottom line as of now. We are focusing on the operational efficiency, the operating profit and other things. So that is the major factor which we have to factor in, the gains from the treasury operations.

The next question is from the line of Jai M. from B&K.

Sir, I'm on your slide number, wherein you have declared the rating of the accounts. So one second, so let me go to that slide. Yeah, Slide #26. External rating of your accounts. So here, sir, it looks like -- sorry, not this one, one second, the top 50 -- you had shared one slide on top 50 borrowers, right?

Correct.

It looks like -- so, AAA, 8 numbers, AA, 6, A, 6. So it looks like the -- 8 plus 6 plus 6, 20 borrowers are A rating or above, the 21st borrower is BBB rated, right? I mean you only have 20 borrowers, which are A or above. Is that right or -- I mean, the 21st borrower is from BBB category. And your 34th borrower is actually BB rated. Is that right or there is some error here?

No, no. See, we have totally 33 borrowers under the BBB and above rated, and out of that 50, and the balance 4 borrowers are the BB, B, C, D and the 13 borrowers are not with external rating. But all the top 50 borrowers are in standard category as of June '21. Whereas in the -- of that, one account was NPA, last time, this time, not even an account -- single account is NPA under that category, not only that, even SMA2 is also not there. Why we are disclosing all these things is, in the past, you may be aware of the fact that we have been slightly over exposed to the large advances, large corporates. And we were closely tracking the health of these corporates also. So that is why now, if you look into this, so it constitutes around less than 15% of our total loan book, top 50. And the stress is also not there. Not a single account is NPA. And as of now, all the accounts are performing. And the AAA rated, we are slightly, I mean, exiting from that particular sector, mainly because the yield is not up to the expected level. That is the only reason. So we are little more con -- I mean, concentrating on the BBB and A and AA without compromising the quality.

And second, in terms of your daily recognition, so there was an RBI circular which said that from starting from June onwards, all banks will have to migrate to daily recognition of NPA across all loans. I mean were you already there on daily NPA, even for Agri and smaller loans? Or you have migrated in this quarter?

Sir, we are one of the few banks, which have 100% -- which are 100% compliant to that particular sector -- circular, not only as of June '21, but about 5 years back itself. We have introduced this system of daily recognition of NPA and daily margin. Not only that, even the provision requirement, migration of provision, everything is automated. And this is being, I mean, followed very scrupulously at Karnataka Bank since last 5 years, more than 5 years.

Even for Agri loans and even small value loans.

100% of the credit portfolio. 100% credit portfolio.

Last thing on SMA, sir. So clearly, you have given a lot more details that currency platform, let's say, if I look at the SMA2, then the total number is INR 2,200 crores, but above INR 5 crores is INR 450 crores only. Do you suspect a weakness in the below INR 5 crores loan because a -- I mean considering the recovery is still low, I mean, the monitoring would still be low, and hence, you may not have much visibility on the health of these smaller value loans. Can that be a risk in terms of slippages, I mean these loans slipping?

See, we have a very clear granular details on each of these loans. So as long as they continue in our loan book, we don't differentiate between a small loan as well as a big loan. So the equal amount of effort and attention is being given for all those loans. And I'm very confident of the quality of the loan book. There is no big concern because we have a daily impact center meeting at all level. At the branch level, we have the huddle meeting. At the controlling office level, we have a daily impact center meeting which starts at 9:45 am every day, wherein each and every business aspect, including the collection, everything is discussed. And I'm also part of that discussion. These are the daily things that is happening. We also have the digital dashboard for all these things. So these are all the silent revolution that has happened in Karnataka Bank, because we thought that this is how -- would help us in developing a strong portfolio.

I now hand the conference over to Mr. Aalok Shah for closing comments.

Yes. Thank you, Mahabaleshwara sir, and their entire team for taking out you time and putting forward the thoughts and the results and the digital platform, which has been put in place by the bank. We really appreciate that, sir. Thank you all for joining in. You may now disconnect. Have a great evening. Thank you, Mahabaleshwara sir.

Yes. Thank you. Thanks for your kind participation, keen participation, and please take care of all those COVID-19 related health guidelines. And all the best to each one of you.

Thank you very much. Ladies and gentlemen, on behalf of Monarch Networth Capital Limited, that concludes this conference call for today. Thank you for joining us, and you may now disconnect your lines.