Ujjivan Small Finance Bank Limited (UJJIVANSFB) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Ujjivan Small Finance Bank Q3 FY '21 Earnings Conference Call hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Murarka from IIFL Securities Limited. Thank you, and over to you, sir.

Yes, thanks, Steve. Good evening, everyone, and welcome to the conference call to discuss the 3Q results for Ujjivan Small Finance Bank. From the management team of the bank, we have Mr. Nitin Chugh, Managing Director and CEO; Mrs. Upma Goel, Chief Financial Officer; Mr. J. Shrinivas Murty, Head Liabilities; Mr. Rajat Singh, Head Micro Banking and Rural Banking; Mrs. Sneh Thakur, Head Credit & Collections Micro Banking and Rural Banking; Mr. Murli Manohar, Financial Planning and Analysis; and Mr. Deepak Khetan, Head Investor Relations. We will start with an opening remark and then open up the call for Q&A. I thank the management for giving us the opportunity to host the call. I now hand over the call to Mr. Nitin Chugh. Over to you, Nitin.

Thank you, Abhishek. Good evening, everybody, and welcome to our earnings call for this quarter for Q3. First of all, I hope all of you and your family are safe and healthy, and you've been keeping well. The way the new year has started strongly, with a lot of hope. We believe that the worst is indeed behind us. And we really have only optimism taking us forward in the next financial year. Of course, the steady decline in the active cases and the massive vaccination drive is going on in the country. I do believe that the pandemic would be a thing of the past for us and probably just so blur that we would necessarily try to forget it. I think it's also prudent and important to account for the damage that the pandemic has inflicted on us, both economically and health-wise. But at the same time, we have to move forward with courage and optimism and most importantly, with a lot of determination. So our results, as you would have seen, reflect a very bold and yet a very calibrated position that we have decided to take. It is our firm conviction that we are back on our growth trajectory. We'll talk a lot about that in detail. But having taken the kind of provisions that we have, I think we are completely positioned to move forward from here and look at growing the book and the business. I don't want to spend time on the macro outlook. I'm sure you've heard enough versions from various agencies. But in general, we are looking at a very positive FY '23 -- FY '22 and also continuing into the next -- new financial year. But I do want to share with you that we have seen a similar kind of bounce back in our customer segments, and I'll break it up by different customer categories also. Now this is giving us a lot of confidence to grow the business. Yes, we had taken a cautious approach, like we have mentioned in the previous earnings calls, but now as things have started to return to normal and in most parts, I think we have given ourselves that confidence to move forward in a very determined manner. We were talking about preparing ourselves for the post-COVID environment. We mentioned that in lots of earnings calls, the last 3 earnings calls, rather, And we also spoke about that in a lot of investor conferences that we were using this time to prepare ourselves to be able to work more effectively and in a better manner after COVID gets over. And all the things that we had worked on, all the initiatives, our digital thrust and several other things that we tried to do to work on our own efficiency and cost efficiencies most importantly, they're all starting to bear fruit for us. And that gives us even more confidence to move forward in this quarter and the next year. So coming to the customer segments, let's start with the MSME, which was probably hardly impacted in general. They faced liquidity, they faced all kinds of other issues of cash flows, et cetera, but the government-backed schemes have obviously helped them, and they have been able to revive and they are slowly coming back on their feet, and we are seeing those signs which are translating into a good demand for credit, which is, in our case, very clearly evidenced by the rise in the new log-ins, which we had reported even the last time that our log-ins are back to pre-COVID levels. In microbanking, there is increased level of economic activity. We had shared with you earlier also that a lot of our customers are into the so-called essential services, business or groceries, et cetera. They were rather quick to come back. But because of some lag in some parts because of various reasons, either lack of transportation or otherwise or because of specific occupation-led nuances, there are some segments and pockets which are lagging, and that reflects in our posturing in terms of our provisions that we have taken in this quarter. We also believe that the massive vaccination drive is really going to help our customers, especially in the segment of microbanking, because they are the ones who are most exposed to any kind of health risk. In affordable housing, the demand actually came back towards the middle of Q2, and we saw that building up in Q3. And we do believe that the demand for affordable housing is going to sustain itself over the next few years. The recent announcements in the union budget also are reinforcing the government's stand and to support affordable housing and their agenda of Housing for Everyone by 2025 or whenever. But from our point of view, we are extremely well prepared to handle that demand, and we will write that there, for sure. So this full commentary from my side -- and I'm sorry I'll take a little more time because these results have to be explained a lot in more detail. So we'll keep a lot of time for question and answers also, which we'll be very happy to provide you. So we will talk about our business, our approach to restructuring and collection, our philosophy behind taking the provisions, our liabilities business, our digital strategy. And