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

Ladies and Gentlemen, good day and welcome to the Karnataka Bank Limited Q2 FY'22 Earnings Call hosted by Monarch Networth Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I will now hand the conference over to Mr. Aalok Shah from Monarch Networth Capital Limited Thank you and over to you sir.

Thank you, Manisha. Good afternoon to all. On behalf of Monarch Networth Capital Limited, we welcome you for Karnataka Bank Q2 FY '22 Earnings Con Call. From the bank side, we have with us the entire senior management team represented by the MD, we have Mr. Mahabaleshwara M.S.; COO, Mr. Balachandra Y.V.; CFO, sir, Mr. Muralidhar Krishna Rao; CBO, Mr. Gokuldas Pai. Without taking much of your time, I would request Mahabaleshwara sir for his initial comments, post which we can take up the Q&A session. Thank you, and over to you, sir.

Thank you, Aalok. Good morning, and good afternoon to all of you. Thanks for evincing keen interest in the con call of Karnataka Bank wherein we will be highlighting Q2, that is Q2 FY '22 performance. Friends, in spite of COVID-19 pandemic adverse effect on the economy, of course, which continued during this second quarter also, our bank has been able to post strong numbers. That is the one important thing. And to begin with, let me highlight the 2 important areas where in the past also, especially by investors and analysts like you, had expressed concern, and let me address those 2 points. That is mainly in the credit area, the credit growth and the second one is the asset quality, including the stress under restructured advances portfolio. So, let me take up these 2 issues first, and then I will highlight the result-related numbers. As far as the credit growth number is concerned, I'm happy that we are back on the track as there is 5.17% growth over the previous quarter. That is as of June 21, we had INR 51,791.21 crores advances. Now, it is INR 54,467.94 crore. Thus, we are now that on growth trap. On a year-on-year basis, the important sectors which have provided the growth are the gold loans, we grew by 27.69%. This is YOY and high-rated NBFCs, we grew by 15.67%. MSME, 14.82% YOY growth rate. Loans to contract is 8.76% and of course, pharma sector grew by 36.77%. Going forward, I'm very confident about the growth momentum. So, the growth number may touch double-digit by third quarter and we should be able to reach our projected growth rate of around 15% plus by March '22. So, this is mainly on account of the fact that the business leads and its conversion is going strong and gaining momentum also. As far as the asset, the quality is concerned. Let me touch upon this issue by highlighting the NPA numbers, stress numbers under restructured advances portfolio. As far as the NPA numbers, that is the gross NPA is concerned. So, as of March '21, our gross NPA was 4.91%. As of June '21, it moderated to 4.82%. And as of September '21, it further moderated to 4.50%. Not only the percent, but even in terms of absolute number also, it was at INR 2,588.41 crores as of March '21. As of June, it came down to INR 2,549.06 crores, now further moderated to INR 2,501.12 crores. And a similar trend is also observed in net NPA. It was at 3.18% as of March '21, then came to 3% as of June '21. Now it is below 3%, that is at 2.84%. And in absolute numbers also, it was INR 1,642.10 crores as of March '21, INR 1,552.95 crores as of June '21 and 1546.11 crores as of September '21. And the NPA addition during this quarter, it is INR 445.36 crores. This is a gross addition, whereas the reduction is INR 493.29 crores. So, the reduction is more than the addition. Of this reduction of INR 43.29 crores, INR 309.04 crores came in the form of actual recovery whereas other write-ups, technical write-off and other things was INR 18.5 crores. So that's our slippage ratio stood at 0.88% for this quarter. For the June quarter, it was 0.83%. For the last year, the entire year, it was 2.44%. So going by this trend, I'm confident that our yearly slippage ratio would be less than the last year's slippage ratio of 2.44%. Now as far as the stress advances is concerned, let me touch upon mainly the SMA2 and SMA1. The SMA2 portfolio consisted of INR 2,245.75 crores as of June '21, and it constituted 4.24% of the GBC. And now, it has further come down to 1,599.73% that is as of September '21, and now it constitutes 2.87% of the GBC. So, that means from