The South Indian Bank Limited (SOUTHBANK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the South Indian Bank Limited Q4 FY '21 Earnings Conference Call hosted by InCred Equities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. [ Saylee Shera ] from InCred Equities. Thank you, and over to you, ma'am.

Thank you, Faizan. Good afternoon, everybody. On behalf of InCred Equities, I welcome you all to 4Q FY '21 Earnings Conference Call of South Indian Bank. Today, we have with us Mr. Murali Ramakrishnan, MD and CEO; Mr. Thomas Joseph, EVP; Ms. Chithra, CFO; along with other senior members from the management team. Without further delay, I now hand over the call to Mr. Murali Ramakrishnan for his opening remarks. Over to you, sir.

Thank you. A very good afternoon to all of you, and thank you for joining us for the South Indian Bank Q4 FY '21 Earnings Conference Call. We hope that you and your family are safe and healthy. We continue to appreciate the efforts of our employees who have shown strong resilience and the ability to adapt to changing circumstances. We are joined by my colleagues, Mr. Thomas Joseph, Head Sales; Mr. Doraivel, who is Head Credit; Mr. Leelanand, Head Treasury; and Ms. Chithra, CFO. Delivering on my guidance given in Q3 2021, I'm happy to announce that we have raised INR 240 crores of equity capital through market domestic institutional investors in March 21. This capital raising was the first tranche of the overall equity capital target of INR 750 crores. The other investment by domestic institutional investors is subject to 1-year lock-in that will provide stability and visibility now shareholding. The bank has posted all-time high CASA of 30% in the history of the bank. The overall CASA amount increased by INR 3,830 crores during Q4 2021. The bank has opened about 3.2 lakhs new savings account during FY 2021. There has been dedicated effort and strategy put in place to build low-cost liability franchise and robust physical mechanism adopted efficiently amongst the branch staff. As far as overall business for financial year 2021 is concerned, it was the strategy of the bank to redig the existing portfolio with a focus to diversify the risk, both in assets and liabilities. We are replacing the bulk deposits with retail deposits and the bulk corporate exposures with diversified retail exposures. We have completely run down certificate of deposits in FY '21 and in the process of streamlining bulk deposits. Growth in retail term deposits in CASA have compensated for rundown in the bulk deposits. The following other special changes which may enable assets build up. The bank has been following brand structure, where asset and liability businesses were managed by branches. This structure was not quite conducive for growth of assets in the present environment as huge focus efforts are required to win over a good asset from the intense competition. Therefore, to facilitate the focus and drive, a dedicated vertical asset structure was formed for all retail asset businesses in which the branches would act as 1 more channel for sourcing new leads from the existing customers and walk-in potential customers. Similarly, MSME and corporate banking verticals have informed its dedicated sales structure across the country. Apart from this structure, we also need good processes and systems to meet up with the tax in customer expectations. As we speak today, the new vertical structure is in place with dedicated team, wherever we feel that the internal talent are not available, especially in the retail asset vertical, we have recruited experts laterally to drive those businesses. Apart from this, we have set up a separate data science division, which would help us to do analytics in the area of asset, liability, collection, et cetera. We have also set up separate operations division to take care of back-end fulfillment of asset and liabilities transactions. Most of the system development, taking of the policies and process implement is done. With the necessary resources in place, I am aiming for a credit growth of about 10% in FY '22 and a relatively stronger growth about 18% to 20% in the coming years. The big headwind in this plan is the impact of second wave of COVID on the individual and the business community and the possible third wave, too. Let me take you through some of the key highlights of the operational and financial performance for the quarter. The company reported net profit of INR 7 crores for Q4 FY '21 compared to net loss of INR 144 crores in Q4 2020. As on March 31, 2021, the total business of the bank stands at INR 142,129 crores. Advances declined to INR 59,418 crores, mainly due to recognition of pro forma NPA during the quarter and de-growth in corporate loan portfolio, which is offset in part by 15% year-on-year growth in total gold loans of INR 8,999 crores. The share of large corporate loans have been continuously declining from 27% in FY '15 to 5% in FY '21, in line with our stated strategy of calibrating corporate exposure and building granular retail book. Core deposits rose by 12% to INR 77,857 crores. CASA deposits increased by 18% to INR 24,590 crores. CASA ratio improved to 29.73% of the total deposits, bulk deposits declined by 55%, in line with our strategy. The NRA deposits, which have been growing strongly, rose by 9% year-on-year to INR 25,858 crores and contributes about 31% of the total deposits. Low-cost NRA deposits grew by 11% year-on-year to INR 7,797 crores. Our investment was at INR 3,373 crores. In Q3 2021, we had given overall guidance of INR 2,500 crores, about -- of which INR 1,600 crores has depleted and about INR 900 crores has restructured for Q3 and Q4 FY '21. The overall debt reported during the quarter was INR 2,473 crores, which includes NPA slippages of INR 2,122 crores and onetime restructuring of INR 351 crores against the overall guidance of INR 2,500 crores. Gross NPA ratio is at 6.9% as of March 21. Due to the order of Supreme Court expenses amounting to INR 1,507 crores, which were owed but was not classified as NPA as of December 2020. Considering the effect of pro forma NPAs, our GNPA was 7.27% as of December '20. During the quarter, the bank has sent technical write-off of INR 975 crores. The net NPA ratio was 4.71% as of March 31, 2021. Net interest income for the quarter was INR 561 crores. Net interest margin was at 2.61% for Q4 2021 as against 2.67% for Q4 '20. Cumulative NIM for FY '21 was 2.71% as against 2.66% for FY '20. Noninterest income for the quarter was INR 390 crores. Our core fee income increased by 25% year-on-year to INR 224 crores, while treasury and ForEx income decreased by 30% to INR 166 crores. Operating profit for the quarter was INR 423 crores as against INR 533 crores in Q4 FY '20. The cost-income ratio for FY '21 was at 55.5%. Overall, provisions decreased by 43% to INR 412 crores in Q4 FY '21. These provisions included INR 719 crores towards the NPA and NPI and reversal of standard asset provisioning of INR 290 crores. The provision coverage ratio stood at 58.7% at March 2021 as against 54% at March 2020. Our overall capital adequacy improved to 15.4% as of March 31, 2021, compared to 13.4% as of March 31, 2020 while the core CRAR stands at 12.8% as of March 31, 2021, compared to 10.8% as of March 31, 2020. To summarize, the bank will continue the strategy of building low-cost CASA book, focused on gold lending, improve NRA share of deposits, improving cost efficiencies and improve asset quality by focusing on building granular advances book through personnel, agri and business segments. With this, I open the floor for questions.

