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

Ladies and gentlemen, good day and welcome to the Q3 FY '22 Earnings Conference Call of Karnataka Bank hosted by Investec Capital Services. We have with us today Mr. Mahabaleshwara M S, Managing Director and CEO; Mr. Balachandra Y V, Chief Operating Officer; Mr. Gokuldas Pai, Chief Business Officer; and Mr. Muralidhar K Rao, Chief Financial Officer. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mahabaleshwara M S, Managing Director and CEO. Thank you and over to you, sir.

Thank you, ma'am. Good evening to all of you. A warm welcome to each one of you for the Q3 results con call of Karnataka Bank. I'm happy that third quarter also has been another quarter of success and also this is a successful quarter of satisfactory performance and consistent results. Our efforts in successfully navigating through the COVID-19 affected economy is yielding the desired results without any major negative surprises. As in the previous quarters, this quarter also we continued to focus on asset quality improvement as well as credit growth and digital initiatives. As far as asset quality is concerned, let me briefly touch upon the NPAs, SMAs and the restructured loan book. As far as the gross nonperforming assets are concerned, during this particular quarter it declined by INR 170.60 crores from INR 2,501.12 crores as of September '21 to INR 2,330.52 crores as of December '21. So in percentage terms, there is 39 basis points decline from 4.50% during the sequential previous quarter that is as of September '21 to 4.11%. Similar trend is also observed in NNPA, which has gone down by INR 186.22 crores from INR 1,546.11 crore as of September '21 to INR 1,359.89 crore as of December '21. So percentage wise, here also we have seen 39 basis points dip that is from 2.84% as of September '21 to 2.45% as of December '21. As a result, the slippage ratio has further improved to 0.56% from that 0.88% as of September '21 and the credit cost also has improved to 0.20% during this quarter from that of 0.24% during the sequential previous quarter. When we look at the SMA-2 portfolio, during March '20 we had SMA-2 of INR 3,453 crores, which was constituting 6.60% of our performing advances. This has come down to INR 1,393 crores during March '21 and representing 2.78% of the performing advances and now as of December '21, it is at INR 1,155 crores, which constitutes 2.13% of the performing advances. Similar trend is also observed in SMA-1 wherein we had 5.32% of the performing advances under SMA-1 during December '20, that is a year back that is INR 2,785 crores and it has further improved to 4.35% that is INR 2,181 crores as of March '21 and the latest number is INR 1,487 crores, which constitutes 2.74% of the performing advances. So here I should say that mainly on account of improved credit monitoring mechanism, we have been able to contain the SMA, contain the slippages as well as contain the NPAs. As far as the restructured advances portfolio is concerned, our total restructured advances portfolio constitutes INR 4,690 crores inclusive of INR 319.90 crores NPA and this is 8.27% of our GBC. And for this entire portfolio of restructured advances of INR 4,690 crores, we have an overall provision coverage of 16.10%. And here the NPA is INR 319.90 crores that is it constitutes around 6.82% of the restructured book. However, for this NPA of INR 319.90 crores, bank has a provision of 53.53% amounting to INR 171.24 crores. As far as credit growth is concerned, year-on-year the growth is 4.40% and for the current year that is 9-month period it is at 5.44%. So some positive traction is happening in the credit area. The important growth sectors for us during this 9 months period is mainly drugs and pharma sector, it has grown by 49.41% and NBFC sector has grown by 46.12%, MSME sector has grown by 27.93% and gold loans have grown by 15.40%, contractors loans by 9.09% and agri crop loans by 5.59%. Hence on account of positive traction in credit and improved asset quality as well as reduced slippages, the net profit has gone up by 8.27% to INR 146.57 crores from INR 135.83 crores (sic) [ INR 135.38 crores] as on December 31, 2020. During September '21 quarter, our net profit was INR 125.61 crores, that is the sequential quarter. Thus during this sequential quarter the net profit growth is 25.61% that is from INR 125.61 crores as of September '21 to INR 146.57 crores as of December '21. Another important development is in the area of CASA. Of course CASA is consistently improving. It is now at 31.30% as against 30.88% as of September '21. PCR has also further improved. As of March '21, it was at 70.05%; September '21, it improved to 71.75% and December '21, that is the latest 73.74%. CRAR where we had 14.85% at March '21, now it is 14.15% excluding the current year's profit. If the current year's profit is also accounted, it will be 14.87%. That is almost at the same level as of March '21. As far as the digital initiatives are concerned, our digital transactions to total transaction, it was at 83.50% about a year back that is as of December '20 and now it has further improved to 92.64%. Of course digital underwriting of loans is on positive track. KBL Xpress home loans digital underwriting has further improved to 68% of the total loans sanctioned on day-to-day basis. Car loans 78%, cash loans -- KBL Xpress cash loan that is for salaried class, it is 100%. MSME loans also we have been able to have digital underwriting to an extent of 70%. So all in all, our effort will continue to focus more on credit growth, CASA, asset quality improvement and digital banking initiatives in accordance with our transformation journey KBL Vikaas 2.0. With this brief opening remarks, now the forum is open for further deliberations. Thank you.