June '21 quarter to September '21 quarter, that is the sequential quarter, there is a reduction of 28.77% in the SMA2 portfolio. The similar trend is also observed in SMA1. I had INR 2,608.13 crores in the SMA1 portfolio as of June '21, and that constituted around 4.92% of our GBC. So, the SMA1, it has further decreased to INR 2,921 crores as of September '21, and it constituted 3.45%. So, that's INR 2,68.13 crore reduced to INR 1,921 crores. There is a reduction by 26.5%. And if you add both SMA 2 and SMA1, our June portfolio size was INR 4,853.88 crores. Now it is at INR 3,520.73 crores. Thus, there is a gross reduction of 27.47% And in the SMA2 portfolio, I said it is INR 1,599.73 crores. Here, above INR 5 crores constitute INR 606.11 crores. Last time I had shared with you that we are closely monitoring this portfolio with a digital dashboard on a day-to-day basis. So here, out of this INR 1,599.73 crores, SMA2 portfolio as of September '21. The latest position is it is further reduced to INR 188.38 crores. Even though above INR 5 crores, it constituted INR 606.11 crores, that is both the main accounts under related accounts, the same now stands at INR 188.38 crores. Another area in the asset quality is mainly pertaining to the restructured advances. I'm sure that all of you would be interested to know more granular details about this particular portfolio. As of March '21, our restructured advances stood at INR 1,738.41 crores. And as of June, we added INR 946.64 crores to this portfolio, and which stood at INR 2,685.05 crores. And June and September quarters are the quarters where we have implemented restructuring 1.0 and I-- mean 2.0 of the RBI guideline. So that means in the September quarter, we have restructured INR 1,658.44 crores of advances. So as a result, at present, a cumulative number of restructured advances, it stands at INR 4,353.49 crores. This constitutes 7.82% of the GBC. And out of this INR 4,353.49 crores, the NPA is INR 360.49 crores. And this, of course, again, this INR 360.49 crores is further reduced to INR 295 crores. This is the latest number. Of course, SMA2 of this INR 4,353.49 crores is at INR 401.43 crores and SMA1 157.79 crores. The most important initiative what the management has taken up recently is, I have created a separate special monitoring cell for these restructured advances. It is named as Restructured Advances Management cell, RAM cell. And this particular cell is headed by an executive. And on a day-to-day basis, they will be closely monitoring this restructured advances portfolio because during this third quarter because this restructuring has to be given effect latest by 31st December '21. So, we may have another INR 500 crores to INR 600 crores to be restructured during this quarter. So, all it could be somewhere between INR 4,800 crores of the restructured portfolio. So that means around 8% to 9% of our GBC. So keeping that in mind, we thought it fit to have a focused attention for this restructured advances portfolio. So, a separate cell to monitor the restructured advances is already put in place. And that is why I'm seeing some favorable numbers moving in a comfortable zone as far as the restructured advances are concerned. And of course, all other partly numbers are already shared. We have already uploaded our detailed analysis in our website. Data is also shared with the stock exchange. And I have already sent detailed e-mail to all the shareholders also that communication is also sent but nevertheless, let me briefly touch upon the important numbers. As you all know, net profit has gone up by 5.17% during this quarter from INR 119.44 crores to INR 125.61 crores. And operating profit, if you compare the previous sequential quarter, it was INR 384.83 crores, now at INR 389.59 crores. Interest income also marginal improvement compared to the sequential quarter, INR 1,523.50 crores, June '21, this quarter, INR 1,554.28 crores. Interest expenses, we have been able to reduce it from INR 948.71 crores as of June '21. Now it is INR 917.18 crores, which is mainly because of a reduction in the cost of deposits. NII, which was at INR 577.79 crores as of June '21. Now it is at INR 637.10 crores. And other income also, of course, trading profit, we have not been able to gain much in the trading portfolio. However, in the miscellaneous other income, there is a jump from of around 35.33%, YOY. But compared to June quarter, there is a reduction. June