[Operator Instructions] The first question is from the line of [ Ravindra Kumar ] from [ RK Capital ].

So the question is around -- mainly on the provision. So from the past couple of years, like [indiscernible], most of the operating profit is going under the provision. I mean like [Technical Difficulty] So the question is concerning [indiscernible] provision. So most of the operating profit coming from last couple of years is going into the provisions. So how long it can continue and when can banks see reasonable returns?

Yes, good question. The point which I would like to add here is that, yes, you are right, in the past, operating profits have gone towards providing for the bank book. But this year, being an exceptional year and last full year, as you know, the economy has been giving -- showing lots of turbulence. And whatever little progress which you are seeing in Q3 and Q4, that again, we are seeing that in Q1 of this year, we are seeing a lot of changes happening there. So while I would like it to be much less, but then the fact remains that a lot of consumer, individuals are losing jobs, and many of them are -- having cut in their salaries. Similarly, many of these small businesses, small business owners, et cetera, they are going through a very tough situation due to the pandemic. So we need to recognize the fact that the economy clearly is not what it should be. Therefore, the opportunity for anybody to generate cash flow itself is coming down because of the unprecedented situation. So while this is on one side, the challenge which I have is of twofold. One is how do you manage the existing book, which carries a certain portfolio, which is already showing signs of stress? And how do I manage the incremental book, which will get added in this period of stress. So what I'm -- I was going through is that just to barricade through well thought-out strategy, we are very clearly driving profitability through quality credit. Therefore, we don't want to rush in and add assets, which can create problem in the months and years to come. So we are picking and choosing the right kind of quality for adding any new book. While doing that, how do we manage the existing book. So that is where the effort which has been made towards granulating the portfolio, both in the corporate side as well as building retail, et cetera, will help us to diversify the risk. So the structure, which I read out that we have already put in place will enable the new incremental addition to assets, which will get added in the months and years to come, will be granular and at the same time will be of better quality because we are going to be using credit models, et cetera, for better underwriting while we manage the large book. And also, you should -- you must remember that during this year that just ended, there were quite a good number of months where even the recovery operation in the country suffer due to many of the courts, et cetera, were not functional due to people not being there, judges not being there, et cetera. So it was a pretty tough situation. Similarly, the ruling of Supreme Court to say that you can't flat rate something as NPA. Therefore, which made all of us to look at the entire book, which is technically NPS pro forma NPA, but we are not able to do any action because it was not technically classified as NPA. So all this has led to delayed efforts in recovery also. Hopefully, in the months and in this year, we'll be able to do much better recovery if things provide a conducive environment for going after not just the cases but for better recovery. And at the same time, consciously reducing the concentration risk in the existing portfolio and incrementally adding good book. This is a correction which we need to do in the bank's books, which is not a short-term gain. It will take some time. So I'm -- we have drawn a plan through which we'll be sharing the entire portfolio mix to be moving towards better quality, and we will start seeing the signs of it in the few quarters to come. That's how I would want to probably relate it.

Yes, sir. I agree with you. I mean I can see a lot of implements once you have come to the bank and as you're going for your Vision '24 as well. But the concern is for past many years, investors have lost a lot of wealth in the bank. And then one more thing which I can't understand is there is a lot of interest from the big banks to acquire for the brand expansion and all -- I know that South Indian Bank has a very good brand recognition in their branches. Was there any interest which you can clarify? Or what is stopping the bank or the investors from going for the prep.

You're asking -- what is stopping bank from what? I can't even hear you.

Merging with an additional bank, and so that's something that get some provisions. Because definitely, if Kotak or some other big bank, which is wanting to expand or acquire a small bank. If that happens, would you expect an invite?

Yes. I mean, obviously, this is a question which I can't answer because we can't talk about what other banks would be showing interest on. What I would like to -- I would be very happy to answer what I am planning to do to make the bank efficient.

Yes. That I can see, sir.

Yes, that's why we've said -- stated the strategy and whatever progress which I'm showing, which I'm reading out to you, is in the direction, making the bank stronger. So I believe that with the team and with the plans which are set in place, I believe that we can bring back -- bring this bank back into a performing bank, with the dedicated efforts of team and with articulated to the clear plans for turning around the bank.

The next question is from the line of Renish Hareshbhai Bhuva from ICICI Securities.

First couple of questions. So one is obviously around the asset quality. So we calculated PCR is again close to some 35%, so what is the sort of -- I think in your Vision '24, we have attributed [indiscernible] also. So it suggests that price cost even from the legacy book in fact to remain elevated. And given the second wave is there, of course, FY '22, we'll have some higher slippages and this little run rate. So what is your take on overall asset quality or maybe credit costs in FY '22? I mean, of course, you can't quantify, but maybe qualitatively, what is your assessment as you speak today?