[Operator Instructions] The first question is from the line of [ Yashwant ], an Individual Investor.

Congratulation for a good set of numbers. The only concern that I have is still I see that the restructuring is on rise from 3 quarters. So that's my first question. And the second question is about the initial goal that we had that the overall business we would be able to do to like INR 145,000 crores or otherwise 15% -- 12% to 15% of growth for this fiscal. So do you still think that it is possible to achieve that in this fiscal having the current situation in place?

Okay. You have 2 questions. One is on the GECL, second one is on the growth. As such -- first one is the restructured not GECL. As far as the restructured advances is concerned, Mr. Yashwant, last time I had told that another INR 600 crores worth advances have already been invoked for implementation during this quarter. As against that INR 600 crores invoked for restructuring so eventually we could get the applications as well as the implementation for only INR 330 crores. That is the first one. So that means the restructuring has not gone up as originally we had estimated. And of course as I said, restructuring advances portfolio is continuously engaging our attention. We have already constituted a restructuring asset management cell and as a result, the restructured advances portfolio, the stress is also significantly coming down. If you look at the September '21 restructured advances NPA, it was INR 359.19 crore and this was constituting 8.25% of the restructured portfolio and now it has come down to INR 321.40 crores, which constitutes 6.85%. Similarly, the stress of the restructured advances under the SMA-2 category. It was -- September '21 it was 9.22% and now it has come down to 8.07%. So the restructured advances portfolio is not causing any concern, but a continuous vigil that we are exercising. As far as the second question that is the growth is concerned. Yes, we are still committed for this for the simple reason we had a good number of undrawn balance especially in the credit during the December '21 period also. In fact the undrawn balance in the OD limit that is INR 1 crore and above, we had about INR 4,434.98 crores and the unavailed sanctioned limit to an extent of INR 3,293.78 crores. That means all put together, INR 7,728.76 crores. So because of the sudden spurt in the Omicron and other things -- negative sentiments observed in the economy as a whole so borrowers just deferred their drawing to this particular quarter and we are seeing a consistent growth in the credit since last 2 weeks that is the second fortnight of the current month. I'm optimistic about this so that is why we are not going to revise our business estimates for the current financial year. I'm very confident that we would be able to see robust credit growth during this quarter.

Okay. And I mean from past 3 weeks or otherwise, we have been talking about bringing some institutional investors to -- as stakeholders. So are there any real good interest on this front from the investors or otherwise we still would want to get into good numbers and that's when we would want to raise the capital?

Regarding capital augmentation, you know very well that we already have shareholders' consent. A view will be taken at the appropriate time by following all the due process.

Okay. And sorry, one last question with respect to the CCD exposure. So we -- I mean I remember that in Q2, you had expected that some -- that account to be a performing asset. So is it the same or otherwise we are still hoping that to be a performing asset?

It is still continuing as an NPA, and there are certain proposal for its revival also as well as the repayment by disposing of the assets which were marked to us. We are exploring both.

The next question is from the line of [ Yash Dantewadia ] from [ Dante ] Equity Research.

So I just wanted to understand in terms of loan growth, what kind of guidance can you give? You've given a guidance of I think 10 -- I think 12% to 15% earlier so I think that is something I want some more clarity on. That's my first question.

I still hold on to the earlier guidance.

And do you think the majority of this loan growth will come through digital underwriting?

No. Digital underwriting we are doing only the retail advances of up to INR 5 crores ticket size. So my aim is to have 80% of our digital -- 80% target for our digital underwriting going forward. It may happen within a year or so. So that is one area where the growth we are focusing, that is the retail sector. But our major growth during this current quarter is going to come in the mid-corporates that is INR 5 crores to INR 100 crores ticket size.