quarter, we had INR 181.18 crores miscellaneous income, whereas this quarter, it is INR 164.37 crores. Of course, total income remained almost at the same level compared to the previous quarter. It was INR 1,730.02 crores, now 1,725.15 crores. The expenditure also almost on the same line, previous quarter, it was INR 1,345.19 crores, now INR 1,335.56 crores. However, as far as the NIM is concerned, this is what all of you were asking many questions in the past con-call also. So as of June '21, it was at 2.98%. And March '21, it was at 2.91%. And now it is at 3.31%. So, I had been telling you that we are focusing more on improving the NIM to above 3%. So hereafter, I'm confident that we will be able to maintain the NIM at a comfortable level of above 3% because it is already a 3.31%. ROA has also improved from 0.49% as of June '21, 0.57%; ROE from 6.34% to 7.41% sequentially, Gross NP and net NP almost think the details I have already explained. Credit cost is at 0.24% for this particular quarter. For June quarter, we had 0.45%. For the entire year, it was at 2.37%. So going forward also, it will not bridge the March '21 number. It will be below that. Provision compared ratio, it is our endeavor to maintain the PCR at above 70%. So, now it is at 71.75%. Cost-to-income ratio is at 51.79%. It may hover at around the same level, maybe at around 50% and CRAR, now Tier1 is 11.98%, and Tier 2 is 2.50%. That is 14.48%, is our capital to risk-weighted assets ratio, and this is excluding the current year's profit. If we include the current year's profit, it will be 14.94%. And if we include the full standard advances provision, then the CRAR will be 15.47%. Then as far as CASA is concerned, this is now at 30.88%. June 21, it was at 30.82%. And March-end, it was at 31.49%. Of course, on a year-on-year basis, our CASA grew by 11.65%. And as far as Lease and advances is concerned. So it was at 9.05% as of March '21, came down to 8.93% as of June '21, and now it is at 8.91%, mainly because of the speed to market competition for the quality assets. And the cost of deposit also has shown a very good improvement from 5.29% as of March '21 to 4.82% as of June and now at 4.64%. So, as a result, our spread has improved to 4.27% from 3.76% as of March '21 and 4.11% as of June '21. So going forward, we will continue to focus on the growth management, especially credit and CASA. I have already given you the expectations of the management in that area. Stress management will continue to engage our attention, especially in 3 fields, that is the NPA management, the SMA management under restructured advances management. Capital augmentation is also engaging our attention. So, the Committee of Directors of the Board, it is interested with that responsibility. They have already met taken stock of the present situation and the future strategy is, all those things are discussed, and we will be taking it further depending on the market and other conditions. And the digital initiatives under KBL, it was 2.0 basically under the concept of KBL Next, it is progressing as per our expectation. A lot of digital onboarding of customers, both for the liability as well as the asset portfolio that is being given that the option is already provided. And as a result, efficiency enhancement in all the areas is being upright. I have an important announcement. I mean important development in the bank to be shared with you all which, of course, we have already shared with the stock exchange. With the approval of the Reserve Bank of India, the term of the presented Chairman, that is the part-time Chairman of our bank, Mr. P Jayarama Bhat, he will be completing his present return by 13th of November 2021, and the Board has recommended new PTC and also sent its recommendation to the RBI. We have received the RBI approval for appointment of new PTC. That is Mr. Pradeep Kumar Panja. He has been an independent director and with our board for the last more than a year. You all know that he worked as MD and CEO of the State Bank of Travancore initially for about a year period. Thereafter, with the State Bank of India as Managing Director, Corporate Finance section at the board level for about 3 years. So, this is one of the best value addition at the top level and he will be assuming the charge effective from 14th of November, 2021. So, with these preliminary few remarks, now the forum is open for any further clarification. Thank you.