Yes. No, I think partly you answered my question -- your own question. Basically, we are at a situation where it's extremely difficult to predict how the market will pan out in the months and in the next few quarters to come. But having said that, in my vision plan also, it was -- if you recall, we have said that we will put the entire structure in place, and we'll start actually working on building good quality book from April onwards. So while we have already put the structure in place with the people in place and so on, we are also in the process of putting all the other important key things required for taking off the business. At the same time, we make these assumptions with a certain expectation that markets and economy will behave in a particular fashion. Clearly, today, given the situation no one, I think, is able to say with certainty what will happen in Q2 and Q3. In fact, other day, I was hearing to a lot of economists talking about how their own predictions about what will happen in Q1, Q2 of this year, they've already revised their numbers, et cetera, downwards. In fact, they are talking about the second wave stretches into the third wave, they're believing will be worse than second wave. If that is going to happen, some of them have said that the entire year is a washout. So I'm not trying to be pessimistic. I'm just saying that we need to be realistic about how these things will pan out. What I am very clear is I also take it as a blessing in disguise because when the market is not very conducive for asset buildup. It also gives time to put their building blocks in place. So as and when the market throws an opportunity for you to do good business, I think we would be ready to take off those. So when I say how do you put those structures in place? This is where I talked about structure, talk about the platform, talk about the credit model, talk about training, talk about capability building, et cetera. So I think those are areas, which we are now continue to be investing in our people. And I believe that with these things come in place, and we have not really taken up a very ambitious plan in terms of asset growth for the year. So I believe that we'll be able to catch up even if we lose a couple of months here and there due to COVID, et cetera. I am optimistic that we'll be able to catch up with the numbers, which we projected. But having said that, obviously, performance of this are all completely linked to what the opportunity will come in the economy. Therefore, we need to be watchful and we need to take it as it comes. So in terms of PCR, you're right. It was showing -- I mean, we were at about 34%. And we had a -- we were at 34% as of Q1 FY '20, and we made a conscious effort to build this and in fact, we built it up to --of course, Q3 and Q4, as you know -- I mean, Q3, it was an elevated one, as you know, because of pro forma NPA, which was not a realistic situation. But we were at about 40% level. Now clearly, with the entire pro forma NPA, we're hitting the entire banking system because all these numbers became more and more visible in the month of December to March is when all the banks started actually feeling the impact of lockdown lifting and the repayment, et cetera. So with that, what we are conscious is that, yes, we recognize that it is low. Therefore, we would definitely want to work on improving it. But this also, to some extent, suffer from the fact that we are providing -- we have provided now 100% in many cases, et cetera, which we had to write off to manage between E&P as a percentage in this year. So this is a decision which anyway as a bank we need to continuously do. Keeping a very high NPA percentage without writing off is one way to follow. The other one is to really manage both reasonably well. But I recognize that it is low and we will definitely work towards improving it. The way it will start panning out to better numbers is, when we start actually building good assets. And we also know that some of these fraud structures, which have hit the bank, we have now released March. We have completely provided for it. And some of the big accounts also, we have -- with the March we have ended providing for them. So unless we see that whatever restructure which happened due to COVID, if they behave much worse than what we are anticipating, we believe that we'll be able to slowly improve it. I'm not promising anything, but then our endeavor will be to take it up to at least 38% level in the coming year. That's the plan here.

Got it, sir. Got it. And sir, secondly, on this whole liability franchise, I mean, the 30% CASA itself suggests that we have a very strong liability franchise at least in South and specifically in Kerala. And I'm assuming since it's a large base of these customers are on the NRI side where it is fair to assume that the AMB would be much higher. So what is the broader strategy in terms of cross-selling or maybe leveraging this -- the whole liability base? So in 19 sector, I'm sure very few banks will be having such a robust liability franchise. So sir, what is the thought process about leveraging this whole liability base?

Good question. So this is actually, if you recall, one of the strategy -- one of the points, which I articulated in the strategy is also to work on improving the other income, which you might have seen that we already started seeing traction in this third quarter results also. So the way to go about it is obviously to do a lot of cross-sell for the existing customers. And given that we have also set up our analytics division, we are now using asset analytics and liability analytics and collection analytics to do -- to sort of figure out good customers who have accounts with us who are liability customers offers, who have the potential to take up any asset product. So products like personal loans, which this bank had negligible presence. We had only some INR 500 crores, INR 600 crores of portfolio in the personal loan, which is one of the easier product to lend, at the same time, definitely, being an unsecured as it carries so much risk. But then if you do it with good quality underwriting and with the mining of data, liability customer base, which you've talked about from the NRA as well as existing domestic customer base, we can tap leverage on this quality of customers to cross-sell product like personal loan, products like some of the other retail products like auto loan, home loan, et cetera. So already the work has started. And we are -- given that we cannot actually go out to the market and seek so and so customers given the restrictions in movement, et cetera. This is where I think 2 areas in this bank is helping us. One is this analytics is helping us to preapprove customers who we can get in touch with -- everything -- all the entire fulfilment can be done over remote -- through digital ways. And the bank is very strong in the digital and technology area. So we are pretty confident that we'll be able to fulfill using our digital capability. So yes, so the liability branch is definitely getting used now for leveraging our strength over there for cross-selling, particularly retail assets.

Yes. I think because we must be having the long transaction exhibit on. So we will be in a better position than anyone else to leverage this base. So I was just wondering what is the thing that...

You're absolutely right, and we are on the same side. Your point is valid.

The next question is from the line of Bajrang Bafna from Sunidhi Securities.