Okay. Also in the investor front, you didn't really answer the question in terms of how is the interest looking like? I mean obviously I know you won't get into specifics and you can't get into the specifics. But in terms of interest front, like what kind of interest are you getting from the market? Because the last update I remember, you've given a con call when you said that investors are going through the loan book, right, like they are going through the data, et cetera, et cetera. Am I right about this?

No. As I said, all efforts are being made. So since we already have the shareholders' consent, we will be taking a view at the appropriate time by following all the due process. So there is a lengthy process, it has to be followed.

Yes, I get that. I just wanted to know in the interest front, what kind of interest we should -- okay, I get that. Also coming to the loan growth front, are you -- the loan growth in this quarter has been pretty average. So is there no demand for loans? And you're still holding on to your previous guidance. So can you tell me how you're going to go about it? What are the initiatives you're taking to go about the 10% to -- 12% to 15% guidance?

See, the loan growth especially the loan origination is robust. As I said, I already have a very significant amount of undrawn limit as well as the unavailed sanction limit. So the borrowers had temporarily postponed its availment, which is now having a positive traction. So as a result, I am confident that we should be able to clock the guidance -- credit growth guidance whatever that we had said at the beginning of the year.

Also that will be all. I'm really happy that the gross NPA and the net NPA is coming down significantly and since you're taking into the guidance, that is the icing on the cake.

We have been consistently performing. I think in all these areas if you look at all the previous 3 quarters, there is no negative surprises and the growth is happening in the desired sectors. That is what we have all disclosed in our analysis of financial results.

Yes, definitely. Also there was this coffee estate NPA I think about INR 100 crores to INR 120 crores, you were expecting the repayment coming in soon. Is there any update on that?

No. We had already received about INR 17 crores during the Q2 and another -- see, this is efforts are going on. They are also making efforts so there will be either a restructuring of that or there would be repayment by disposing of their assets. It is also being examined by the present promoters.

Okay. What percentage of your net NPA is that? If you can give me some insight in the terms of amount? What amount is pending?

You want to know the percentage of that exposure to the net NPA?

Sir, you can either tell me the percentage or you can tell me the amount. Both is okay.

That we have provided fully and it is technically written off also. It is not forming part of the net NPA at all.

Yes, I'm aware that it's written off, but I was just hoping on getting the amount since -- because if it comes back into the book, it's obviously, a profit, right?

Yes, it is around INR 100 crores.

INR100 crores. Okay. If I'm looking at the other bank performing and the way they have performed, I think especially in a small market capitalization bank like Karnataka Bank, I think we've outperformed most of the other banks in terms of constant profitability and the NPAs are pretty low if you compare it to some of the other smaller banks. So I'm really happy with that. Thank you so much for your effort in guiding.

Thank you for that critical observation.

The next question is from the line of Manish Dhariwal from Fiducia Capital Advisors.

Continuing from the previous conversation, I would like to compliment the team for the splendid efforts that are being put in. Having said that, I would like to understand in a little more granular manner the opportunity that Karnataka Bank finds for loan growth. See, like when one looks at all the banks starting from HDFC and SBI at the top and then going down to the other banks, there is such a tremendous strive and fight for business and obviously their cost of money is also significantly lower. So what are the pockets which are basically giving you the confidence of good growth, which is also secured and not risky?

Yes. From this -- very interesting question. From this point of view, our thought process and action as of now is we will be exploring more and more options under the co-lending. Apart from that, I have indicated certain areas where we have shown in the past a good credit growth like MSME, gold loans, loans to the contractors, agricultural loan, agricultural ancillary activities and all such things. Majority of the ticket size what we are exploring, it is falling under the retail and the mid-corporates and we are taking very, very conscious and conservative steps in taking huge exposure of above INR 100 crores. That is number one. Number two, we are focusing on those states -- last time also I had mentioned that we had zeroed on about 12 states across India for our credit growth where our track record of the credit monitoring in those states as well as the credit quality in those states are satisfactory. So that is the geographical sectors that we are exploring along with the particular loan sectors. So that is why I said all efforts have started yielding. In fact December also, there was very good growth in credit origination. So I'm confident that all will get converted during this quarter apart from additional credit origination during this quarter. The only thing what we are very carefully observing and watching is, is there any fourth wave of COVID-19 and what is in store for the entire economy in the ensuing budget also. But of course these are all the external factors. But as far as internal things are concerned, myself and my entire team is totally charged up as far as ensuring the qualitative growth is concerned.