Ladies and gentlemen, we will now begin with a question-and-answer session. [Operator Instructions] We have the first question from the line of Sarvesh Gupta from Maximal Capital.

One particular point which I wanted to investigate further was on your restructured book. So, while we have sort of been at the same level of NPA, but restructured advances are going up a lot. So first of all, I wanted to understand, in case you wouldn't have gone for restructuring of these accounts, how much of that would have flowed into your NPAs? And secondly, how do you look this I mean you have guided for INR 500 crores increase but what's the trend going to be March '22 and beyond? Like do you think that resolutions are going to happen here? Or how do you think this shaping up in the future?

What is your second question? I didn't get it.

I wanted to understand that how this restructure booking going to shape up as beyond December?

Yes, that is first question. Second question?

That's the first question only. I'll ask my second question after this.

Okay. So, your first question is had there not been restructured, what would have been the NPA? Sarvesh, we need to understand that this restructuring is and the Reserve Bank of India guidelines implementation under the restructuring 1.0 and 2.0, mainly to keep the economy going forward. And this is also a helping hand extended to the needy customers. So that hypothetical question, I may not be able to give you the numbers right now. But what I'm able to say is that need-based restructuring is done. And all these accounts, I'm very confident that going forward also, they will continue to be a performing asset. At the time of restructuring, also almost all these accounts were performing, it was mainly on account of the external factor. But as a banker, we need to be very, very conservative. And even if the restructure let us say, it fills up to, say, 10%, then we already have a provision of more than INR 690 crores for the restructured portfolio of INR 4,353 crores. Now, restructured standard for the entire standard advances portfolio, we have INR 690 crores. So, even if there is a let us say, 10% slippage, so INR 435 crores, I already have a standard advances provision of INR 690 crores. So, the future shop we -- generally, we will not allow it to happen like that. That is why I said all the preliminary steps are the require steps we have already initiated. Even if there is aberration in the future, this is already insulated in terms of providing of making upfront provision. So, we will be able to take care of the needs of the customer going forward also by fully protecting the health of this particular portfolio.

And I wanted to understand the trend beyond December. How do you look at this book, like you said, INR 500 crores can be added in this quarter and beyond December, how is it going to work out?

Where INR 500 crores is added to which portfolio?

Sir, restructured in this quarter is what your guidance was.

Beyond December, there is no restructure program at all. Restructure program last day is 31st December '21 as per the present regulator guidelines.

Sir, I mean do you see any significant reductions coming in this day remaining in the standard book? Or how do you feel that the NPA levels would be high from the book?

NPA is moderating, not only moderating, this number is also coming down, both in terms of percentage as well as in terms of absolute number. This trend is going to continue. I'm optimistic that by March '22, our NPA, gain NPA could be around 4% and this gain NPA could be around 200%. It is going to be further reduced because we don't have any big ticket advances causing concern. So, even during the current quarter also, even in the fresh addition to NPA, the large advances that has added the ticket size was INR 35 crores-- INR 31 crores. And that also got regularized subsequently. Yes, very -- in fact, very next day, it got regular because there was an element of out of order. So, we treated it as NPA and that got regularized on the very next day. So, that means the larger ticket advances becoming NPA is almost we have addressed that issue. And even the SMA2 also, I had one account of above INR 35 crores. which had -- which is -- which was in SMA2 and now also that particular account got upgraded to SMA1. So things are moving in the right direction.

Sir, on your CASA side, we have seen a lot of banks gaining CASA percentage. But in your case, it has been sort of stable. So, any thoughts around that?

CASA, as I said, in the -- of course, it is at 30.88%. And we are aiming for around 33% by March '22. So here, the most important thing is SB growth is there, but current account growth is not as per the expectations. This is mainly on account of closure of some multiple current accounts end by the borrowers with the different banks. As per the recent RBI guidelines, the working capital limits, if they had in one bank, they cannot have the current account in another bank. So as a result, in our bank, around 17,000 current accounts, we had to close. And on account of there is a negative growth in the current in the earlier months. And going-- once this is stabilized, I think going forward, there will be a robust growth in the core also, and that would help in improving our CASA portfolio.

We have the next question from the line of Chinmay Bafna from Anzen Insurance.

Sir, firstly congratulations on this quarter. I mean people thought that with COVID and everything, things will be worse, but I think you've come out much, much better and congratulations on that firstly. Sir, I have 5 to 6 questions, if you don't mind. I'll take some time of yours.

Then I should have a con call with you separately, Chinmay. Okay, but please keep in mind the time constraint and please be brief.