finally, also, we'll spend a minute on the IWG recommendation which were open for public feedback until 15th of January. So coming to disbursements and new business, while in the initial months of the year, because of the uncertainty, we were very cautious with our disbursements, and we did not book too much of new business. However with improving loan growth situation, we felt very confident or a lot more confident to scale up and we have brought the focus back on growth. So while our loan book has seen a very marginal change over December '19, it's at INR 13,637 crores, probably 0.4% higher than what it was in December '19. But our month-on-month disbursals have picked up very well, and we have been stepping up on the business from December onwards. So in December, we actually grew almost 8% over December '19 in terms of our disbursals. And in January, we are now equal to pre-COVID levels what we were on January '20. Just to give you a sense, we did INR 1,285 crores of disbursals in January '21. And in January '20, we were at INR 1,299 crores. So it's almost there. Importantly enough, a lot of our businesses are also delivering their highest ever numbers, which also improves a lot of other ratios for us in terms of productivity and efficiency, which I'll talk about. So I think this whole momentum that we have picked up now with the business picking up in December and now carrying on into Q4, we strongly believe this momentum will continue for the rest of Q4 and well into the next financial year for which we are extremely well prepared. Our collections on the loans that we have disbursed during this financial year, April onward, is at a very high of 99.5%, probably a shade better than where it was pre-COVID. Now that also indicates the robust quality of the new book in this year, building in this financial year. On the last call, I mentioned about log-ins that had reached a pre-COVID level in MSE and housing. Now I can tell you that for all business verticals, that's pretty much the same thing. In January, we did our ever highest disbursals in both MSE and housing loans. In fact, we also delivered the highest ever productivity in MSE and housing loans for the month of January '21. And microfinance is completely back on track as far as pre-COVID levels are concerned. In fact in December, we did more than December '19, even in microfinance. So for every asset business, our disbursements are now showing Y-o-Y growth. Overall, December '20 disbursements were up 8%, like I mentioned earlier, year-on-year. And in January, we were back to January '20 level. In microbanking, we were taking a cautious view. So we gradually opened up the new customer acquisitions. As you would remember, 1/3 of our onboarded customers every month pre-COVID were new acquisition and 2/3 were repeat customers. However, that number was only 5% until Q2 because we were very cautious with the new acquisitions. That number has now changed to 10% for Q3. And we are now gradually opening ourselves up to acquiring new customers also as things improve. We've also added 165 Money Mitra outlets, which is expanding our reach beyond our 575 branches. Also a tie up with Airtel Payments Bank, we've those additional 700 (sic) [ 7,000] touch points for our customers. And in addition to Airtel, we have now also tied up with PayNearby, which you will know has almost 800,000 outlets. Now with all of this, we believe our customers will have more access points, and that is already reflecting in the amount of cash that we are handling now, which is substantially lower because these points are being used for either depositing repayments by customers themselves or by our own staff who collect from customers and then they go to the nearest point and deposit the cash there, and we don't have to bring them back to our branches. In affordable housing, we continue to do well with disbursals at par with Q3 of FY '20, 180% higher than Q2 of FY '21. New case problems are not significantly higher than pre-COVID levels. We've improved our internal processes by way of digitization. And the focus on productivity is already at a highest -- all-time highest in affordable housing, which also resulted into ever highest disbursement in this month of January, and it continues to be a clear focus area for us into the next financial year, and we are extremely bullish about this whole business for the next year. In MSE, though it was impacted, our disbursements grew about 145% over Q2 of FY '21. New case problems were already at pre-COVID levels, but we have tightened our policies, which reflected our cautious posturing and the approval rates were lower. However, the January '21 disbursements have been highest ever like I mentioned earlier. Here again, in MSE, we've tied up with a fintech for supply chain finance. The first set of loans, we were able to sanction and disburse in the month of January, and we do believe that partnerships like these are going to strongly supplement our growth which will come through these alternate channels. Now with also low cost of funds, you might have noticed that in the investor deck, the cost of funds have been coming down every quarter. And the team, which is very well established now, we have still the team to also deal with more formal segments rather than only the informal in the semiformal. So we are slightly shifting the product mix to bring in a slightly better quality on the book. The formal segment of customers are largely dealt on the basis of balance sheet, audited financials, GST details, et cetera. And these could be customers like FMCGs, corporates, pharmacies, distributors, consignment or commission agents, et cetera. So we are making -- we have made a start there, and we are also looking at expanding that segment on a meaningful basis. We also disbursed INR 55 crores under the ECLGS scheme. It isn't much in our case. We were doing that very carefully. We are not sure how it is going to play out after the year, so we were extremely cautious with