My only -- if I may just ask a small follow-up. You mentioned about finding opportunities in the core lending space. What I understand there is that say if there is a consortium kind of a lending or if there is a multiple banking kind of a situation, really how exactly would you look -- I mean what exactly are we meaning when we say that we are looking at co-lending options?

No, it is not consortium. We will be having tie-up and specific MoUs with respective NBFCs. So generally 80% of individual loans that we can lend so this is as for the co-lending guidelines of the regulator.

I understand. So you're looking at the NBFC tie-ups, right? I assume that that space is going to be very risky because the NBFC financing is typically in the areas where the risk is little on the higher side.

You tell me one area where there is no risk.

That is also very true, sir. Sir, now...

See, we are into the business of risk only. But only ours is a calculated risk and we have all the precautions of mitigating the risk also.

That is wonderful. Although in fact the previous participant basically was trying to understand that while obviously like in the process of raising finance and equity, it's a full detailed process and all that is very important. We all understand that. What I think he was trying to understand which exactly is also my request is to understand as to how is the investor community looking at you. See the point is that if you look at various parameters, we find that at all valuation parameters you are being very, very undervalued. So at one end of the spectrum, I think that you already have a CRAR if about 14%-plus, why do we need to value it at such an undervalued price. But then I also then go back to the previous conversations that we had with you wherein you said that a good investor or [ dear ] investor will basically add a qualitative flavor to our bank, which will basically improve the valuation multiples, et cetera. So this question basically is emerging from that side as to now we have demonstrated our intents of raising -- getting in an investor. How is the community which is like desperately looking for good deals and all, how are they -- what is the what you call interest from their side? If you could just share your thoughts on that, that would be very helpful.

I will answer this question at the appropriate time.

Okay. We understand that. So all the very best to you. We have been a long-term investor and we continue to remain so. So we are really hoping for some tremendous returns now.

The next question is from the line of V.P. Rajesh from Banyan Capital.

Congratulations on a good set of numbers. My first question is about the restructured book. Is it fair to assume that it has now sort of completed in the sense that there are no more addition that will happen in the current quarter or is there some more to be added to it?

Rajesh, as per regulators' guidelines, restructuring process should be completed latest by December 31, 2021. So restructuring all eligible accounts invocation should have completed by September '21 and implementation by December '21, and we have totally adhered to the regulator's guideline.

Does that answer your question, Mr. Rajesh? As the participant left the queue, we'll move to the next question, which is from the line of Sushil Choksey from Indus Equity. The participant have placed the call on hold. We'll move to the next question, which is from the line of Ajay L from [ Demo Advise ].

My question is regarding -- the first one is what I can see is the interest earned has just increased from INR 1,554 crores to INR 1,565 crores if I'm right and the main increase in profit before tax is just as we have [ decreased ] the provisions as we are seeing less number of NPAs. So what is your guidance going forward? Will the number of NPAs be reducing and the reason for just a slight increase in the interest earned?

See, there are 2 issues. One is as far as the slippage. So we have been on the consistent track during this 9 months period and in all probability there will not be any negative surprises going forward. Second one is the net interest -- I mean interest income. So you are aware that interest income during this last 1 year, it is almost flat. We had of course December '19 our interest income was INR 1,595 crores and December '21, our interest income is INR 1,565 crores. Here the main reason is the yield on advances has come down because of the severe competition for good assets in the market. So my yield on advances which was at 9.39% as of December has now come down to 8.81%. However, we have been able to hold on to our interest spread by reducing our cost of deposits. So that is why in spite of there is reduction -- a significant reduction in the yield on advances, we have been able to maintain and manage the interest income. Going forward when the credit base itself enhances, I think we should be able to improve this interest income also.

Next question is from the line of [ Sameer ], an Individual Investor.

I have 2 questions. What is the reason for decrease in fee income by almost INR 100 crores? And second is why is there an increase in employee cost compared to last quarter?

Fee income last time, we had a good trading profit. See December '20, my trading profit was INR 89.81 crores whereas this year this quarter it is just INR 1.86 crores. Of course this is an area where we are now focusing. We have already shifted our treasury to Mumbai and going forward we will be able to do well in this also. That is the reason why there is a decline in the other income. Sorry, your second question?

Increase in employee cost as compared to previous quarter?