Yes, sir. I'll be very brief. Sir, many banks have shown interest to divest stake in subsidiaries associate companies. Looking at the current market scenario, where insurance companies are witnessing attractive valuations, what is Karnataka Bank's strategy around its exposure to Universal Sompo?

Okay. Then?

Sir, I mean the second question...

As far as Universal Sompo exposure is concerned, I have about 6% stake in that company. And for the time being, we will continue to hold that. And if at all, any revision is required, I will take it up with my Board, and we will take an appropriate decision which is most favorable to the bank as well as its shareholders.

And sir, income from treasury operations have slightly fallen this quarter and interest rates are expected to increase sort of in the coming future. And treasury investment income is going to stay under stress. Your mark-to-market portfolio of the bank is almost 24% of total investment with duration over 3 years. So, the compounding effect will happen due to that, how do you intend to manage the risk of MTM loss on this?

No. My CFO will take that question. Yes. Majority of our holdings are in HTM category. So, the depreciate market value impact as far as the accounting is concerned, it may not be there. Our AFS portfolio depreciation is not very material. So, balance sheet impact may not be there. Yes, portfolio impact will be there. But definitely, this portfolio we are building up as the interest rate is increasing, we are building up. And definitely, we foresee that if not this year, next year, the correction of the interest rate will happen and there will be opportunity.

And also, sir, with this growth of 15% going forward, there was 2- 3 players of right issues over the last 2 year, I saw on in 2020 and then again in 2021 of a QIP. And South Indian Bank has been able to raise a small amount around INR 250 crores. So are we likely to see the QIP coming through?

QIP, our shareholders have already permitted, we are evaluating the situation. Not many things have already lined up as in the most advantageous position, at the right time and the right price, we will be in a position to take it forward. That is number one. Number two, I have already highlighted the capital adequacy ratio. So, as far as the CAR is concerned, it is at a comfortable level. Also, one of the factors which we have to factor in.

And sir, on the fintech companies are causing a huge disruption right now in the finance industry. This could result in the consolidation of the banking sector as well? And how does KBL management see this space in the future, sir? And also, I mean, do we have any exposure to cryptocurrency accounts like oil BCX or any of these players holding money with our bank?

So, a lot of collaborations we have already started during our KBL because 2 transformation journey under the concept of what I said, KBL Next. So, each and everything about the fintech, about the start-ups, how they are going to propel our growth dreams, how we are going to collaborate with them because no bank can afford to treat them as a competitor. This is a new disruption that is happening and even bank has taken note of it, and we have made a lot, many initiatives in those areas. As I said, our --initially, we have started with the underwriting of the loans in a digital platform, and we are also looking into the CASA-related things. New bank -- neo-bank concept is also being thoroughly examine. All those things are being taken care of. That is why I have kept our transformation cell headed by our GM totally focused on this particular asset. And now the bank wants to emerge as the digital bank of future I think that will sum up our overall, I mean, focus on this particular digital area.

Sir, do we have any exposure...

The exposure you said we don't have.

Okay. We are not opening accounts for any one of these small-head companies...

No.

And sir, one more thing. Most of the mid-size and large private sector banks are increasing their focus on treasury and trading currencies, rate products and so on and so forth to manage the impact of reducing net interest margins. How does KBL look at this? And do we have any plans to increase our treasury operations and trading in currency and FX derivatives and so on and so forth?

Yes. Both it is engaging our attention. In fact, my board has already permitted me to shift my treasury, integrated treasury to Mumbai that we will be doing very shortly. We will be shifting. As of now integrated treasury is at Mangalore only. So, we have already taken an in-principle consent from the board, and this has to be now affected. That will be done very sharply. And other areas where there is good scope for earning money on day-to-day basis. So, we will also be focusing on that.

And sir, last question, Universal Sampo, your subsidiary is in the process of launching a product for enhanced deposit insurance. So right now, DICGC covers INR 5 lakh of regular deposit insurance. This is being planned to increase as an insurance product to INR 30 lakhs or INR 35 lakhs. And the cost of this would be quite normal is only 5 bps to 7.5 bps. So do we see any sort of interest from the bank side on this? Do you think it will help, especially we're looking to increase your CASA on the retail front?