that. However, there's little bit of -- the INR 55 crores that we've done has also had an impact on our NIM because this is at a fairly low yield as was prescribed by the scheme itself. The other thing which has come out very strongly for us is that now we are digitally onboarding all our customers in MSE and housing. We are scaling it up gradually. Now this is going to help us in reducing our turnaround time to customers, and we do aspire to be the best in the industry and is obviously going to free up a lot of bandwidth for us, which will help us in growing our disbursements. We have created a very good base for affordable housing and MSE business. And I think it would continue to perform strongly and contribute even more meaningfully to an overall growth in the coming years. This is also in line with our strategy of diversifying and that is the reason I am elaborating a lot more on affordable housing and MSE because these 2 businesses have now reached a level where we can start scaling up with all the things that I have already shared with you. On the institutional lending side, our FIG business, it has been performing well in terms of portfolio quality with no overdue accounts during the pandemic. We are now focusing on better-rated NBFCs and expanding our range of products. Currently, we do only term loans. We disbursed INR 105 crores during the quarter, which is significantly higher than the INR 88 crores of Q3 FY '20. However, the book is holding up at the same level. We have cautiously decided not to grow the book. However, we've also taken a call that we would start dealing with better-rated entities even if it is at a slightly lower margin. The other 2 verticals, which we have on the asset side, vehicle finance and personal loans, are still in their stages of their life cycle of the business. And we do expect them to be meaningful contributors in the next 2 to 3 years. Nevertheless the business traction continues to be strong. Personal loan disbursement during the quarter was at par with Q3 FY '20. Vehicle loan disbursement on a very small base was 7x compared to Q3 FY '20. Both of these will start showing higher traction from Q4. And for both these businesses, we are using our own channels rather than depending on DSAs or any high-cost channels. Also trying to partner with a whole lot of fintechs for alternate distribution. But most importantly, we are distributing these products across all our branches, which was another thing that we did during the last 6 to 8 months by enabling all our branches to cross-sell vehicle loans and personal loans. Here again, like I mentioned, we are -- we have tied up with a lot of multiple -- a lot of fintechs for workflow digitization also, which is already showing an impact in the reduction of turnaround time and freeing up of bandwidth at the back office for handling more volume, which has been made possible through very systematic and targeted tie-ups with fintechs for workflow improvement through these digital integrations. We had also started a pilot in gold loans, which is doing well, though it's a very small set of numbers to share, I mean, not even probably not worth sharing. But in any case, we want to test it for some more time. But we do see this as a potential growth area as we're learning this business and adding to the people who will run this business. For the next financial year, this is going to be a meaningful product for us. So in summary, our growth areas would be affordable housing, MSE loans and the new businesses in addition to going back to our microfinance, which is our core, and the other businesses such as personal loans, vehicle loans and gold loans. We are also likely to be dealing with more A-rated entities in our institutional lending business, and a fair share of this growth would be made possible through the digital workflows, our robotic processes, which we are automating systematically and our fintech partnerships, which will result into far better efficiencies, lower costs and increased levels of productivity across all our businesses. Just to highlight to you our productivity levels in both MSE and housing, for example, went up by 30% just over a period of 2 months. That is the level of productivity, and this is the highest ever that we looked over the life cycle of these products. Our growth will also come from expanded distribution through new branches, which we do plan to add next year, and we've extended fintech partnerships that we are now opening up rapidly. Now coming to collections and provisions. So collections continue to trend upward for us with an overall collections efficiency at 94% in December '20 and stabilized at 92% in January '21, taking into account the collections efficiency of 73% from the restructured set of accounts. I'll talk about restructuring a lot more in detail a little later. But it's also important to highlight there are collections lagged in Tamil Nadu because of the extended festival holidays in January and in Assam for the reasons we all are aware of. And the collections efficiency in Assam actually dropped by nearly 9% in January itself. As of December '20, 94% of our customers are paying -- 95% of the customers are paying EMIs for the month of January '21. So collections efficiency has really improved. The nondelinquent accounts are showing strong collection trends and moving closer to pre-COVID levels or are already at pre-COVID levels for most lines of businesses. The new book for this year, like I mentioned earlier, which is now 45% of our OSP in microbanking, it is already behaving at 99.5% plus collections efficiency, which implies that there is no incremental stress, which is building up. We've shown significant improvement in West Bengal, which is one of the places that we were concerned about the last time we discussed West Bengal. It has gone up to 92%. Maharashtra and Punjab are also now going towards 90% mark. Assam, obviously, will continue to be a bit of a wait and watch, and we just hope that things won't