Yes. Congratulations, sir, for coming back into the last -- from the last quarter. So broadly, sir, if you could highlight, we have continuously seen appointments at the top end of the management, almost a couple of people have joined, especially from ICICI bank. So sir, could you just throw some light, what is the mechanism of the strategy that we are going to follow to motivate the higher end of the management, et cetera, in terms of results and all. And again, in terms of changing the D&A of the lower end of this spectra, what are the purposes or what are the changes that we are going to think about over a period of time? That will be really helpful, sir.

Right. Good question. So first of all, I just want to make a small correction. We have added very, very, very small number of people in comparison to the base of employees we have. So we have 8,000-plus employees and what we've added is a very, very miniscule number. Primarily in the area wherever we felt that we need to have -- bring in expertise in those products. specifically identifying those specific skill sets, we have added a few people. And therefore, that number obviously is much smaller compared to the existing employee base. Second, even in the existing employee base, We have conscious process of identifying these skill sets, particularly in the senior management level. We identified people who have demonstrated skill sets, and they have made them heads of divisions and departments so that we can leverage the experience of those employees having been in this bank for 2 to 3 decades. So we are actually using a good mix of -- lots of existing talented employees with small supplemented with few additions from outside to manage important functions and divisions. Second point on motivating employees with ESOP, et cetera, yes, ESOP training is something which was already there in the bank. Clearly, after my moving in, we have sort of relooked at that ESOP as a policy. And we have done a little bit of peeking based on what is commonly done in the market. And with that, we will be definitely making use that -- of that as a tool for motivating, not necessarily senior employees, but even middle level employees for having further -- recognize their contribution for the development of the bank. So this is on the ESOP side. Third thing which you talked about D&A, I think you're on right track in terms of asking the very relevant questions. How do you actually -- because the entire transformation will happen mainly when the entire employee base of the bank works with a common objective of making the bank stronger and better. So towards this, I think we have taken a lot of initiatives. Just to cite a couple of them. We have come up with set of values which would want every employee South Indian Bank should display, and we have articulated that, we have sort of -- made each of those values, how it can be displayed through the everyday behavior, in our day-to-day conductance of our affairs in the bank. And how do you make every employee sort of absorb it and invite it so that it becomes second nature to them. And towards that, we have also sort of in order to bring them into being aware of this at all points in time, we also made like what I got used to do in my earlier -- one of my earlier organization in GE Capital. We have made actually cards, et cetera, which clearly articulated these values and how this can be displayed through everyday behaviors. And these cards were made available to each of the employees. And apart from this every month, we are also taking one of those values as a team, and we are making -- creating some engagement around that team across the regions and across the branches. Plus apart from this, we have also created in our own Internet put places where leaders can expose such a display of behaviors by the employee. And they sort of put it in the system, which will be looked at by the entire bank. Though we are actually populating that as such behaviors are positively reinforced amongst all the employees. So I think this is on the soft side. On the hard side, in terms of skill building and functional skill building as well as in the soft skill building. We are also -- we have also initiated Department of Learning and Development wherein we are going to be making use of e-learning models with the content developed to both in-house as well as content obtained from outside, with a lot of video streaming because today, given the fact that we can't have a classroom training for all the employees, we are coming up with the short video capsules, which will highlight some of the traits which we want our employees to carry, for example, sales training, how to initiate a sales stock, how to close a deal, how to negotiate with the customer. This kind of -- some of the sales skills, et cetera, very nicely demonstrated through a very short video of around 5 to 6 minutes with a nice animation, et cetera, which will be circulated to the employees, and they will learn it through in a fun way about this skill set. Through this, we are sort of standardizing the learning process also and making each employee really bring by the culture that learning is something which we need to do continuously in order to become better and better. So these are some of the initiatives which we have taken on the capability building side. In fact, we recall, capability building is one of the 6 things which we are working. So a lot of initiatives have been taken around this.

Great. I think that was really very enlightening to see that we are trying to change the D&A because that is the -- as the new the biggest issue that makes the talent very -- kept it very carefully, and I think you are working in the right direction. Sir, second question, maybe last question is if you try to compare your bank with a similar geography, the Federal Bank, we have seen that once the management was in a capable hands, the slippages have come down drastically. And even in this pandemic, if you just try to compare what slippages that we have reported and what Federal have reported, I think not even a single private sector and even the larger one has been able to compare with Federal Bank. I think something must have been really right in that bank. And that is why in this pandemic, they have been able to manage less than 2% kind of slippages. So hopefully, you are also working in that direction. But directionally, when can we see -- because corporate book has come down less than 5% now, and we are continuously building the annualized book. So maybe '22, '23 So quite something where we could also see slippages to the tune of, let's say, less than 2% kind of number because that is where when we started. [Technical Difficulty] I hope my question was clear, sir?

