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

Good morning, ladies and gentlemen. Welcome to The South Indian Bank Limited Q3 FY '22 Earnings Conference Call, hosted by Antique Stock Broking. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sohail Halai from Antique Stock Broking. Thank you. And over to you, sir.

Thank you, Lisa. Yes, good morning, everyone, and thank you for joining the call. Today, we have with us senior management from South Indian Bank represented by Mr. Murali Ramakrishnan, MD and CEO; Mr. Thomas Joseph, EVP and Group Business Head, Sales; Mr. Anto George, Senior General Manager, HR and admin; Mr. Sanchay Sinha, Head, Liability and Branch Banking; Mr. Leelanand, Head, Treasury; Ms. Chithra, Chief Financial Officer; and Ms. Minu, GM, Credit. The call is to discuss 3Q FY [indiscernible] earnings and also to look at the future outlook of the bank. I would request Mr. Ramakrishnan sir to give his opening remarks, post which we can open the floor for Q&A. Over to you, sir.

Sorry to interrupt. Sir, we're not able to hear you.

Thank you. Good morning to all of you, and thank you for joining us for the South Indian Bank Q3 FY '22 Earnings Conference Call. We are joined by my colleagues, Mr. Thomas Joseph, EVP and Group Business Head, Sales; Mr. Anto George T, Head, HR and admin; Mr. Sanchay Sinha, Head, Retail and Liabilities; Mr. Leelanand, Head, Treasury; and Ms. Chithra, CFO; and Ms. Minu, GM, Credit. 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. Let me start with a brief update on consolidation of our loan portfolio. As per our stated strategy, the bank intends to build granular loan portfolio. Over the past 5 years, the bank churned about -- over the past 5 quarters, the bank churned about 30% of its loan book with better underwriting mechanism. The new book based on the accounts opened since October 1, 2020 -- INR 18,000 crores. The overall average ticket size has decreased from INR 17 lakhs as at September 30, 2020, to less than INR 14 lakhs as at December 31, 2021. We have seen consistent growth in our disbursement across the products quarter-on-quarter in this financial year. The bank achieved an overall disbursement of [ INR 16,800 crores ] during 9 months ended December '21. Further, we saw a record disbursement of INR 7,901 crores during current quarter ended December '21, which was 81% higher than the same quarter previous year. Coming to the corporate lending. We disbursed about INR 7,600 crores during the 9 months ended December '21, predominantly the A- and above-rated corporates. The share of A- and above-rated large corporates has improved from 63% as at March 31, 2021, to 82% as at [ December 31, 2021 ]. It's worth highlighting that we have 0 delinquency on new corporate book. [ Core portfolio is the segment that has been consistently ] growing throughout the pandemic. We saw a disbursement of about 5,200 crores during 9 months ended December '21, with an average ticket size of about INR 1 lakh 40,000 and [ LTV ] of 74%. Personal loan is another segment where we are witnessing good traction. Since the launch of preapproved PL in September this year, we are seeing steady monthly disbursement run rate of around INR 85 crores. As far as SME is concerned, given limited [ quality-grade opposite your desired pricing ], we are cautiously growing this segment, with the monthly disbursement averaging at INR 250 crores in comparison to the average of INR 175 crores in the first 2 quarters. We continue to support our existing borrowers with good credit history. The most important part [ of the new book ] is that we have seen very low delinquency. Another focus area where the bank has put in a lot of efforts over the past few quarters is on recoveries and collections. The bank has taken multiple initiatives to strengthen recovery process like beefing up collection team, onboarding collection agencies across the country, alignment of recovery team with [ asset verticals ] and implementation of new collection system. These initiatives have helped the bank to do a record recovery and upgrade, including recovery from technical written-off accounts, of [ INR 928 ] crores nonperforming accounts in 9 months ended December '21 compared to last full year performance of INR 600 crores. Further, the recovery during the quarter was without any major consortium account resolutions. We are targeting to achieve full year recovery of around INR 1,200 crores, which if it happens will be 100% more than the last year. Further, following the robust collection drive within the bank, our SMA-2 portfolio has consistently improved quarter-on-quarter from INR 2,139 crores in Q1 2022 to INR 1,330 crores in Q3 2022. This has in turn led to an improvement in collection efficiency quarter-on-quarter from 87.7% in Q1 '22, 95.1% in Q2 2022 to 100.6% in Q3 2022. Coming to the Indian economy. Lately, we are seeing sudden spurt in COVID cases [indiscernible] [ carrying a threat of ] new Omicron virus variant looming over the economy. Many states have begun to put restrictions on economic activity, which may impact businesses to some extent. However, compared to second wave, most people are vaccinated. Then hospitalization rates in third wave are less across the states. We are hopeful that the Indian economy will be back on the path of economic growth once the intermittent pulse of COVID's third wave stabilized. The bank is closely assessing impact [indiscernible] borrowers and will provide suitable assistance and support if needed. Let me take you through key highlights of the operational and financial performance for this quarter. The total business for the bank stands at INR 1,45,757 crores as at December 31, 2021. Retail deposits rose by 10% year-on-year to INR 84,151 crores. CASA deposits increased by 21% year-on-year to INR 28,229 crores predominantly due to continued improvement in our SA business which grew by 21% year-on-year to INR 23,569 crores. CASA ratio account -- CASA ratio continued to improve and increased by [ 113 bps ] Q-on-Q to reach 32% of the total deposits as at December 31, 2021. Bulk deposits declined by 40% year-on-year to INR 4,197 crores, in line with our strategy. NRI deposits, which have been growing steadily, [ grew by 5% ] year-on-year to INR 27,144 crores and continued -- contributes about 31% of the total deposits. Low-cost NRI deposits grew by 7% year-on-year to INR 8,424 crores. The bank saw robust growth of 35% year-on-year [ in NRI ] remittance business during the quarter. Advances grew on a sequential basis to [ INR 59,229 crores ]. We continued to see good traction in our gold loan [ with a consistent growth ] of 12% year-on-year to reach INR 9,862 crores as at December 31, 2021. The bank continues to calibrate and churn corporate portfolio with better-rated corporates. The share of A- and above-rated corporates in large corporate book, that is INR 100 crores and above, improved from 75% at September '21 to 82% in December '21. During the quarter, we have seen good traction in recently launched preapproved personal loans. We continued to [ healthily ] grow our [ SME ] portfolio; and disbursed [ INR 800 crores ] of SME, MSME loans in the quarter ended December 31, 2021. Our investment book was at INR 21,066 crores, of which HTM category [indiscernible] INR 18,585 crores, while AFS contributed INR 2,455 crores. The bank witnessed slippages of INR 387 crores during Q3 2022, which were in line with the guidance given for FY '22. Personal and business segments continued to feel the impact of the COVID. The bank has restructured 1,977 -- INR 1,970 crores [ worth loans ] under COVID OTR framework, of which business segment is INR 1,024 crores. Personal segment is INR 306 crores and [ corporate is ] INR 640 crores. The bank's collection efficiency improved from 95% in Q2 2022 to 101% in Q3 2022. The overall collection efficiency for the months of October, November, December '21 were 100%, 99% and 102%, respectively. Gross NPA improved by 9 bps from 6.65% as at September 30, 2021, to 6.56% as at December 31, 2021. In the quarter, the bank was able to recover and upgrade INR 291 crores worth of NPAs. The net NPA ratio improved by 33 bps from 3.83% (sic) [ 3.85% ] as at September 30, 2021, to 3.52% as at December 31, 2021. Net interest income for the quarter increased by 9% Q-on-Q to INR 573 crores. Net interest margin improved by 15 bps Q-on-Q to 2.64% in Q3 2022. Sequential growth in CASA has led to an improvement in cost of deposits by 17 bps Q-on-Q -- reached 4.67%. Noninterest income was flat at [indiscernible]. Our core fee income increased by 23% year-on-year to INR 127 crores. [indiscernible] INR 346 crores in Q3 FY '22. These provisions include INR 279 crores towards NPA and NPI and standard asset provisions of INR 40 crores. Our PCR improved from 65.02% as at September 30, 2021, to 68.08% as at December 31, 2021. PCR excluding write-off improved by 410 bps to 48% as at December 31, 2021, compared to 43.9% as at September 30, 2021. Our overall capital adequacy ratio continues to be robust with 15.60% (sic) [ 15.68% ] as at December 31, 2021. The Tier 1 ratio stands at 12.72% as at December 31, 2021. We are hopeful that the momentum in disbursements and collections will continue in the coming quarters, with the headwinds in the economy [ tapering ]. With this, we open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of Gautami Desai, Chanakya Capital Services Private Limited.