Let me correct your question. Universal Sampo General Insurance Company Limited is not a subsidiary of Karnataka Bank. We are promoter shareholders of Universal Sompo General Insurance Company and my shareholding as of now stands at 6% only. That is the first question--first answer clarification. The second one is, whatever the product that they launched, since we are the channel partners, we also evaluate it internally, and then we give our consent for the sale of that product in our bank. So, our department is evaluating this new product. Once they share that particular product with us, we will evaluate and then we will take an appropriate administrative decision.

And -- but do you see a large potential in this in general for the banking sector and for Karnataka Bank also?

I won't be so the evaluation, I can't answer this question Chinmay. I think I may not be able to.

We have the next question from the line of [ Sher Surya ] from [ PMS Vantage Holdings ].

Going forward, what SaaS bank is contemplating to diversify into the insurance setup depression move into the insurance set up?

Yes. No, I didn't get your question properly, Mr. Surya. Will you please repeat that?

You are telling that you have some 6% holding in insurance venture?

General Insurance Company, correct.

What is the future plan for a clear cut -- I mean, increasing in the bank exposure to the sector?

If there are any plans for further capital augmentation and there are only limited shareholders in that company. So if they offer it to us, we will evaluate at that time. That is why I said in the beginning itself, all those decisions, we have to take finally, keeping in mind the bank's interest and the shareholders' interest. So, whenever effect the option comes, we will evaluate and respond at that time.

We have the next question from the line of Jai Mundhra from B&K Securities.

One is on the restructuring number. So, it looks like in the last call, you had mentioned that restructuring is going to be unchanged-- I mean the guidance is going to be unchanged at around 5% to 6% of loans. That was at the time of the 1Q call. And now that number has gone up to 8% and there is some more pipeline also and then -- so is that the number has surprised you? Or how should one make out of this number because that number has clearly gone up too much in a very short period of time. See, restructuring under the -- our restructuring of this resolution framework 1 and resolution framework 2. So, we had estimated around INR 2,500 crores addition under this particular sector. So, since we already had about INR 1,738 crores as of March '21 and now it is at INR 4,353 crores, so additionally, we're still within that range only, INR 2,615 crores? So, it may go up by another INR 400 crores to INR 500 crores. That is the thing. So in totality, around 9% of our loan book would be the restructured one. That is number one. Number 2, many of the customers with whom we have interacted and who have opted for restructuring, they had opted it as a precautionary step. So -- and they have also avoid GECL and all facilities. And if you remember in the past, when the moratorium was extended, about 51% of our customers-by-value had opted for moratorium. And at the end of the day, only about 1% to 1.5% stick to--there was a delinquency up and around 1% to 1.5%. So here also, I foresee as a very precautionary sort of step opted by our customers. So, that is why even though it is at around 9%, I'm not much worried about this particular portfolio. Nevertheless, as I said, it definitely deserves our top most attention. That is why we have put in place those steps of effective monitoring of that particular portfolio. And added to that, this particular restructured advances portfolio, we have already provided around 13% of that portfolio as a provision. So, even if the worst-case scenario let us say, 10% slippage, even if it is there, I think it will not affect our future profitability and other things. So the question, I understood the math. What I'm saying is, has this number surprised you negatively?

No. Not at all.

Okay. So you are not negatively surprise wise restructuring going from 5% to 9%.

It is, again, Mr. Jai dependent on the external factor. So customers call it the final -- if they are eligible for restructuring facility as per the Reserve Bank of India guidelines then in such cases, we have to oblige. So, there is no person of denial. But we -- in all these cases, what we did is, before taking up that particular proposal for the restructuring, it's a suitability as per the Reserve Bank of India guidelines and also the viability of the restructure. And all such things have been usually taken care of. One of the prerequisites there are availing-- one of the pre-requisites restructuring. So, some of the customers opted under that particular category as well.

Okay. So some of -- for GECL, there were some preconditions for the restructuring, so they've got themselves restructured and got the...

For a certain period.