Yes, your question is clear. So 2 -- I would want to respond it in 2 ways. One is, you are right, we definitely appreciate Federal Bank's performance. So you also should remember that Federal Bank has started doing many of these activities for quite some time back. I think just after [ Sham ] moved in as the Federal Bank fit, I think it's that when they have started doing all these changes, which is at least 10 years old, if not more. And therefore, these processes, these changes, et cetera, take time. And therefore, clearly, you are looking at a bank which has initiated all this quite some time back. And therefore, you are seeing the fruits of their actions happening now. I'm not saying it should take 10 years for everything we've seen in this bank. While we appreciate what they are doing, each bank has its own set of issues and set of portfolio, set of culture, set of people, set of challenges, which are very different. And so also the previous -- I'm sure you working for a certain organization, you will find that your own peers who are in the similar line of business must be at a different stage of evolution in the same space. So I think beyond the point, I think we should -- as they say, we should drive our vehicle looking at our rear view mirror. We can't drive our vehicle looking at Federal Bank's rear view mirror. So we need to do what is right for us. So therefore, I think -- I believe that whatever we set out to do, we need to be patient. We need to be diligent and we need to be continuously working at it to make it better and better. Yes, I would also like to see these numbers coming down sooner than later. But given that, we should also recognize that we are facing one of the most unprecedented situations in terms of economy. It's a toughest period. So in the most difficult period, when you are trying to manage book which has certain big challenges, I think it requires humongous effort to work on all areas. One thing is that you have everything in place, structure in place, people in place, you need to only work on the quality of book, that's one kind of a problem. The other kind of problem is, yes, you have quality in place, but when you have people challenges, then that's a different set of problems where skill building can be focused and it can be brought in. But when you have these 2 coming at different levels and the economy not being very conducive, So you are working with too many uncertainties. Therefore, it requires really humungous efforts and diligence and sustained efforts without losing patience. We need to work at it to make it better. Yes, we are quite confident. That's the reason why we have drawn also plans for the next 3 years. With certain assumptions, obviously, those assumptions need to be revisited depending on how the economy is panning out, but we are quite optimistic that we will do as we can -- we'll put our best efforts to make it happen. That much -- I mean, we will not spare any efforts. That I must say.

So just to rephrase, so this part, what kind of stress that probably we are seeing right now? Because I believe that last year, a lot of cleaning has already been done in terms of legacy book and all the best for the company has already adopted. But going into FY '22, I know it is premature because still we are in the midst of crisis and -- but whatever that you have seen in the last 1.5 months, what sort of expectation probably the modeling that we should do for this year. Any guidance on that will be really helpful, sir. Maybe a range is also...

Very difficult to give guidance, but I -- looking at the way I think what we experienced in September, October to what we are experiencing now. And with the anticipation that second wave, how long it will last and when the entire vaccination will happen and prevent people. And when each state governments will lift their lockdowns, et cetera, with so many different states adopting different methodology to address the COVID infection. It's extremely difficult to predict any -- so in my mind, I am assuming that this year, coming year, I mean, without any solid data to back it up, I would tend to think that it will be as bad or as good as this year, which went by.

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

Sir, my first question is on the collection efficiency. So if I see on Slide #19, the collection efficiency was 90% for the overall bank. If you can give some color, sir, on segment-wise collection efficiency, let's say, for business loans or personal, SME or corporate, how it has been? And I mean what is the trend for April or maybe fortnight for May? Because I mean, a lot of lenders have reported that they are seeing beeping collection efficiencies. So how it has been for your case? That is my first question.

Yes. No, you're right. Collections, we have been maintaining that. Collection definitely has suffered very badly during the lockdown period as well as in Q3, Q4, et cetera. The trend which we are seeing is in the months when these are sent to the customer. The recovery efforts are clearly much less on the -- in the same months when the demand falls due. But over the next month and next couple of months, the recovery happens from those customers. Today, let's -- we must recognize that today, whether it's an individual consumer or self-employed, today, they are also -- I mean, as much as you and I are suffering from not being able to go to physically to any place and do work, et cetera, they also suffer from the same thing. So for them to generate cash flow, et cetera, it will be very, very difficult, especially if you're in a business where your supply is impacted, your acquirers are in trouble, and you are not recovering, you are not able to receive money, et cetera. So clearly, the market is really hitting them very badly. So what we are seeing is over the next 1 month or 2 months, the collection is definitely turning close to 97%, 98% on the demand, which has been raised in the -- on the same month, it is about 91% -- 90% to 91%, but over the next 1 month to 2 months, it moves up higher, 98%, 99%. And here again, like what we said earlier, retail recovery is much better. They are definitely crossing 97% upwards, 99.9% per month for housing loan. Bank loan is about 99.93%. So we are seeing good traction in retail loans. Clearly, market, which is basically, I mean, other loans, other term loans, which is MSME or corporate, et cetera. Clearly, there are challenges because: a, the outflow will be large; b, the market is not conditional for them to carry on this. So compared to even March, I would say, April and May are definitely worse than -- because the pandemic, the second wave started hitting the market in the month of April. And now as we are talking, we are going through series stress. So collection, though I don't have the numbers, but subjectively I could sense that the collection is muted. It will -- we'll have to see how it will get collected over a period.

Right, sir. Sir, second follow-up on that. So if let's say our collection efficiency is something around 91% for the month. For the total overdue book that is SMA-0 plus 1 plus 2 on a portfolio level would be something around 9% to 10%, right?

Sorry, Das. Is that something around what?

So I'm saying that if my collection efficiency is something around 91% for the month. Then my total overdue book will be something around 9% or 10%, I mean, cumulative, including SMA-0 1 and 2. So is my understanding correct?

Correct, correct. Yes, correct. Correct. But what we should see is, obviously, it's not -- in that month -- I mean, today, even if you look at other banks, I think this trend is similar. It's not that the customers have money and they are not paying, which is actually they are in a position -- they're in a difficult position, not being able to pay due to the fact that their income revenue has been affected, either if they are individual, they have lost their jobs or drop in salary or if they are central bank, they have lost their business or they are having less prospects for the business. So you're right. 91%, 92% is the collection efficiency for the month when the deal made. To that extent, 9%, 10% will fall in the SMA-0 or in the buckets. But then over the next 1 or 2 months, it gets collected. So what I'm doing as a banker, we carry out these SMA reviews every week. In fact, this is something which is driven by me personally to ensure that we are constantly after the customer as and when he realizes we are able to get paid off. So at the end of the day, today's situation is if a customer is injected with 3 or 4 financials, clearly or is able to meet repayment regularly, we'll be able to collect the money. So particularly for this test customer. Good customer, anyway, he'll be able to pay everybody. I'm talking about customers who are stressed. So they will obviously prioritize to -- and give to the lender who is after them. So I think that is something which we are bringing in a sense of urgency but I think by carrying out reviews every week.