Yes. I -- yes. You can hear me, right? I -- can you clearly hear me?

Yes, yes, we can hear you now.

Yes.

Yes.

Yes. Sir, we are very patient investors. And we really appreciate that the bank is trying to grow without a capital raise, and we request you to continue doing the same. So congratulations for that. And sir, you've seen and even in the presentation and [indiscernible] you spoke clearly about your growth in the gold loan and the corporate, so similarly can you take us through your growth across verticals? And where are you seeing more -- where is your focus on right now? Like where are you more hopeful about? Like I could see some of your vehicle loans going up and things like that. [ So can you take on that ]?

Yes. In fact, I've covered as part of my initial talk. We are actually focusing on doing good-quality business across segments. So as explained in the past, we are focusing on growing retail and SME business because traditionally this bank had a lumpiness in the corporate book. So as a conscious strategy, the bank was continuously trying to reduce the dependence on bulky corporate loans, so in tune with that, the corporate loan portfolio, which was contributing in excess of 45% of the total loan book, now has come down to 24% to 25%. However, [ to granularize the risk ], et cetera, the focus was turned towards SME and retail, but in the last 1.5 years since the COVID pandemic has started, you know that this is the segment which is also most vulnerable because they have seen the biggest shocks. Therefore, we are -- as we witnessed the impact of this on the market, we are continuously tweaking our strategy to ensure that we do find opportunities in good, well-rated corporates. So corporate book -- as you must have heard from my talk, that we are looking at well-rated corporates. And the composition of that book has gone up substantially. And we have also seen 0 delinquency in the new books [ that got created ]. Apart from this, we are definitely growing our gold loan book, which you know that the credit risk is negligible and -- [ almost is ]. And we are growing quite well without compromising on the LTV. And we're also growing SME very cautiously by ensuring that we increase our underwriting standards. We have improved our underwriting standards and we're ensuring that the new book which gets created doesn't slip, and we have seen good traction happening over there. In this quarter, you must have heard me saying that we have done about -- close to about 850 crores of -- in 3 months. And if you look at -- the other retail business which are growing quite well is PL, where we are actually now churning our existing liability -- existing huge customer base, [ which we ] have more than 6.8 million customer base. And we are using our analytics, which is newly formed division about a year back. We are using analytics to get insights about the customers who can be given preapproved offers. So through -- and that has started giving us good traction. And we are also seeing that it has very, very negligible slippages. So that is something which is now getting traction. And we are now averaging about 75 crores to 85 crores a month, and it is coming at a good yield of 14% plus. And I am sure you must have heard me in the past talking about the -- a credit card type which we have done with FPL, which is a -- who's a -- which is a fintech which is into credit card business. And we have started issuing credit cards, co-branded card with SIB emblem. And that's something which has taken off quite well. Already we have issued more than 20,000 cards, and we are hoping to ramp it up in the coming quarter too. And there we have started now getting a good traction in terms of the book getting built over there. As I am talking to, we are seeing it crossing 50 crores of credit card book. Though -- it's a brand-new business for us, but this business comes with a good ROA. So net-net, if you ask me, I think, everywhere, we are focused on [ good-quality ] business. And as far as [ home and market ] is concerned, we are tweaking the policies. We are tweaking the process flow. We are also strengthening the infrastructure needed for good-quality underwriting, but we are seeing good traction happening now in the sourcing of new home loans with the new DMA, DSAs coming up; and with the way we have formed the vertical with [ cluster heads ] and branches focusing on existing and walk-in customers; and with the DMA, DSA sourcing market. I mean new cases from the market. And with the churning of the existing customer base, where we can offer [ good-quality ] home loan and mortgages, we have started seeing sourcing improving. Obviously, for it to really reflect in the book, it is -- though -- we are disbursing, but then the rundown there is happening due to the aggressive pricing which is there in market, but we are hoping to see good traction happening once we get this fully streamlined. So by and large, I think we are growing in every possible opportunity where there is a possibility of getting good-quality customers. With improved underwriting standards, I am hoping to build a good-quality book, which is the only remedy for [ getting control ] on the slippages which is happening due to the legacy book.

So how about vehicle loans, what's your experience? [indiscernible].

Yes. Very good. All the new vehicle loans also which we have disbursed has been pretty good. And here again we are using the existing customer base to preapprove vehicle loans. And also the existing [ good-rated ] customers...

So which segment is -- within vehicle, which segment you are seeing a traction.

Auto loans. I mean we are doing it very selectively, and our volume is not that large. And you know that vehicle loans generally come with very aggressive pricing, so we are also very conscious that we do only where the credit quality is good and where we don't see any possibility of slippages even though margin-wise it might be a little less.

The next question is from the line of Mahesh, M.B. from Kotak Securities.

Sir, just a couple of questions. One is that when you are now recovering these loans which have defaulted out there. What has been the kind of experience that you're seeing in terms of imposing the collateral, as compared to the borrowers coming back and repaying the [ underlying ] dues? And how long is it taking for you to now recover the [ RF ] as compared to probably about a couple of quarters back?