deteriorate any further. Even we are taking a lot of steps on the ground, trying to communicate and engage with our customers, and wherever we have a chance to engage with the local authorities. Yes, the bill is for the NFIs, but the loan waiver announcements have created all kinds of possibilities there. But it's also important to once again highlight that Assam is only 3% of our portfolio. We have INR 364 crores of an outstanding book as of December in Assam and we are not planning to grow that book at all right now until things improve. So while we are closely monitoring all the sales pockets, the professions, customer segments based on our assessment of potential set, which again is based on our ongoing interactions with our customers and a lot of mathematical modeling of expected spread, we have taken an additional provision of INR 547 crores in Q3. With this, our book coverage has enhanced to 8% as of December '20 from 3.4% as of September '20. On the microbanking book, the coverage would be 9.3%. We believe that we've taken this gold call by: One, acknowledging the fact that it could take longer to resolve the impact on the portfolio; and two, also to protect the P&L from any seen and unseen future damage. And from here on, now that we've taken these provisions upfront, we can focus on building back the business and the book without having to worry about the credit cost. Of course, there is a lot that we will improve even on our collections. But our numbers from December and January do evidence the fact that and our results that we are moving ahead and we are going to be growing the business back and take into demand. I do again want to emphasize that our focus in FY '22 would be clearly on growth. We may not have to take -- of course, I mean, the way we've taken provisions now, we don't see the reason to take any more provisions, though we have -- though we endeavor and covering for our costs with efficient savings also. I think we have also been able to deliver us from PPoP of 4.3%, which is 45% growth over Q3 of FY '20, and we do hope that this can continue now that we've taken the provisions. Now coming to restructuring, starting October, we initiated identification of customers, and we engaged in extensive discussions followed by assessment of the repayment behavior and their cash flows at that point in time. Now based on this exercise, we identified accounts, which had to be restructured in our microbanking book. We took 2 approaches with our restructuring effort: One, that we elongated the tenor and reduced EMI for some borrowers; and for some, we gave them moratorium or a repayment holiday for a month or 2 months. So under tenor elongation, we reduced the borrower's EMI after assessing the cash flows and elongated the tenor by a maximum of 24 months from the original date of maturity. The interest for unpaid period has been capitalized. Customers who have availed the moratorium for 1 or more months were restructured by way of tenor extension by the number of EMIs unpaid. There is no change in the EMI in that case. INR 852 crores or 8.5% of the microbanking book has been restructured. We really wanted to follow the policies that RBI came out with in letter and spirit. And we thought that it was a good way of also assessing our customers who we were in touch with and giving them more time. So it's also a good thing to share with you that we are seeing 73% collections efficiency from the restructured book already in January '21, and we expect it to improve in the coming months. So we are happy that we took that decision. We are happy that we were able to assess our borrowers, and we are also happy that we have done things exactly in line with what the RBI had described in both letter and in spirit. So what's been heartening for us is that there were a lot of customers who hadn't paid a single EMI since the moratorium started in April, right, and they did not pay until December. And we did get a chance to examine that and restructure some of those customers. And the balance, obviously, we continue to go through our collections efforts. But the ones that we restructured, 29% of those customers have also paid us in the month of January. Now this is very, very heartening for us because it does really bring all the whole hypothesis in a very clear manner that, yes, these customers needed assistance, we have done that in a meaningful manner for them under the framework that RBI expects us to. For all the other retail assets, we have identified the accounts, again, based on our conversations with customers, our data science and the repayment behavior during the moratorium, and now we are in the process of communicating with the customers on the process implications benefits, et cetera. And we do have time until 31st of March to complete this activity, which we will. I can also tell you now that the focus on collections would be stepped up further as much as the focus on growing the book and the customer base, which I spoke about a lot in my previous section. And we will continue accelerating this well into the next financial year. I'm sure you'll have a lot of questions on this whole subject of researching. And I think we'll again be very happy to answer this. Now coming to liabilities. Our overall deposits grew by 9% year-on-year. Retail deposits, which is where we have been focusing for the last 1 year, have grown by 20%, and CASA grew by 66% Y-o-Y which got us to a CASA ratio of nearly 18% for Q3. Now this is despite the rate cuts that we had done on the deposit rates in H1. We didn't feel the need to reduce them any further because our CASA mix has been improving. So on an overall basis, the cost of funds have been coming down. But I do want to highlight that we were able to replace a lot of high-cost deposits at a significantly lower rate. Now this is also in line with our strategy of building a granular and a stable retail franchise, which is long-term sticky in nature and gives us the ability to cross sell. And for that