Right, sir. So sir, on the GNPA side, for the last -- in the last call, you said that out of your pro forma slippages of INR 1,500 crores, there are 2 lumpy corporate accounts, which are roughly around something around INR 400 crores. So now in this quarter, we have released that. There are 2 corporate accounts, we just create, which I supposed to be restructured, however, has not been restructured, that is INR 205 crores. So are these the same accounts? Or I mean, how is it?

No, no. Out of the 2 accounts, we talked about at last quarter as 1 we have recovered cash also. And the other one -- other account which I talked about, which was -- which I said will be restructured, got restructured in this quarter, which will anyway come out in our June number.

Okay. Okay. And sir, on the recovery side...

Two, which I'm mentioning now, the INR 209 crores, which I talked about, where I said I talk about 2 accounts which will get out of NPA into restructuring. One of them has been done already.

Right. So that will be upgraded by Q1?

Correct. Correct. Absolutely.

And sir, on the recovery side, so I guess in the opening remarks, you said that out of INR 1,000 crores of reduction in the quarter, the write-off was something around INR 900 crores. So I mean, on the recovery, actually, sir, I wanted to ask that what is the recovery expectation we have for the Q1 or Q2 or, let's say, for the FY '22?

See, what we are seeing is that if you look at the year which went by, the recovery efforts, which all of us made in Q1 -- particularly in Q1, Q2 and Q3, because of many issues, which I talked about, like courts are not in place, no IBC, et cetera, many of the NCLT, I mean, they just were not there, et cetera, cetera. So a lot of efforts we are putting around the time and all the legal cases were filed, et cetera, and all the follow-up efforts are happening. Well, in Q4, we could see some traction of recovery happening. So all of the recovery which we have made has actually happened in Q4. So -- therefore, in coming years, I only hope that we will not go back to the same situation. Also, if you recall, because of the Supreme Court guideline being bad debt pro forma NP, we could not do anything on those cases. We could not file, we could not proceed against those cases. We've had many of the cases, there has been ruling also saying that you can't follow up also with the customer for recovery because government clearly is of the view that customers are strict. So anybody trying to recover through any means, it will be tantamount to harassing, et cetera. So this is also -- since we are presenting all the states, especially in southern states more predominantly, we find that last year actually suffered from some of these. But despite that, whatever target which we gave for the recovery team, I think they were able to meet up with that number. But clearly, that is much, much lower than what otherwise we would want. So we made a recovery of -- just to give you numbers, we made a GNPA recovery of -- in the Q1 of FY '20 -- sorry, in Q4 of FY '20 -- sorry, just a second. Yes, Q4 FY '20, it was INR 69 crores. In Q1, it is INR 19 crores. Q2, it is INR 115 crores. Q3, it is INR 79 crores and Q4 is INR 106 crores. So you could see that the jump in recoveries happened in Q4 compared to even the Q1 of INR 19 crores. So all these suffered because of the various things which I talked about. Hopefully, this year, we believe that it will become a little better, and we will be going -- I mean we'll be able to take all our required efforts to fruition. So that's what we are hoping.

The next question is from the line of Vaibhav Badjatya from HNI Investment.

So can you help us naming the -- some of the senior members of your team who have joined earlier about sort of even last 4, 5 -- 4 to 5 months? And at what level they have joined, if you can just provide a brief about them with their name.

I think we can probably share that off-line with you if that is okay. I can tell you that the people -- I've got Head of Home Loan. I have recruited a Head of Home Loan and Mortgages. I took a Head of Personal Loan and Credit Card, unsecured -- the Head of Unsecured Operations. I have taken CCO, Chief Credit Officer. I have taken Chief of Operations. I have taken person heading data science. And I have taken person heading agri credit. And I have taken person heading treasury. They are already in place, up and down.

Okay. So I will take their names offline. Secondly, on the business model of the bank, so India already have a crowded banking space. This bank -- do you think that South Indian bank can actually try to aspire to be enrich -- which you think that probably that is the model South Indian Bank can also work for and aspire for. So is there something on this line?

No, rather than looking at any particular bank has an ideal, I think since I have worked in a private bank also for long, obviously, my experience of having worked in the large private bank where I was involved in building up the -- fully in the bank and I work across various functions in the bank. So what I can tell you is that the practices which we -- which I learned over a period of time working for the bank, those practices are being tested and proven because it has stood the time of 3, 4 big changes which have happened in the economy. So I know that those are good practices there. So I'm rather -- I would rather put those practices and models and systems and processes in this bank to emulate those structures, which will stand the test of time. So if you are looking at a banks for modeling because the conditions are very different. I mean largely private sector bank, the way they can -- I just give you example. The way they can compensate is very different. The way they can increase the stickiness is very different. The way, the skill sets, which they will define will be very different. They can afford many things, which, I think, a smaller bank cannot offer. So obviously, the methodology, which they adopt cannot be just simply replicated. But the good practice is the way we went about building the portfolio with a good quality, with a good yield and with the right monitoring to happen, with the kind of processes to put, policies to put and the kind of independence to be given for credit team to have a say on the quality of the transaction, to enable the sales team to go and source the right kind of customers, to make the salesperson appreciate the risk when you resourcing a case in the market. Those are good practices, which we are now trying to build in our bank.

The next question is from the line of Vibha Batra from FairConnect.