Yes. See, as far as collection and recovery is concerned, we are continuing to -- we have -- one, we have, first of all, created a good infrastructure for doing a very focused collection and recovery. So we have formed a separate collection team. And Particularly for handling retail collections, we have tied up with agencies across the country, and now the agencies have completely taken charge of doing collections. [ Earlier ], this was done by the branch resources. And given the number of cases which they needed to collect from and that the same team was also focusing on SME and other collections, clearly the focus on retail was becoming less on the branch side, so -- but now we are using agencies to do the focused collection on the retail side. Now [ with the bank -- with released -- ] of retail collection from the branches, branches are focusing on SME and agri and other collections, which are basically branch-led businesses. And as far as the big corporates are concerned, clearly wherever we are sole bankers, et cetera, we are engaging [indiscernible]. And we are using all the possible rules under the country to ensure that we negotiate hard and we get good value for money. So it's I will say that we are looking at the opportunity of trying to close it at the earliest rather than waiting for a few more years where the ultimate net present value for whatever you realize in future [ may not ] really be worth it. Therefore, we try and enter into onetime settlement wherever there is a possibility of doing. And wherever we are seeing that, legally we can take a quick recourse by enforcing [ surfacing ] and taking charge of the assets and disposing [indiscernible] options, et cetera. So we are progressing on all directions to ensure that we clean up the book. And you must have heard me talking about how SMA-2 book is now getting cleaned up, and we have brought it down substantially. In fact, as we continue to do traction of this, we are bringing -- trying to bring it down below 1,000 crores in a shortest possible time. And this is clearly happening due to focused collections so that we don't let them slip into NPA. In fact, the case in point is that I've been giving a guidance of [ 400 crores ] to 450 crores for Q3. And we ended with less than 400 crores, clearly much lower than what I had anticipated. And we hope to speeding up our recovery in Q4 also. [ And you remember ] that Q3 recovery has happened without any bulk settlement which has come. In Q2, we had the advantage of [ DHFL ] helping us with good quality -- good recovery, whereas in Q3 it was all granular and smaller and medium-sized deals without any big deal [ which got sold ]. In Q4, hopefully, 1 or 2 of them kicks in. Then we will probably be achieving more than what we are targeting to do. Overall, if you look at the overall collection for this year, till Q3, we have done close to INR 880 crores of recovery and upgrade compared to what we did of INR 600 crores for the full year last year. And I'm hoping that we will surpass INR 1,200 crores by March, which means we will have done more than 100% of recovery compared to previous year. So this is as far as the collection and recovery is concerned. To -- with regard to your question on how we are planning to handle the legacy book which continues to give slippages. I mean you could have -- you will have seen the way we have been managing it in the last few quarters by doing aggressive collection; by doing aggressive recovery; by also providing proactively; and also selling of assets where we have -- where we feel that the -- it makes [ a lot of ] sense to put it to a specialist like [indiscernible] to handle, where we'll work very closely with them to ensure that recovery resolution happens. And wherever we have provided for fully, we are also writing them off so as to manage the overall percentage of [ GLP ]. So if we look at my GNPA: The fact that it has improved from 8.01% in Q1 to whatever we have declared now, there's a very clear, continuous action happening in bringing down the overall NPA levels. And we will -- it's very difficult to say by when we will completely clean it up because of 2 reasons. One is market is -- still continues to suffer with COVID pandemic, and therefore there is always this issue of movement getting restricted and [ courts ] not functioning. And many of the [ RTC ], et cetera, also there are delays in having judges, et cetera. So all this actually comes in the way of faster resolution, but we are hoping that COVID 3 impact may not be as bad as COVID 2. If that supports us, definitely we will do a very aggressive collection and recovery. With the new head having taken over our recovery and collection and with the restructured team of -- team under the new head, we are seeing good traction happening across all segments.

Sir, I just want to clarify. What is your outside ECLGS exposure today?

Sorry. I didn't get it. Come again.

The ECLGS exposure.

Just a second. Just give me a minute. Just give me a minute. I am just taking [indiscernible] the right numbers.

And while you are looking at it, sir: Just qualitatively, have you been -- have you started seeing slippages in this book? And have you seen reimbursements coming in from the credit guarantee corporation?

Okay, I'll answer both the questions. Just hold on for a minute. See, ECLGS. You know that we have ECLGS 1, 2, 3 and 4. And then there's an ECLGS 1 extension, 2 extension, 3 extension, 4 extension. All these have happened with various guidelines which have come in. The total number -- and total number of accounts which we have done restructuring, as per this, is about 10,859 accounts, amounting to 3,339 crores. And as -- gross advances as of December is about 2,434 crores, and 166 crores have become NPA out of that. And this has predominantly happened in the ECLGS 1 when the bank had actually offered unilaterally to all the customers and only those who wanted to opt out came and opted out. So we are seeing NPAs happening only in that, but as with ECLGS 2 and onwards are concerned, they have done a very careful analysis of the viability of the cases which we are restructuring. We hope that we will not have -- see that much of slippages happening from ECLGS 2 onwards, but however, it all -- as you know, it all depends on how the market supports recovery and collection and [ various ] other resolutions.

Sir, just one clarification: 3,339 crores represents loans under the ECLGS product. Or is it the divestments made under the ECLGS product?

It's a sanction limit. 3,339 crores is the sanction limit, of which the gross advances outstanding as on 31/12 is 2,434 crores.

Okay. And this 169 crores which have become NPAs, you've got the repayment from the credit guarantee corporation.

Yes, yes, yes. That is a continuous process. And we have been -- yes, that is happening.

You've had no negative experiences, so far, with the credit guarantee corporation on the ECLGS disbursements.

No, not at all.

We'll move on with the next question. That is from the line of [ Anirban Sarkar from Max Life Insurance ].

One question. So what's your view on your SME portfolio and your restructured loans? We are seeing reports saying that banks are now demanding an extension of ECLGS and moratorium on that. So if things are all good, then it leads to the question that why is this demand being raised.

Yes -- no, the -- I think it's the question which I answered just now. I read out the numbers which we did as ECLGS and all those extension also forming part of that number which I read out. So see, as far as the ECLGS portfolio in SME specifically, if you look at it, this is the...

[indiscernible].

[indiscernible]. So see, as far as the ECLGS is concerned, wherever we felt that the viability of the case is clearly established, we are going ahead and restructuring. And wherever we believe that -- the moratorium extension which we were to provide as per the revised guideline, when we see cash flows are showing a traction where they will be able to survive and repay, we are doing that. So we are fully adhering to the guidelines which is being brought out, and we are applying our underwriting mechanism to ensure that we do for the right cases. So as we experience the recovery -- I mean, once the moratorium period gets over and as we see repayments start happening, we will -- because we are -- it's not that we will have -- we have given moratorium of 12 months and 24 months. Wherever customers have offered for much lesser moratorium also, we have given less moratorium. And we are seeing that the customers are repaying once the moratorium period gets over, so as far as -- I mean, as of now, it's really not a great cause of concern for me, but having said that, since COVID has impacted SMEs and retail to a large extent, we continuously closely monitor as to what is happening [indiscernible].