Yes. Employee cost compared to previous quarter, it has not gone up significantly. We had INR 267.25 crores as of last year that is December '20 and now it is INR 256.90 crores. Of course compared to September, it has slightly gone up. Otherwise employee cost salary-wise, there is no much increase and superannuation benefits also, we have been able to hold on to the same position compared to December position. But there was another thing, I think which you might have noticed. There was a requirement of family pension -- additional family pension that was supposed to be made and the regulator has also given an option of amortizing that family pension over a period of 5 years. In our bank what we did is we had calculated that around INR 23 crores. So we didn't opt for the amortization so we have absorbed that entire amount during this quarter itself. That is the plus point there.

Okay. So it's basically good accounting practice.

[Operator Instructions] The next question is from the line of [ Deep Shah ], an Individual Investor.

So I have a few questions. So my first question is on the core fee income. So can I just know the reason for the decline in the core fee income, which has come down sharply from INR 268 crores in 2Q to around INR 194 crores in 3Q on a sequential basis and what are the components that is dragging it down? Also if you can share the breakup of fee?

See, this other income that is the core -- it is not just the core fee income, it is also inclusive of the technically written -- recovery under the technically written-off account. So during the September '21, we had recovered about INR 104 crores under the -- INR 104.1 crores under the technically written-off accounts whereas during the current quarter, it is INR 51.18 crores. That is the main reason why there is a nominal decline in that fee income and other incomes.

Okay. And sir, can you give the guidance -- FY '23 guidance on the loan growth, credit cost and ROE trend?

FY '23, we have not yet published it so I'm sorry.

Okay. I have 2 other questions on the asset quality. So what will be the [ ECL ] you have outstanding at the end of the December quarter and what portion of it would have slipped into NPA?

You want the clarification in the GECL portfolio. GECL I said -- you see under the GECL, our NPA is INR 390.30 crores, which constitutes about 2.34% of the entire GECL portfolio. See GECL, actually our disbursement under GECL is INR 2,100 crores and to the borrowers, the total exposure is around INR 16,702 crores. So of that because the NPA -- even the GECL account becomes NPA, entire borrowers' exposure also becomes NPA. So as a result, the NPA is INR 390.3 crores, that is around 2.34%. Here what happens in the GECL, there is 100% recovery through GECL Corporation, we have started logging our clients also. So that there is certain procedure to be followed. That also we have done. Our portfolio is showing significant improvement in terms of SMA-2, SMA-1 and all. It's all because of the improved recovery efforts and the mechanisms.

So FY '23 so you don't have the guidance, but is there any internal estimate on the PAT side?

We do have. At the appropriate time, let me disclose it.

Sir, one last question. So on the capital raising front so what is the validity of the bank's approval for raising capital? What is the deadline for that?

That is up to what date? Up to September 1, 2022.

The next question is from the line of [ Sudhir Mahajan ] from [ Mahajan Family Office ].

Congratulations on a decent set of numbers and I'm sure we'll have better numbers in the ensuing quarters. One is I welcome you as a shareholder into the [indiscernible] with the ESOP that you have taken, 29,000 ESOPS. Could I know the price of this ESOP, number one? Number two...

That is my ESOP. It was at market price. Sorry, it was purely on the market price on the date of allotment.

That is there, all your ESOPs are at market price, right.

Yes, yes, yes. No discount was given.

That is as per the ESOP pricing. It was heartening that you have exercised your ESOP so you're showing a lot of confidence right now on the ensuing quarters of listing.

I have put all my savings there.

That's what I'm saying. That is why I said it, sir. That is why I brought it up. Okay. The next part is what would be the PCR by end of March?

Sir, PCR we would definitely maintain it at above 70%, but our endeavor should be to take it to a level of 75% over a period of next 2 to 3 years. We are in the accelerated provision mode now. That's why during this quarter while finalizing the result, all the future -- almost majority of the provisions of the future also we have front-loaded. As I have made it clear that family pension, there was a provision for moratorium over a period -- amortization over a period of 5 years that we didn't opt and entire INR 23 crores we have absorbed. And there was also a requirement of NPS increase from 10% to 14%, that also we have absorbed. And over and above, we have also made certain accelerated provision for our NPA portfolio also.

The next question is since you have some NPAs of IL&FS and Fintex. How is the resolution of those 2 going and do we expect to recover anything from that?

IL&FS, yes, that is I think we are one among all the consortium banks. So in the entire banking industry, it is going in a forward mode. So if it happens during this quarter, we'll be getting some recovery under that. But individual bank as such, there is no recovery effort. It is all consortium and of course that is again fully we have provided and if it comes, definitely -- of course one or the other day it has to come. So that is going to help to improve our bottom line.