You have covered that how recoveries as they did improve in Q4. And based on that, now that Supreme Court restriction is not there. Of course, it is difficult to predict on how the operating environment will pan out. But if you know the kind of assets you have been and your strategy and a lot of legacy assets have now run down, and you would have a good hand on what your portfolio is. So if you were to take up overall view on the slippages and recoveries, what kind of credit cost do you think one would have the coming year and after that in relation to your advances? [Technical Difficulty]

Sorry, I think there was a disruption in the line. So I heard your question. So just to -- yes, you are right that there would be -- we -- I now that have 7 months since I got into the bank and I have a fairly decent understanding of the portfolios which we're carrying. So we are clearly looking at how the portfolio is behaving currently and what kind of exposures we have taken and what kind of industries we are exposed to. And also, we are closely looking at what is happening in the market in this pandemic. What kind of industries are going through difficulties, et cetera. Given that this is on the hard core behavior of the individual credit cases. But apart from that, there is also equal uncertainty in the recovery environment and collection ability going to the customers and being able to collect -- recover money from retail SME customers and corporate customers. Those are definitely suffering due to lockdown and various other situations. So it's virtually impossible to predict how much -- how it will pan out, but obviously, we are working with certain assumptions. So that's the thing which I answered earlier. I believe that this year, given these uncertainties, in my view, it will be as bad as this year is what I see in terms of for loss provisioning which we might have to take, but this is obviously assuming that things will be as gloomy as it today. If it has become a little better, I'm sure our collection efforts, recovery efforts, et cetera, will also become better, and customers will also be able to swing back to a cash flow situation and operations, and individuals also will be able to pay back whatever is their liability. So we are working with the assumption that we always say that credit cost will be around 2.25% is what I'm using it as an estimate to make my projections and obviously, try and see if we can improve it over a period.

Okay. And over longer terms, say this coming year, maybe '21.

But this year, it's difficult to predict. I don't know for the longer term. Next quarter, and we are not able to predict with certainty. Let me tell you honestly. Actually, next year, they would see the way we build the business itself, see with the traction happening in the advances book, the way we will -- we are now gearing ourselves for doing retail SME with incremental book which is getting built will be -- I'm reasonably sure that it will be of better quality. So with that, clearly, the things will definitely be looking better than what it is today. Because any addition to my portfolio, I would want to ensure that quality is definitely there. And whichever is there in the present -- with negative book which I'm caring, I'll try and see how to make them perform by -- through by all my efforts in recovery are through restructuring or doing any of those kind of things.

[Operator Instructions] The next question is from the line of [ Renu Goyal ] from Goyal Investment.

Yes. Actually, I have 2 small questions. I am retail investor, and I am investor in South Indian Bank for the last more than 5 years, and I invested around all of my investment in South Indian Bank. So I was just like looking more by when investors can expect some return out of the investment because in first year, when I bought the right share, we go from INR 0.60 per share dividend. Then after that, we got INR 0.50, then INR 0.25. Then now over the last 2 years, nothing is coming out, and the older investment is around 50% value left. So from an investment point of view, by when we can expect like some return coming out of through -- any way through the bank?

It's a very difficult question for me to answer because one thing which I know is we are -- we will be focusing on improving the fundamentals of the bank, and we'll be focusing on building the bank in a robust way. So from -- while interactions with various investors and various fund manager, et cetera, what I could understand is that, yes, they have all invested, and they've gone through the pain of the investment coming down over the period. And clearly, some of them invested at INR 20, INR 30, et cetera, and they were obviously not seeing much return because the share stock has come down. But what I can do is setting the bank in the right trajectory and ensuring that we communicate clearly what we are doing as a bank. And I would like to be as much transparent as possible as to what is working, what is not working within the bank. And I will endeavor to share exactly the plan of how we're going about. And I'm very open to receiving any kind of suggestions from the people who are engaged with whenever I make a presentation to them. So I can only tell you that the stock is -- even as I'm talking to you, the book value of the share is close to INR 27. And therefore, if you ask me whether any other stock in the market will have as much discounting from the book value, at least I can't think of anything. So in my view, I think they stock, INR 1 stock having a book value of INR 27 quoting at whatever rate it's quoting, I think, clearly means that it's not just about performance. It's also about how we engage with the entire market. I think that is where my efforts towards engaging very regularly with more and more transparency and with our clear attribution of what I wish to do. I'm not saying it wasn't there, it was always there. But I would probably -- each one comes with his own style of doing. So I would probably feel that my approach is to make it as transparent as open as possible and show the performance. And I believe that with the consistent improvement in performance and with the dedicated efforts in making progress in turning around the prospects of the bank, market will sooner or later recognize that it's a worthy investment to keep. I think that is something which probably I can aspire for. And beyond that, obviously, nobody understands why some stock preferred, some stock is not preferred. It's not just about fundamentals alone. It's many other things, perceptions, et cetera, which I'm sure you know as much as I know. So I think we will have to leave that for them to do. We need to do what we are good at doing, that is basically to focus on improving the fundamentals of the bank. That's what I will -- I and my team will work towards.

Right, sir. But the bank management can think of some -- giving some sort of like payout to the investors like giving them some bonus share or some low value light share, something like that so that they can compensated by some way, not in cash loan, but at least who are associated to the bank for long, at least they can like continue investing with the bank. Because I don't want to think for any other investment because I believe in banks, and I am there for last more than 5 years and I bought good amount of shares. But I'm just looking for some sort of small return or some benefit kind of situation. All other banks or other shares right, even the values are rising or some sort of dividend are coming, but there is nothing like we are getting.