Sure, sure, sure. And sir, on core profitability now: Our [indiscernible] assets is on the lower side. It's we are at about 60 to 80 basis points of fee and plus our margins, minus OpEx, so it would come to less than 1% basically. And so what a -- trajectory we can expect here. Should we expect any kind of improvement [ going the year ahead ], sir? Because otherwise, our ROAs are going to remain low. And even with some improvement in credit costs in the future, if our core [indiscernible] doesn't improve, then ROA is likely to remain low, so what's our view on that?

Yes. See, ROA or ROE obviously will start becoming positive only when we start actually giving positive profit. So right now, in the last -- over the last 15 months, as per the stated strategy, we are churning the existing book which had quality issues. We are now sort of churning them for -- with better and better-quality assets getting added, at the same time resolving the earlier book in the best possible way. And while doing that, [ what are all the ] products which we can focus on which will probably give us much better yield? So that's a reason why we started focusing on personal loans, started to having [ a type of ] credit card. We are also now looking at a few other opportunities where we can probably get much better rates. So like, for example, commercial banking activity is something which we are now looking at [ expeditiously ] because many of the corporate customers, SME customers -- where we can look at a fee-based income, where we can look at 100% [ fee-backed ] discounting, et cetera. Where -- we are already there, but we will probably start doing more of them. And we're also looking at products like gold loan, et cetera, where the credit risk will be negligible. So it's a journey. I think today my NIM is definitely improving. And you can see the NIM has improved even despite the marketplace being -- or moving towards -- moving southwards. Still our advances of -- rate of interest is -- continues to be almost with the same level over the last 6 quarters, 7 quarters. And our cost of deposits has continuously been coming down because -- due to the efforts of CASA contribution going up and due to the fact that we are continuing to raise more money at a lower deposit cost. And this journey will continue. And as we see, the advances -- difference between the yield on advances to the cost of deposits will -- is only going up because we will continue to ensure that our cost keeps coming down. Our advances are -- [ we'll keep with the ] high-yielding products, but on other side, we have treasury which is also contributing to the overall NIM. There, if you see, due to the adopted strategy of the bank to reduce the duration, et cetera, the yield on investments clearly is, yes, coming down. And given the fact that the -- there's limited opportunity for good-quality assets in the market, the surplus which we have, we are -- also [ define it in alternate ] opportunities. And we have also diversified our income from treasury by going for arbitrage opportunities by going for currency and even in taking part in IPOs, et cetera. Those streams -- have started giving us a good stream of income. Now with the new treasury system coming into place, we will obviously be doing more in those activities also. So it's a journey which we are going through. And definitely the [ milestone for me ] is to reach 3% NIM. Our aim is to reach it as -- ASAP because that's the only way we can ensure that, with the provisioning coming down and with the income going up, certainly the bank can turn around to positive results, but the journey will go on for, in my view, depending on how the market also is conducive for slippages not happening; and helping us in doing better collection and helping us to manage the existing book, at the same time sourcing more and more of good-quality, new assets which are better yielding; and continuously tweaking our liability strategy.

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

I have a couple of questions. So one is I think there is -- you have restated the numbers. And we have taken the recovery from write-off accounts in usual other income versus what we were netting off from provisions till last quarter, but at the same time, it looks like that, the MTM depreciation, you have kept as negative item in the other income, right? Why is that, sir? Because I remember -- I mean my understanding is that RBI is -- I mean in the revised circular there was no such thing, right? So you -- is there -- I mean, could you have written -- I mean, could you have retained MTM in provisions? Or MTM depreciation is now mandated to come as a negative line item in NII and other income.

So Chithra, do you want to answer this? I think she'll be able to answer it well. Chithra, are you there?

[indiscernible].

Sir, [indiscernible] because, since I am in quarantine and [indiscernible] line, it's not been clear for me.

[indiscernible]...

[ Vinod ], you can answer that.

Sir, regarding the depreciation on investment, it has to be netted off with the other income. That is the RBI circular as of now. Only the amount recovered from written-off accounts, we have to adjust in the -- come back to the provision -- come back to the other income. Earlier, it was adjust in the provisions.

So that part is also clear, as we have done. His question is on MTM. I think that this was due to -- of...

ARCs, yes. One of the...

No, one of the accounts in...

[indiscernible].

No, no. This is in [indiscernible] depreciation. That is with the ARCs. See, last quarter, if you recall, we had sold 2 pools to ARCs where we had to take provisioning under -- as per the asset -- those have continued in our books. So that was there. This time, obviously, we have not done any sale. Therefore, that is clearly not there. This time, what we have also done is that recovery which we have done from the fully written-off accounts, with about 5 crores for this quarter, which has been shown under other income which was earlier classified under provision and contingency. If you have any specific questions, probably you can -- we'll get in touch with you and clarify because [indiscernible] answered your question fully.

Sir, no worries. No worries, sir. Okay. And second thing, sir, is on your growth strategy, right? So what you are doing is you are churning the book in favor of better-rated corporates, but at the same time, I wanted to understand this more because I don't know. Are you lending on MCLR or external repo or fixed rate? Because it is slightly difficult to assume that your MCLR rates are at least, let us say, 80 to 100 basis points higher than some of the larger banks. And even they are having some challenges on growing their better-rated corporates because the pricing seems [ to be very fine ] at marketplace. So when you are seeing higher growth in better-rated corporates, how are you doing? I mean, is it -- what is the strategy here, and would it continue? Or you want to build a bank with slightly better focus on commercial/SME book.

Yes, good question. See, let me answer it in 2 ways. One is, as you said rightly, we have obviously benchmarked this lending which we do to better-rated corporates [ with either ] a T-bill or with repo rates, depending on whichever is making us competitive. And second, we are looking at this as an opportunity in comparison to the alternate opportunities which we have because clearly, due to lack of good-quality long-term assets, et cetera, we are -- we definitely have surplus. And this surplus, we are deploying for exploiting the opportunities which are there. And I am doing it with a very conscious effort because, many of these AAA corporates, once I get it with AAA- or A- and above-rated corporates, once I get an entry, today, I'm able to deepen my relationship with them by offering products like dealer financing, vendor financing, even retail loans to the employees of those corporates, [ et cetera ]. So overall this is very much in tune with the ecosystem concept which, anyway, has been popular now where a relationship's [ ROE is being looked at ]. Even though you might have a very fine rate, as far as the corporate is concerned but -- overall the yield from the corporate will be much better due to the various other opportunities out there. Secondly, we are not looking at really to tie it up for a long term because we know that, long term, the rates are going to go up. So we don't want to tie ourselves up with a lower rate in the long run. So wherever it's 3 months, 6 months, 9 months, within, let's say, 9 months to 12 months, we definitely -- if we believe that we are -- we can get a decent yield in comparison with alternatives which we are deploying, we are making it as an opportunity to acquire customers who otherwise we wouldn't have had an opportunity to get in. So this is the strategy, as far as [ corporate banking ] is concerned, but having said that, will it continue for years to come? Clearly it is today we are using it because we have surplus. And once the economy revives and if we see more and more good-quality assets in the market, [ obviously ] we would want to grow a regular advances book where we'll be offering a kind of, let's say, 3 years or 4 years for a retail or working capital and term loan for SMEs and agri products, et cetera. That's obviously -- and even for corporate term loans and other project loans, et cetera where you can probably tie it up for a little longer period [indiscernible] of opportunities in any new big projects coming up, et cetera, we are effectively using it instead of actually putting this money into very-low-yielding alternate options or giving to poor-rated individuals or SMEs.