What do you think would be a recovery on that account, sir?

I'm optimistic, sir.

And about Fintex?

There also.

You'll be having some recovery?

No. So far no, but recovery efforts are moving in right direction.

The next question is from Sushil Choksey from Indus Equity.

Sir, congratulations to team and management of Karnataka Bank for stable results. Sir, listening to all the Q&A so far, where is our transformation journey, the current phase likely to get over before we get to the next phase?

Transformation journey, which started about 2 years back, we have completed the first phase of KBL Vikaas 1.0. In the first phase, we focused more on the holistic transformation of the bank that is why you're seeing all these positive numbers now. There we focused more on credit transformation, our HR transformation and the IT transformation as well as the customer experience transformation. So now we are in the second phase of that transformation wherein we are purely focusing on the digital transformation. That is why I said all the digital underwriting of the loans as well as the digital onboarding of our SB customers. We have already introduced tab banking as well as web banking. There also now at present around 53% of my day-to-day SB accounts, they are getting opened through the tab and the web bank mode only. So in this second phase, we will be opening our analytical center of excellence at Bengaluru and a lot of initiatives have already started and even my Board also making a very thorough review of all these initiatives. That is why we are aspiring to emerge as the digital bank of future during the next 2 to 3 years period.

Well, you are housed in the state of Karnataka, which is the Silicon Valley world where Bangalore and Karnataka and Mangalore is concerned. How are we taking the benefit which we think is a state in terms of so many start-ups, unicorns, soonicorns that are emerging from our state and which is --they have so much of money coming in, which can support not only the state, but a bank like Karnataka.

Yes, 100%. I think your thought process as well as our actions, both are on the same page. We have tied up with good number of startups as well as fintech companies. That is why we have housed our digital center of excellence as well as analytical center of excellence at Bengaluru and we are getting lot of positive vibes from these centers. And all these products, whatever that I'm telling, these are all developed in-house so that is the advantage for us.

Sir, in the digitization journey, you said you will be starting co-lending. I'm sure that would be under digital process along with the partner who would come in 80-20 ratio or whatever ratio you decide with the partner. What kind of business segment are we looking at; education, gold, MSME, personal loan, neo banking? What kind of partnerships are we looking at?

As of now, it is early -- this breakthrough is made in co-loans, in MSME and in the areas of the home loans. These are the 3 areas where we have already we are in advanced stage of co-lending arrangement.

Do we look at all these unicorns, soonicorns, which are forming in your state or country -- in India? They have equity money, but there is no debt support because new businesses don't get that kind of support. Have you looked at any such kind of business partners?

As of now, no. I should be honest. As of now, no.

Okay. My last question, sir. To the core business improvement, I see South India being a prominent saving community as a part of journey from India. Nationalized banks have reached 40%, 45%, 47% and the banks which are even in TCA reaching 50% CASA. How are we trying to improve from 30%s to 40%s to bring down our cost to income?

See, of course our core area of household CASA that will continue and added to that, we will be having our own government agency business cell housed at Bengaluru to capture this market of enter not only the South India, but also wherever that we have identified as the prospective states for us. So that is why I'm confident that going forward that CASA traction will be on the expected pace.

But sir, when you are talking of so much of digital initiatives, will not bank attract few lakh current and saving account customers who will get all the facilities whether it is mutual fund subscription, trading in shares, insurance, car loans, housing loans, all that can be connected. So are we making an effort for pure retail 5 lakh, 10 lakh, 20 lakh kind of current accounts, saving accounts?

Sir, that is very much happening. See now actually, we are in the midst of our CASA campaign itself which started on November 16, '21 which will run up to February end. So far we have been able to onboard about 3.5 lakh new customers for CASA. So that is the effort that our team -- field level team wherein we have a dedicated regional sales executive for CASA and the CASA marketing officers, all those in separate vertical is already in place. That is definitely going to continue and it is also going to continue and give us good result in the days to come.

Sir, how are we empowering our youth or talent of Karnataka Bank or human resource for digital banking or credit banking or various initiatives, which we are likely to benefit over a decade now?

Multilevel activities are happening. At the entry level itself, they are properly introduced for the digital banking and the existing manpower skill upgradation is also going on. We have our own e-learning module for all our staff members. Besides that, we are also encouraging and taking effective steps for capacity building in each of the core areas of banking.