Sir, is the appointment of Mr. Pradeep Kumar. So, I think this is a significant move. But if you can -- I mean correct the understanding. So, Karnataka Bank for a very long time, had been only internal people who have joined Karnataka Bank like you and the previous chairman who were all in let us say Karnataka Bank employee, they were MD and Chairman. And this is sort of a new change that an external person is coming in as a chairman of the bank. What does this suggest, if you can throw some light there?

No. In the last past also, we had 3 chairman from other banks. If I remember correctly, we had one chairman by name, Mr. Raghuram. He served the bank for about 5 years period. He was serving in one of the banks in the overseas. And we had another chairman who was external person, Mr. U.V. Bhat as the Chairman for about a 2-years period, then we had another Chairman called Mr. Sundar Rao. He was our Chairman. At the that time, Chairman was the CEO for about 5 years, he was from Syndicate Bank. So, that tradition is there. So, it is basically the suitability. So, we don't think that a person should only from inside or from outside. We don't have any such watertight method or the requirement. So, depending on the requirement and the changes, we have our people as PTCs.

And just one data keeping question, sir. If you can GECL outstanding, that will be very helpful.

GECL outstands will come. We will let you know later. Mr. Jai, I will give you the exact number. I think around INR 2,000 crores plus. We will let you know later.

And this includes GECL 4, right, which is the investment GECL 1.0.

1, 2, 3, 4, everything is included.

Right. No, no. So I'm asking the definition why is the 4 is the one additional disbursement to the GECL wise?

Correct.

We have the next question from the line of [ Yashwant Kumar ], an Investor.

So one, why is that we are not taking aggressive provisioning to make our PCR more than 80%? So that is one thing. And then I'm just reading out that the business strategy that you have mentioned in the investor presentation, so it's a minimum space maximum business. And we are planning to build a 2.4 lakh square feet office. So, how should somebody read this, having said, we are looking for a funding to raise our...

So you have 2 questions. The first question is PCR. Mr. [ Yashwant Kumar ], you may be aware of the fact that this PCR is basically dependent on the provision requirement as per the IRAC comps. Earlier in the coming I mean, all along, we have been making provision as per the IRAC norms and no additional provision was being made. So, now what is happening is since the last about 3 years, we have started making provision over and above the IRAC norms. That is why our PCR is at above 70%. So, your suggestion is good. As and when our profitability improves, definitely we will aim for 80% PCR, as suggested by you. Second one, Yash, is regarding the minimum space and the maximum utility that we have projected, maximum business. And at the branch level and the regional office level and all, the sort of wherever we have the leased premises. So there, we have cut short this office requirement. This is mainly from the point of view of the fact that now the digital transactions are happening through the digital platform, and it has reached a level of around 91% plus. So, that being the case, customer traffic to the branches have considerably reduced. So, we thought that this is the right time to rationalize the space at the branches. So, that is the reason why we adopted this principle of minimum space and maximum business. Your question is why you are proposing a building, a centenary building at Mangalore. See, now almost all the activities are being run through the back offices. So, we are strengthening the back offices, strengthening our risk management team, strengthening our compliance team and a lot many sanctions, almost all the sanctions are happening at the centralized location now. So, that has helped us in improving the efficiency and also in improving the quality on a sustainable basis. So, even though customer interaction business premises requirement is less, the back office requirement is very much there. So keeping in mind, we have planned for this, and that is also to commemorate our centenary year, that is by '23, '24. Yes, the cost aspect, as you have said, we will be very, very considerate. But wherever we will be in a position to have this type of that of having a back office at places like very costly places like Mumbai and very-- a place like Mangalore, where the top and the land value is very cheap, it makes a huge difference. We will be very much considerate only the need-based requirement will be taken care of. This is also thoroughly discussed by my board, and they have given a lot of suggestion. We will be, I mean, taking a decision in due course in this regard as well.

And one last question with respect to operating profit per employee and the branch. So, there is a down trend towards, I mean, refer to the operating profits. So I mean, can you show some basically, you have an explanation number, please?