Understood. So on the SME side, sir, if I see that you were seeing a Q-o-Q decline for the last quarters, and of course, the environment is not very certain because of this COVID and everything, then this segment clearly is more impacted, but at the same time, other large private banks have seen a very phenomenal growth in business banking or commercial space. So I mean, if I were to [indiscernible], how much of your degrowth in MSME is coming because of competition? And how much is because we are getting cautious? So how should one look at it?

So it's very difficult to quantify with numbers, but let me tell you what as a strategy [ we will do ]. See, today, what is happening in SMEs -- there are 2, 3 issues which I think one should be very clear about. One is, as you said rightly, the COVID has impacted the SMEs, and retail to a very large extent, which is clearly evident from SME -- the slippages clearly evident in SME and retail slippages clearly evident from many of the banking -- many of the branches who have come up with results, et cetera. Having said that: [ So your choice of ] wanting to lend just for the growth of this segment, you can continue to lend. And you can continue to suffer from slippages happening because nobody is too clear about how the market will pan out for particularly the SMEs whose resourcefulness is obviously very limited. And many of their business models have [ come in for shocks ] due to the COVID continuing, COVID pandemic continuing. So if we look at -- the other side is a rate at which these deals are done in the market. Today, obviously, there is no pricing to the risk which is happening in the market, so clearly large banks -- I won't say it's blame, but it's -- it probably is an adopted strategy. They are actually going and offering rates which are clearly inconsistent with the riskiness of those cases, but they are riding onto maybe the good behavior of those customers with the existing bankers. And even though they could be compromising on security which is the -- being offered by the borrower or the rate which is going to be far lower or the enhancement which they might be seeking, they have a choice of either wanting to retain customers by going down on [ your rating ] and retaining your customer. Or somewhere, you need to say that, "This is not something which is going to help me in my overall scheme of what I would want to drive for the bank." So we are taking it as it comes. And we are obviously playing [indiscernible] definitely worth keeping it in our books, we fight and we ensure that they stay. And we also try and work with the customer to ensure the overall deepening of the customer relationship happens and we improve the overall ROE coming from the customer. Wherever we feel that the rates which are offered by the competition is far lower, which has no relevance to the riskiness; and if we believe that even the existing limits are far higher; and if -- over and above that, if somebody is taking enhancement clearly to fund these losses or fund this lack of receivables [ experts ], we believe it's only going to add problem, so we let the account go. So it's, I will say, the combination of this. And having said that, there are segments in SMEs where we know that, with a good collateral and with cash flow assessment happening where we have [ GST ] data, et cetera, where we believe that it is a good company to deal with, we definitely keep lending. And that's a reason why we are saying that SME new disbursement is clearly -- we are showing good growth in new disbursement in SME. The SMA book degrowth is happening for 2, 3 reasons. Book degrowing is happening due to, a, slippages of SME book into NPAs. That is one. Second, restructuring of SME cases, which I read out earlier also [ almost ] 1,000 crores SMEs were restructured due to the COVID pandemic. And three, very-low-rate SMEs which today are lured by big banks, clearly, with the rates which are not priced to the risk. And therefore, we need to make, as a bank, to take a call whether it's worth retaining them. Or we let it go. So I am not unduly worried about the lack of growth happening in the SMA book. I know that I'm churning the book for -- to better-rated SMEs, with better-quality SMEs. And this will only help us in our strategy of churning the book for better quality so that my slippages will keep coming down. So [indiscernible] SMA-1, SMA-2 restructured book [indiscernible] which I need to grapple with, I'll definitely be extremely cautious, more or so due to the fact that I have seen SMA cycles over the last several years of [indiscernible]. This is a segment which we -- one needs to really handle it correctly. Otherwise, we can easily get distracted [ to building great-quality book ].

The next question is from the line of Lalit Deo from Equirus Securities.

Sir, could you highlight the trends on the restructured book? Like how has been the NPA experience from the restructured book? And how much provisions do we carry on the restructured book?

Yes. See... [Technical Difficulty]

Ladies and gentlemen, we seem to have lost the line for the management. Please stay connected while we try to reconnect the management.

Thank you. The question which you asked about the slippages from restructured book, I just want to give you a detailed picture of that. We have been all about -- I mean I'm talking about Kerala flood [indiscernible] which we had then restructuring happening due to [ DCC ] extension; and then MSME restructuring which is based on [ GST 1 ]; and then COVID 1, COVID 2, COVID 1 which we have done for personal loans, MSME and other exposures, similarly COVID 2 for personal loan, personal loan meaning consumer segment and MSME and other exposures. [ So in all ], we have total standard restructured book of about 3,737 crores, out of which 878 crores have slipped into NPA. And these slippages have predominantly happened in the flood segment and in the MSME restructuring which had happened in the -- which had passed. So in all, about -- the overall book, if we look at it, is about [ 23.49% ] is slippages. And we have got about 180 crores which were upgraded or closed. So overall it has come down by about 112 crores, and as we are talking, it's at about [ 2,567 crores ]. That's the outstanding standard restructured book today. And we are seeing very negligible slippages, obviously, since, of course, moratorium is also there. We need to see how they behave after the moratorium gets lifted, but by and large, we see that the slippages are predominantly in the flood restructuring and in the MSME restructuring in the past.

And sir, like what will be the provisions on the standard restructured book?

That's [ as per the ] regulation, which is about...

[indiscernible].

5%.

Okay, sir. And sir, could you give us like the broad composition of the new loan book which had been generated post the [ September '20 end ] which is about [ INR 18,000 crores ]?

Yes, sure. Just a second. Yes, it's about -- predominantly it is -- as I said, it's retail is about INR 4,400 crores. I'm telling you approximate numbers. Retail is about INR 4,400 crores. Corporate is about INR 4,600 crores. [indiscernible] segment is about INR 1,680 crores. And agri is about INR 7,290 crores, which includes gold, et cetera, [ also ]. So in all, about [ INR 18,000 ].

Yes...

And sir, like as you mentioned, that like we have churned about 20% of the [ WC ] book. So now with the churning going on, so what could be your loan growth targets for -- like for FY '23 and FY '24? So any specific number you are looking at?