No, you are right. I hear what you're saying. Clearly, what I would want to communicate is that the moment the bank starts doing well, clearly, we will definitely do things which you talked about. We are now in the midst of so many uncertainties, so many challenges, et cetera. As you know, I mean, I'm sure you must be reading our numbers, you must be reading our commentaries, et cetera. So if you ask me, do we have the intent to do whatever you said in terms of bonus shares, dividend, et cetera, definitely, I have great intent to do all that. But do I have the ability to do it today, I don't have the ability to do it today. Clearly, we are working towards making the bank get that ability to do. So we are only hoping that the market will also be helping us and we'll be able to put in action, all the plans which we have in mind. That is where I mentioned about things which I'm articulating. I'm going about sincerely accomplishing them, whether it is raising capital, whether it's raising CASA, whether it's working on bringing down the cost, et cetera, and bring the opportunity, et cetera to make a condition for growth. All that -- whatever is required to fundamentally change the direction in which the bank is going, we are doing our best to make that happen. Hopefully, that will get results if market is also conditional, it can happen sooner than later. But I completely empathize and understand what you're saying. Please be rest assured if things definitely enable us to make those things, we'll be the first one to do -- happily do it because we certainly appreciate long-term investors like you who have stake in the bank, and we definitely would want to do everything possible to make that realized.

The next question is from the line of Sanjay Kumar from iThought Financial.

So good signs of improvement with growth in the corporate book, improved CASA and fee income. So 2 requests before my questions. So can you [indiscernible] or give us some time before the call or even just before the call you can go to it. And can you improve our disclosures like GNPA [ even the open and then close out ] maybe you can entail more details about the recovery, write-offs and also in the SMA, retail recovery breakup. That will be great. So my question is so first on the restructuring book, we have around INR 1,277 crores. Are you expecting any slippage from this number, how much have you provided for this? And are we carrying any provisions for it, the additional provisions [indiscernible].

Yes, sure. Just hold on for a second. Yes. Well, if you look at the restructured book, it's about INR 1,277 crores. That's the total restructuring book which I carry. In which the restructurings are happened due to flex is about INR 87 crores. And due to project alone, business restructuring is about INR 77 crores. The MSME restructuring is about INR 762 crores. COVID restructuring retail is about INR 18 crores. COVID restructuring, the MSME is about INR 256 crores. So other exposure is about INR 77 crores. Total standard restructuring is about INR 1,277 crores. So this is the number as of 31/3/21. The same figure in '20 was INR 1,205 crores. Okay. Now if you ask me in terms of provisioning, clearly, whatever is the regulatory provision, which is required to be done, that we have provided for all these cases. And if you ask me about the slippages, in COVID restructuring, we are seeing a slippage of close to 30%. In other restructuring, we are seeing a slippage of close to 25%. That's what we are seeing.

20% in FY '22?

Sorry, come again.

So you are expecting 20% of this book INR 1,277 crores to slip this year?

Correct. No, not necessarily this year. I'm saying this is an experience overtime or these are trends that's what we've seen, not necessarily this year. This is what we are seeing as a slippage over a period of time.

Okay. And are we carrying any provisions for the [indiscernible] we wanted to show some profit so you stop providing more. So do we need -- should we have [indiscernible]?

No. Clearly, in fact, I'm sure once you get to see the audited report -- auditors report, you will see that there is absolutely no qualification on some auditors at all. So whatever is to be provided, clearly, we have adhered to that. And you should also know that in Q3 when I -- that was my second quarter when I was coming up with results, I had no hesitation in coming out and showing a loss. So I have no [ doubt ] showing the correct picture. There is no net -- I know that what I'm doing is to make the bank stronger. There is no need for me to just show profit of -- for the sake of showing profit. It is not going to help any way. In large market, I should show profit. If it's not making profit, I will not show profit, and that means, it can be rest assured.

Okay. Sir, last question. In last quarter, you had spoken about your ability [indiscernible] recruiting people. So are we covered in terms of competency and capabilities? Or are you expecting more tools that you are disposing? Or are you [indiscernible] that our engines to grow once [indiscernible] or execution gets better?

Yes. We -- as far as the key recruitment is concerned, et cetera, as I answered for one of the previous questions. We have put all the key people in place. And all the restructuring which we had to do in terms of structure, both in the liability side as well as in the asset side, all that has been done. And we are also, based on the recommendations which have come in terms of how we ordinate our distribution network, we have brought -- we have made branches, we have made clusters. We have brought in cluster heads to manage 8 to 9 branches. And we have brought in the new hedge to manage the 6 to 7 clusters so that we can get a focus on driving branch profitability, driving cluster profitability and driving regional profitability. We have also bit latter the branches by taking some of the activities, which were done in branches. We have taken it off, and some of them are being carried out from the central location, wherever it is.pertaining to operations, et cetera, where there is a partnership interest. We have created a separate op structure for taking those activities over there. So all these are in -- have been done. And the people also -- this is the time of the year when we also promote people, give new responsibilities for people who got promoted. We also move people to take up positions in these branches, et cetera. So this year also we have done that, and we are very consciously doing because of movement restrictions in the entire country. So as much as possible, we are trying to see how we can accommodate people by putting them in nearby locations, so they don't to have to really dislocate themselves to a large -- to a far off place. All that -- so some of the people are -- a small portion of the people are still to take charge in their new jobs. But by and large, the structure is in place. The restructuring of divisions have happened. And we have started seeing traction in, putting the right team for sourcing, et cetera. templates for reviews, all that has been done. But while doing all this, obviously, market is not very conducive for sourcing. So that's a challenge. But we believe that it's -- this structure will definitely help us to navigate that, and we will start seeing traction in the way we grow the business.

Thank you. Ladies and gentlemen, due to time constraint, we will take that as a last question. On behalf of InCred Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.