The next question is from the line of V.P. Rajesh from Banyan Capital.

Sorry, my line dropped and I did not listen to your answer. So if it's okay, would you just mind repeating that? My question was regarding the restructuring book, it has peaked now or do you see no addition to it?

No. As I said, this restructuring exercise as per the regulatory guidelines, it is completed by December 31, 2021. So there will not be any spillover effect as of now unless and until the regulator comes out with one more restructuring package. That is not in my hand.

Okay. But are you anticipating something like that or you're just saying in case they do it?

External so many factors are there. Say, for example this Omicron, all of a sudden there was spurt, now it is receding. So we have to adjust ourselves to the external factors. I don't have any control over that.

Okay. And then on the last call, you had said that you were expecting around 10% of this restructuring book to result into NPAs. What is the take on that estimate now?

That will -- going forward it will come down because as of now in the restructuring book, the NPA is around 6% only. As I said, we think we have further streamlined all our market monitoring activities. I don't foresee any sudden spike either in the restructured book or in overall my advances portfolio.

Okay. And I don't know if you answered this, but what is our exposure to Cafe Coffee Day, which I believe you have taken complete write-off on?

Yes, it was about INR 100 crores.

INR100 crores, okay. And then all these places which have been in the limelight like IL&FS, Fintex, PCV and other sort BHFL, what our total exposure would have been for which we have provisioned 100%?

We have a reasonable exposure, but only comfort level is we have provided that fully. In fact my overall NCLT referred accounts exposure itself is INR 1,185.08 crores. For that, I am having almost 100% provision [indiscernible].

Okay. And then just a couple of questions on the equity raise. Since you have time, should we assume that the equity issuance is likely to be less than 1x the value, which is like INR 228 now?

I didn't get your question. Will you please repeat it?

Sure. So our book value as of this quarter end is INR 228, right? So the question is that should we assume that the equity issuance to an incoming investor will be less than this particular value?

No comments.

Okay. And then secondly, if I may ask, are you in active conversations with some investors right now or this is just your resolution at this point in time?

Yes. So that is a part of my job. Always I have been in touch with the investors whoever is interested. Since last -- ever since I assumed this charge since last 5 years, I'm doing that job also.

Okay. And finally, what is the ideal size from your perspective of an equity raise? How large will that be?

At present, no comments.

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

I have a couple of questions. Sir, first on -- if you can provide some more detail on slippages, I mean where are these slippages coming from? Any broad breakup?

See, slippages this quarter, none of the advances of above INR 15 crores have slipped to NPA. All the slippages are below INR 15 crores.

Below INR 15 crores?

Yes, below INR 15 crores. So that is how we have been managing the portfolio. I think a couple of quarters back, I had told that above INR 15 crores, no slippages. Last quarter we had focused on INR 35 crores level. This quarter it is INR 15 crores and above, no slippages. It's all below INR 15 crores ticket size.

And on recovery, sir, is there any lumpy recovery in this quarter or again the recoveries are also...

This quarter, no.

Okay. And sir, on this Slide 30 if I see provision breakup, does this fair value of minus INR 8 crore, is it MTM on bond book or what is that? Because I thought the bond book NPA is now supposed to be taken in other income.

Provision and contingencies NPA is INR 111.75 crores, standard advances INR 34.80 crores, fair value which is write-back INR 7.81.

Okay, right. And do you have any this MPM loss on bond book?

MPM loss this quarter is for the depreciation on investment, that's all.

What was that number, sir? And does this come in other income or does this go to provisions now?

During this 9 months period, it is something around INR 50 crores depreciation.

Okay. And now this becomes a negative line item in other income or this comes in provision only?

Negative line item only as per the revised guidance.

Understood. And the last question from my side is your growth. So if I look at growth driver for this quarter as well as previous quarter, it looks like that you are growing in corporates with ticket size above INR 100 crores, right? So in your -- if I back calculate the number, I mean you have given pretty much detail on the loan growth -- loan book. So if I calculate then, it looks like of your INR 1,000 crore incremental advances increase, around 9,000 -- sorry, INR 900 crore is coming from corporate, which is above INR 1 crore. So is that understanding right that so far as of now, you are focused -- I mean whatever opportunities are there mainly in corporate at this point of time?