So we actually -- as you know, we came out with a vision document last -- I mean, in September 2020. That was obviously much before COVID 1 impact, and obviously we never [ knew with ] COVID 2 and COVID 3. There I talked about we wanting to reach 1 lakh crores by 2024 March. That's what we had indicated, but clearly that was -- those were projections we had made with the assumption that the market will get over this COVID and we'll not have any problems of -- it will be like any regular, normal growth in the economy. Clearly that is not to be so because, last 2 years, I think the country as well as the world have seen never-before economic impact on the various segments. So suffice to say that we may not -- we will definitely look for good-quality assets. And we are not letting down our need to grow asset book with -- which are good, high-yielding asset book and with a good-quality asset book because this is in tune with what I have been setting as my strategy of profitable growth through quality credit, but between growth and credit quality, definitely I would -- till first time, I have a full hold on legacy book completely getting handled. I will continue to build a book with high quality. Therefore, if it happens, if it's a little less growth, I am fine with that because I know for sure that today, even with the limit [ I am, we're only given ] with operating profit which I have, if I have a clean book, I -- my profits will definitely be far -- will be much, much better than the loss which I'm showing today. So I need to improve my metrics in terms of PCR, in terms of GNPA, net NPA. And therefore, I need to continue to have a grip on them, but having said that, clearly for each product and Q3 in particular -- I'll say Q3 is the first quarter where we have had 3 months of actual normal -- fairly normal economy. And we have shown that the bank is capable of doing good disbursement in the 3 months. If only the economy continues the way it is -- it was in Q3, definitely we can catch up with the numbers which we have targeted, but having said that, here I am once again reiterating that it's not mainly for the growth that I'm looking at growth. I want to have a growth with quality. So long as it is coming with good quality, I will continue to lay emphasis on growth. While doing that, my bigger focus will be around recovery and collection, handling restructured book, handling SMA book, et cetera so that overall metrics in terms of GNPA, [ net NPA ], PCR, et cetera gets covered. And the same time, our NIM continues to become healthy. And we continue to grow our CASA base, which is going to make us more and more competitive. We will definitely grow our government channel [indiscernible] and NR, which are really firing very well now. With all that, we hope to continue to work on improving our cost of funds because market rate is something which we cannot determine. Market rates are going to be decided by how much competition is desperate to get an asset. Therefore, what we can do is what we have in terms of liability, better liability sourcing. That is something which I'll continue to focus on so that -- with better NIM coming in and with a very less impact on provisioning due to better-quality assets, we believe that we can turn-around the bank for profitability.

We'll move on to the next question that is from the line of Nilanjan Karfa from Nomura.

Two or three broad questions. So first one is the data. When you talked about that ECLGS account and you mentioned INR 166 crores, that's what I noted as slippages. Is this INR 166 crores the total stock of loans or just a portion of ECLGS [indiscernible]?

Yes, it is from the stock only. Whatever we talked about as the exposure under ECLGS as of 31/12 was INR 3,339 crores, of which this was the sanctioned limit. Of which, the gross advances as of 31st December INR 2,434 crores. Out of that, the NPA is [ INR 166.84 crores. ]

No, I'm sorry, I'm still confused. The sanction was INR 2,434 crores, which is basically up...

The sanction was INR 3,339 crores. Sanction limit is INR 3,339 crores. Advances, which is standing as of December, is INR 2,434 crores out of that total ECLGS book.

So just a clarification, so that INR 2,434 crore is the ECLGS amount plus your own...

No, no, no. [ The value is there ].

Okay. And that INR 166 crores, is it comparable to INR 2,434 crores or the entire loan book?

[ The value ] INR 2,434 crores, [ value of this ] out of the INR 3,339 crores. Its [ value ] pertaining to this book. If your question is whether it's pertaining to only ECLGS book, the answer is yes.

Right. So the actual stock of loan that has splitted from ECLGS is much higher, maybe 5x this amount or 3x this amount?

I didn't understand. What are you saying? I didn't understand that. Stock of what?

So INR 166 crore, is it only the sanctioned ECLGS portion? Or this is the total stock of loans to those borrowers which have slipped and had taken ECLGS?

So that total exposure of the bank to such NPA, if you ask me...

Yes.

That is about INR 1,169 crores, correct.

Yes. Okay. Yes, that was helpful.

INR 3,339 crores minus INR 1,169 crores is what I read out as gross advances standing as of 31st December, which is INR 2,434 crores.

Okay, okay, okay. Yes, yes. Okay. Second, on that SME, we have been giving out this average advances for quite some time. And it does look like the net number of clients that we have lost is probably running at 8%, 10%. The question is you basically highlighted that the clients who have gone to competition, there is probably -- they are not understanding the underlying risk. My question is if SMEs that have moved and have survived to COVID have perhaps much better credit rating optionality, why do you then feel that the underlying credit risk for these guys [ is their investments ]?

I'm not saying that they don't know what they are doing. So first of all, I want to correct that. Each one obviously does what he or she thinks is right. So certainly, that's not the commentary I was making. And when you make comment that there is a pricing to SME risk, there's a pricing to corporate, there's a pricing to retail risk. So officially, we have seen that especially in the Indian market, if you see the sea of SME book of various banks, including public sector banks and private sector banks, we have seen many of them having good cycle as well as very bad cycles, and many of them really have to rehash the entire SME strategy also. So the limited point which I'm trying to make is, today, when an SME customer, who otherwise would be in the conventional rating, he would be probably BB or even lower than that. Today, if he is getting rates of 7% or 7.25%, in my view, over a period, this is not pricing to the risk. But having said that, do they deserve 7%, 7.25%, even we are retaining customers by paying 7.2%, 7.3% in some of the very few SME cases, but we are also going down retaining many customers, where, as you said rightly, people were saying COVID 1, COVID 2 where they have been able to perform [ reliably ] liability, et cetera. And we are clearly seeing that toward retaining them. We are going down on rates in order to retain such customers. So while losing, I won't say that the entire base is getting lost to the competition. It's only 1 portion of that probably which are -- where we are not able to match the pricing or where we believe that the pricing is not justified, that's the one which you lose. But otherwise, the degrowth in the book is happening due to them slipping into NPA and them getting restructured, I mean those are the other things which we need to look at. So I'm not saying that they don't know what they are doing. I'm only saying that...

No, no. Sir, that was not my intention. I was just trying to double check exactly what you mentioned.

The pricing of SME risk is something which one needs to be cautious. That's all I'm saying.

Sure. And sir, I had actually 2 related questions. So could you share -- I'm sure for any client that you lose, you take it very seriously, have you broadly analyzed why are they leaving? Is it because of just the rates? Or is it something about, let's say, them having to put lower collaterals, for example? Could it be service-related? And anytime you lose this client, do you also lose related accounts? It could be promoter or family deposits, investments. If you can share some thoughts around these levels. I mean, to the extent that you...