You will be better positioned to understand Yashwant because operating profit from core business, we have been able to do well. Operating profit also includes the trading profit. The trading profit for the first half of the last year, we had about INR 510.55 crores. This half year, it is only INR 31.84 crores. I think that explains the entire difference. And you know that trading profit, again, it depends on the market conditions, external factors. Last year, we had a very good opportunity. This time, that opportunity is not there. But we will be focusing more on the core business. I will be able to make good offset going forward.

And noting that the e-commerce transactions, again, I mean is, I mean, from past 2 years, there has been a rise in e-commerce transactions across the banks. But in Karnataka Bank, I see that the e-commerce transactions have gone down. So, any particular reason for it?

Yes. My CBO will take that first. Mr. Gokuldas.

Yes. In fact, our digital taverns have more than 91.6%. As far as the e-commerce, the right to, yes, it has gone down both by volume and amount. And it's mainly because of our UPI transactions have seen a marked improvement.

So, that may be the reason. There may be a slight migration from the e-commerce to the UPI-based transaction. But anyhow, we will again get it thoroughly examined.

We have the next question from the line of Siji Philip from Axis Securities.

Within the restructured book, could you give a sectoral color as in what segment, what business segments are constituting the restructured group?

Yes. Agriculture, around 4.77% of the portfolio is restructured. Commercial real estate, 0.02% of the commercial real estate book is restructured, housing around 11.42%. So, that means the individuals have opted for the restructuring to the maximum extent, infrastructure, 3.22% of the loan book of that infrastructure is restructured. And in the MSME, around 11.2% of that portfolio is -- they have opted for the restructure. And other personal loans, including education loans and vehicle loans all put together, around 14.71% of that portfolio, they have restructured. Whereas the large industries and services, it is around 10.26% of that portfolio. Overall, it is 7.83% of the GBC.

We have the next question from the line of Pooja Ahuja from Monarch Networth Capital Limited.

sir, most of my questions have been answered. Just wanted to understand about, while you did mention that the impact was due to the RBI guideline on the CASA book, so how has the growth been in your savings account book?

Madam, I'm not able to get your question. Will you please repeat?

Sir, the CASA has remained stable sort of sequentially and you attributed that to the closure of some current accounts -- so how much has been the growth in the savings account?

Savings account growth year-on-year, it is 13.68%. The savings account, there is a robust growth. CASA, yes, it is a temporary operation. That's how.

And how has been the growth sequentially?

Sequentially, See, by SB balance was INR 19,233 crores. And now it is -- that is sequentially, INR 19,230 crores to INR 19,668.25 crores. Year-on-year, it is INR 17,300.84 crores to INR 19,668.5 crores.

We have the next question from the line of Krishna Srinivas, an Investor.

I had just 1 question in terms of -- you had mentioned that you have been empaneled by the government. So, have you seen any kind of fund inflows into any deposits or any government agency till now?

Mr. Krishna Srinivas, it is not entrant by the government. It is the agency arrangement. We have been designated as agency bank by the Reserve Bank of India. With that help, we can approach the government departments and we can get the government business. So that action has already initiated. We have approached the many state governments, many state government departments and a few of the central government department also, and things are moving. And in due course, we will be able to get --I mean, reap the benefit out of this agency arrangement.

Ladies and gentlemen, due to time constraints, that was the last question. I would like to hand the floor back to Mr. Shah for closing comments. Please go ahead.

Thank you Mahabaleshwara sir and the entire team for taking out your time and taking us through the journey of Q2 and how things look forward. To the participants. Thank you all for joining me. Mahabaleshwara sir, you have any closing comments?

Yes. Thank you very much. And a lot of people have evinced interest and it is our collective responsibility to come up to the expectation of each of you. We are really trying hard and you can see very good all-round growth growing forward. During -- under this very trying condition of the Q2 because there was a very severe impact of COVID almost for the first 2 months, we have been able to provide this type of consistent and forward-looking sort of business numbers during this Q2. And I am confident that going forward, we will be able to build on these numbers. Thank you, Aalok.

Thank you, members of the management and Mr. Shah. Ladies and gentlemen, on behalf of Monarch Networth Capital Limited that concludes this conference. Thank you for joining and you may now disconnect your calls.