These are all INR 5 crores and above ticket size. There are some corporates who have taken about INR 50 crores, INR 100 crores and all such things. So some of the corporates, they have availed the limit that was sanctioned and the rest of the things they are availing during this quarter. So growth will be more even during this quarter especially I'm expecting the growth to come from the mid-corporate advances as well as the retail advances.

Right. So the reason why I'm asking, sir, it looks like that large banks, they are competing or they are -- their pricing has become very competitive when it comes to INR 25 crores and below SME loans. So have you -- I mean what is your -- have you also seen such higher competition from large private banks?

That competition is very much there. That is why I have also given this impact on the yield on advances. But we have our own niche areas and we will continue to focus on that and that is our priority.

The next question is from the line of Anshul Saigal from Kotak PMS.

Sir, I have 2 or 3 questions. If I look at your I mean initial comments where you said that the growth has come in because of somewhat close to 45% growth in NBFCs. Now what NBFCs are these? Are these -- and how are they weighted? Are they government, private? And is there -- what kind of risk level you're assuming when you're growing an NBF?

Anshul, I think we have given a detailed disclosure in our analysis of financial results, which we have uploaded in our website. I would draw your attention to Slide 37 there, NBFC portfolio. We have 69 accounts. Of that, 67 accounts are BBB and above rated. So there you will come to know what is the risk weight that is assigned and even I have told what is the NPA there and the SMA-2 on the restructured book. Entire NBFC portfolio we don't have any restructured advances, we don't have any accounts in SMA-2 -- why SMA-2 not even in SMA-1 and only one account that is under NPA, that is also fully provided. That is the NBFC portfolio as of now.

Right. And you also mentioned, sir, in the previous comments that you're looking to grow in the current quarter in retail and SME segments. But then if you look at the reason why credit have not grown in the previous quarter, that is the first quarter, it is because of -- as you mentioned earlier that corporates have not drawn on their limit. And so in the coming quarter, corporates who draw on their limits, they will be -- I mean that credit is what we will see as growth in the current quarter. Now how do we kind of align both these aspects because will we grow because of credit in corporates or we'll grow because of retail and SME? How should we look at it?

See, I have made our priorities very clear. We would like to see more and more qualitative credit in the retail sector that is up to INR 5 crores ticket size and also in the mid-corporate sector that is INR 5 crores to INR 100 crores. So we have already lined up and sanctioned also good number of proposals in this particular sector and they are all now in the disbursement mode. Apart from that, credit generation activity is also going on in full swing by all the regional sales executives headed by the National General Manager heading this national marketing activity also. So that is why we are confident that there will be a balanced growth in almost all the areas wherever we are targeting as the preferred sectors. We have this sector prioritization exercise also wherein we have identified the sectors where we want to grow. That has already been disseminated to the field level functionaries and we are focusing only on that area.

Right. And sir, if we were to look at some of the larger banks and the results that have come out so far, there has been no impediment to credit growth in the current quarter and even for the future quarters, the growth estimates that they have been giving are quite strong. Now again in our results versus some of the other banks that have come out with their results, there is a bit of a dissonance that in the previous quarter we have not been able to grow credits in line with market. How should one see that? Is it just a spillover into the next quarter or is there more to it?

100% correct in the sense my credit growth on year-on-year basis has been 4.40%. Since last 9 months of the current year, it is at 5.44%. So that is a clear cut indication that there is a positive traction. But as I said, it's the undrawn and unavailed limit would contribute during this quarter and I think the acceleration would happen during this quarter and we will be at par with the national average.

Right. And my final question, sir. On the restructured book, I recall in the previous quarter call you had mentioned that in that book we will start seeing reduction and I think you had mentioned that at least 10% reduction will be seen in the current quarter itself. Now again the feeling one gets is that that's really not coming through. So how -- again how should one look at the restructured book? Of course you've given some clarity on focus on that segment.

What I said is we have already about INR 600 crores restructured invoked book. So my intention was -- my effort was in the direction to what extent we can contain that. As against INR 600 crores invoked book, eventually only INR 330 crores got implemented. So we have been able to recover and keep those accounts regular amounting to around INR 270 crores without opting for the restructuring.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.

Yes. Thanks to all the participants for their keen interest as well as making a very thorough analysis of the results and passing on their inputs, which is very, very valuable for me also. Almost all of you have appreciated the consistent performance of the bank. I'm thankful to each one of you. Thank you.

Thank you. On behalf of Investec Capital -- on behalf of Karnataka Bank, that concludes this conference. Thank you for joining us and you may now disconnect your lines.