First of all, I want to tell you that any customer who we are losing, if we are clearly gaining traction of other deeper relationship with them in terms of promoters accounts with us and wealth with us or any of the other relationships we have with them, we don't definitely let them go to the competition. Clearly, we are retaining such customers because we just don't look at only credit-related income, we look at the relationship value. So clearly, we don't let such accounts go at all. And every account, which we eventually take a decision to lose as we've taken with the application of [indiscernible] to ensure that is it not all indeed worth it if you're seeing a deterioration in the performance of the customer. Clearly, we are seeing these struggling with the COVID hitting them very badly. And he is probably -- many of them -- now with the GST data, you know that how much of sales are they doing every month. When you find that many of the months are having 0 turnover, et cetera. And then when he comes and asks for [ very fine ] rates. Today, when the competition is trying to lure them by offering 7.25% where the current rate which you might be servicing could be, let's say, 10.5% or 11%. Suddenly, when you are wanting to go down on 4%, 4.5% of spread, where we are seeing that there is a clear deterioration in the performance, a drastic deterioration in the performance, where there is no other relationship with the bank, we don't want to retain such customers. So those customers are the ones who we let go. Wherever the points which you made about service-related, rate-related -- the service-related, clearly, there is no question. I mean, every -- just to give you, share with you an insight is that customers who -- were lured by the lower rate, many of them are -- some of them are coming back and say, why don't they come and take over us again because we are not getting the service which we are getting from you. So clearly, service, there is no question. I mean these customers are -- we clearly have a huge edge in terms of service. And it's a well-known fact that the banks which are clearly regional banks, et cetera, have a much better relationship value with the customer in terms of being an integral part of whatever happens in their family, et cetera. Therefore, there is no question of we losing because of service issue. Clearly, rate is an issue. But rate, we apply these yardsticks to figure out where it is worth retaining them, where it is not worth retaining them. And where it is not worth retaining is not necessarily then a good account even if it's earning, let's say, 7.5% or 7.7% for SME, which I believe is something which we can a limit today because our cost of funds anyway is coming down, and we are constantly working on improving our cost of funds. Still, we have a 3%, 3.5% -- I mean at least 2.5% to 3% of spread, which we have which there is no delinquency, we will continue as well for the bank. So we take a very conscious call [ wherever we let it go ].

Great, sir. That is very heartening. And sir, final question, and again, focused on SME. What do you think is the greatest hindrance for growth at least at this point in time? Is it -- could you -- would you want to classify it as because we are obviously changing the risk metrics, changing the processes, changing how they are onboarded. Would you want to say that teaching or the frontline stuff is something that is not yet complete? Or is it more external in terms of is it the weak environment overall or competition? So broadly speaking...

Yes, I think it's a combination of things. First of all, let me tell you that the entire restructuring of the brand structure as well as the retail asset structure -- I mean, the vertical asset structure, et cetera, that got completed somewhere around June, July. So -- and the team started actually working in their new assigned role, let's say, after 1 month of settling down in the new job, which they've been defined for. And we have also found the LME division through which we are continuously upgrading their skill by making them go to e-learnings on functional skill as well some soft skills, et cetera. So today, the team, which is focused on a specific business vertical, they are now trying to -- they are obviously learning at a much faster pace of exactly how to go and pitch to a customer who want to talk and how to do negotiation and what kind of risks which are there. So we are working on multiple areas to ensure that these resources, who are probably doing this business as a sole purpose [Audio Gap] because until now they have been sitting in branches, probably they might be doing 1 SME deal and 1 retail deal, therefore, the expertise which you expect -- the nuances which you expect from each of these businesses were in something which they were familiar with. Now with the way the team is now settling down and they've started doing, like you can see the rate at which we are now growing the SME in terms of monthly disbursement, the rate at which we've grown our corporate book and even the PL book where we are using existing customer base, turning the existing customer base and where we make our teams go and talk to the customer for availing preapproved personal loan, they are learning it very fast, and we have a very young workforce. So our average age of our workforce is 32 years. So these are young people, kids who are wanting to learn and wanting to really build their expertise in learning these areas. So this is a process which is now happening at a good pace. Having said that, maybe the economy is a normal economy. With this skill set, which is getting added, probably the traction will be far more than what we are experiencing. Because of the economy being not so [ conditioned ] there are 2 things which are happening today: a, the opportunity for good quality assets are clearly not -- usually is much lesser than what you would expect in a normal economy; b, because of lesser demand for good quality loans and there is extra supply of liquidity available in the banking system, rates that are given, offered are clearly not something which probably a bank would want to keep it on a long-term basis. So therefore, this bank, which is at the stage of evolution will have to do what is best for them. And especially for a bank like ours, then we are trying to churn the existing legacy issues and then when we are trying to build a new quality portfolio, you must remember that I have very less leeway to having any more delinquent book to my existing book because I already have very high GNPA and net NPA. Therefore, I need to manage it very cautiously. At the same time, you cannot not grow, therefore, you need to ensure that you grow in the right areas by focusing on improving their underwriting standards. And for improving their underwriting standards, we did not necessarily depend on employees to learn this thing, we are also using the credit models developed by consultants who we know have done a great job in this. So we are using in retail and in SME, credit model which have been built by back testing them in the good and bad portfolio, which we have built in the past and using statistical tools to ensure that we do better quality underwriting. And we're also making use of the publicly available information like CIBIL Score and CIBIL CMR rating and individual CIBIL rating of those customers, et cetera and the GST data. So we are -- today, we have fortunately many other data available to do a better quality underwriting. So we are making use of all of them to ensure that incremental portfolio gets added out of good quality.

[Operator Instructions] The next question is from the line of Akhil Hazari from RoboCapital.

Am I audible?

Yes. Yes.

So I just wanted to know, could you give us any guidance on credit cost for FY '23, FY '24?

Yes, I would like to give a firm answer for this, but the situation which the economy is in, I would be -- I will probably say that we will continue to work with the 2% to 2.5% kind of credit cost. That's what we are looking at.

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

Sir, just 1 question. Can you share the exact loan book, which is currently enjoying moratorium, either in terms of interest or in terms of principal, the total across different categories?

This is at ECLGS, which I -- just a second.

Apart from ECLGS, I think you have given that number is close to INR 2,500 crores. I'm just rounding it off. Any other book which is also enjoying moratorium, either interest moratorium or principal moratorium under the standard advances or some other category?

No, there is no such -- I mean there is nothing big which we need to really inform. I mean typically, these are the ones which are restructured where we have been clearly giving moratorium based on the guidelines which are there. So other than that, I mean if you're talking about regular cost of restructuring where we would have probably given by way of restructuring where probably with NPA restructuring or [ another ] restructuring, that anyway, I don't think there's any big number -- material number really to share. This is exactly the overall standard restructured portfolio book is what I read it out to you, which is about INR 2,567 crores.

Okay. That includes that ECLGS also, the standard restructured?

Yes, yes, yes.

Okay, okay, okay. And just on the -- any guidance on the slippages? I think you've talked about close to INR 2,000 crore plus number for this year. And maybe some guidance on the next year, if you could help us out because now we have built up almost INR 18,000 crore of the new book which is completely doing fine for the bank. So any guidance next year from a slippages perspective?

So very difficult to tell for the next full year, but I'm retaining what I've projected earlier for the -- for Q4, we expect it to be around INR 450 crores. That's what we are expecting. But even for Q3, I was expecting about INR 400 crores to INR 450 crores, we ended with INR 387 crores. For Q4, we are projecting INR 450 crores, but we'll obviously work towards actually having it much lesser than that. Next year is very -- too early to talk about because we clearly do not know how COVID 3 will impact and -- what we can -- what we are definitely sharing with you is this new book is clearly -- which has not given any issues or concern. So -- and obviously, that, again, it's too early to conclusively prove anything. So we will take it as it comes. And definitely by -- towards the end of Q4, we will definitely get a good sense of how we want to -- how we are looking at the coming year, we'll share that number with you.

The next question is from the line of [ Jay Shankar ] from InCred.

Sir, my [indiscernible].

Sir, your voice is breaking up. We are not able to hear you clearly.

Okay. I'll come back later. Hello? Can you hear me now?

Yes, sir, please proceed.

My question was you explained very well about how you prepare the restructuring of the way business is looked at as it changed in the bank. How much has your -- the staff who has been doing the completely different thought process methodology for the last so many years, adapting to the new changes because while you are advocating what is required in the current environment, is the personal up-to-date with what is the required -- what are the changes that is required?

Yes, clearly, see the change which you're asking about, how the team is adapting to the changes which are required, as we said, the average age of our workforce is very young, and these are all young professionals and many of them are MBA and engineers and [indiscernible] So clearly, they all have a great learning adaptability. And I -- while we are -- I'm articulating these changes, I also do a continuous communication with the entire bank as to clearly explaining what we are doing and why we are doing and what is expected from us and what is expected from them. And we are also equipping them with the tools which are required so that they understand clearly what they need to do and how they need to do, et cetera. So it's not just about functional competent talent, we are also looking at how working of soft behaviors which would help them to really perform well. So even as early as when I took charge, we had clearly articulated 9 core values, which we want every employee in the bank to be exhibiting. And we have clearly defined how these will have to be adopted in the work situation across -- cutting across functions, et cetera. And even we are incorporate this in some of our appraisal mechanism, in the feedback mechanism which we are planning to give to our employees, we are clearly articulating to them what they are good at and why they need to improve, et cetera. So that there is overall a positive change which is being brought in, in terms of their thinking, in terms of their action. And clearly, we are using it as a rewarding mechanism to ensure that the behavior changes stays with them. So I really do not -- I wouldn't say this is very, very easy. But having said that, I don't think it's very difficult also because even in an existing institution, not necessarily from SIB, I'm saying even any other bank which is operating today or any other financial institution that's operating today, I think the changes that are happening in the environment is really so fast that even a nonconventional bank today will have to think about how to adapt digitally the whole fulfillment and how to digitally source a liability customer, asset customer, et cetera. So all of them are undergoing changes. And it's in a way, it's easy for us because while we are instituting these changes, we are also making them exposed to the latest which is happening. And being a technology bank, we are very, very strong in the technology area. And we have made, as I'm talking to 93% of our transactions happen digitally. So it's -- we are actually cutting the learning curve very, very fast, and we are now comparable and we have been continuously featuring these top 10 banks in the [indiscernible] index of at least the Government of India. And we have been continuously bagging awards in the technology area. So the team is pretty much aware that the technology is going to be the future, and they are already experiencing it because many of them are youngsters. Today, they know that every day requirement is also taken care through technology. So they are adapting it very well. So I'm happy to say that we are seeing good traction. Yes, can we expect a much higher productivity than what I'm experiencing now? I'm sure I will, but it's also due to the fact that economy today is not very [ conditioned ]. I mean we are experiencing once in a [ 100-year ] situation. Therefore, if things remain -- go back to normalcy, I'm sure these skill sets will definitely help us to be far more [ productive ].

Ladies and gentlemen, we'll be taking the last question, that is from the line of Rohan Mandora from Equirus Securities.

One question. In terms of the new disbursements that we have done of INR 18,000-odd crores, what would be the incremental ROA or ROE that we are making, assuming that the credit cost is more normalized on that portfolio?

Probably we'll work it out and get back to you because I don't have the ready numbers with me because we have just started accumulating -- I mean if you see even the rate at which this -- we have built this book also, good traction has happened only in the last 6 months because Q2 was the first quarter where at least we are 1.5 to 2 months of normal pre-situation. And Q3, all the 3 months were normal situation. So many of these loans are also fairly young loans in terms of the tenure. But we will work it out and get back to you, Rohan.

Sir, alternatively, if I may ask in terms of pricing these loans, like what is the target ROA or ROE we are keeping in mind? And are we able to price it at that level or is it still because the competition price lower?

So we are -- and let me take this into 2 parts. See, one is that the opportunity which we are trying to explore in the short term, where we have surplus funds available today and which we are deploying it in, let's say, any opportunity today, but then we are able to make much more money than that by taking -- by doing a short-term opportunity in terms of discounting or whatever. So we are -- that way we are able to onboard good customers, et cetera, then we will start penetrating more and more by offering other products with them. There, if you look at ROE, it will be probably very, very negligible. But then [Audio Gap] [ and PL ], et cetera, there, clearly, we are offering rates which are sizable rates, and we are really looking at good quality customers and offering them at a good ROE. So therefore, these products are really good earning ROEs. And even my -- overall, if you look at my ROI, the return on -- I mean, the interest rate, which I charge, it hasn't really gone down over the last 6, 7 quarters. So I continue to earn close to 9% in my overall book, while my cost of funds has been continuously coming down. Cost of deposits have been coming down, even cost of funds have been coming down due to better CASA and better sourcing of deposits at lower rates. So whether I'm able to get the exact ROE, which I'm targeting, so I'm targeting double-digit ROE. But this double-digit ROE, which I was mentioning as my deliverable was with the [ situation ] we were when we laid down our strategy document. Obviously, that was much before COVID 1 huge impact and COVID 2 and COVID 3, where market rates have -- from then to now, they've gone down like crazy. So clearly, while our endeavor will be to the target double-digit ROE, currently, the bank first needs to get into profit, which will happen with more and more book quality assets and handling of our existing legacy book and by sourcing, continuously sourcing high-yielding products. When we start growing those products, we'll start getting much better ROE and ROA. Credit card business clearly is one where we are expecting ROAs to reach about 2%, and we are already -- we have built a book of about INR 50 crores, and it's growing quite well. And of course, we are late entrants to these businesses, so we will take it as it comes.

Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Sohail Halai for his closing comments.

I would like to thank Ramakrishnan, sir, for giving us this opportunity to host the call and for the detailed insight also on earnings and the changes that, sir, you are making at the bank level. Before we end the call, sir, would you like to give any closing remarks?

So I wish to thank all those who have participated despite a very tough situation, which we are experiencing as a country. I really appreciate all those who took the efforts to take part in this. And I also appreciate the kind of questions which were asked, clearly asking questions, which probably help me also to articulate how exactly we are bringing about changes in the organization. I hope to be giving a comprehensive and as transparent as possible, which I have been continuously reiterating and I wish to get support of each one of you in the year in the quarters to come. Thank you so much.

Thank you. Ladies and gentlemen, on behalf of Antique Stockbroking, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.