reason alone, we have enabled all our branches to cross-sell all our asset products. Our customer acquisition remains strong. We mobilized 7.3 lakh new deposit accounts, approximately half of which were new to bank, and we are witnessing a fair -- a large improvement in our staff productivity in new customer acquisition. Our cost of deposits at 7% declined 80 bps from December '19 and the cost of funds have therefore reduced to about 7.1%. In fact, for the month of January, it dropped even below 7% for the first time. I'm also happy to share with you that the whole ability that the reduced cost of funds gives us is helping us in making sure that we are able to price our assets appropriately and it's also going to give a lot of impetus in moving to more formal segments like the way we discussed on the asset side. So we are confident about keeping our cost of funds under control. And I think we will continue to benefit from improving retail and CASA base. You would remember that we had plans to take our CASA ratio to 25% in 3 years' time. I think we are not just on track, we are well ahead of our own milestones by getting to 18% in Q3 of this financial year. Again, like I spoke about productivity in the assets businesses. We have put a lot of focus effort in improving the same for our liabilities businesses also. We have seen a significant improvement in lead generation, in participation of staff in lead generation, even the non-sales people generating a lot of leads when they interact with customers, the quality of leads, the quality of accounts that we're opening, the kind of balances that we are building. And all of this is visible in the overall performance of our branches also. We also witnessed improved assets cross-sell from branches since we enabled them for all the assets during the year. And this is going to continue and keep improving as a share of branches into the asset businesses adds to more cross-sell. We are also focusing on higher variants in our liability side of the business. Now it just gives us the ability to serve probably the higher end of the low middle class or, let's say, the lower end of the middle class whichever you want to look at it. But largely, let's say, senior citizens or customers who can maintain balances. So we are offering them the higher variance. And that mix is also helping us in improving the average balances, which came at INR 11,600 in December '20, up from INR 10,600 in December '19. Our salary accounts are showing very good traction. We are opening double -- more than double the number of accounts that we were opening on an average last financial year. So in December, we opened only 9,000 accounts. In January, we did a lot better than that itself. And more importantly, the salary credit into the salary portfolio has gone up by 3x in the same period of time from December '19 to December '20. So we are also building a fairly good quality book on the salary side. We are also available on all forms of digital payment platforms. And I am happy to share, and this is as per RBI data, that we are indeed the industry leader within SSPs in terms of usage of various platforms like e-commerce, POS, UPI, IMPS, off-us ATM transactions, et cetera, by a wide margin. And this is again in line with our strategy of building multiple touch points, making sure that the consumers are transacting. You would have noticed that in our overall change in transactions on a year-on-year basis where we've also reported our digital transactions having moved from 56% to 59%. So we're happy that we have more transacting customers. This is going to give us a lot of help in our analytics practice and, therefore, in our cross-sell abilities of retail assets from our branches. And our digital transactions, like I said just now, are now at 59% for Q3, up from 56% in Q2. And this was 33% in Q3 of FY '20. So that's a good 26% jump that we've seen. And it's a balance across all kinds of our customers in our portfolio. Third-party products, largely insurance, because we don't do any other third-party products. We do have plans to introduce mutual funds in the next financial year as one of the other products that we will look at. Our focus -- our insurance income accretion has largely been dependent on the credit life insurance product, which is bundled along with the loans that we do. However, we started to focus a lot more on the retail insurance business through our branches and the other businesses. And you will notice from the investor deck that we are seeing a large change in our retail fee income. We also renegotiated our commercials with our insurer partners, which is also helping. And the retail fee income has actually doubled on a year-on-year basis. So we are now focusing on health products and guarantee products within life insurance. We are expanding their distribution by a way of increased number of employees who are certified to sell insurance, which also is almost 4.5x the number that we had at the beginning of the year. So there are many more people, who are marketing insurance for us. In addition, we are also tying up with an insurtech for digital distribution of insurance business through our API integration. And the whole process of onboarding the insurance customers will also get digitized. We already use handheld devices. A lot of this will go into the handheld devices. And I think we should be amongst the very few people who would have digitized the whole end-to-end insurance workflows as a insurance distributor and not necessarily as a manufacturer. And our branches and the increased customer base is going to be really feeding into our third-party cross-sell. And this is again the same place where we will start our mutual fund distribution from probably in the first quarter of next financial year. I'll talk about digital a little more. So like you know, we are committed to become a new-age mass market bank, which is technology led, which caters to a large customer base due to the technology to be efficient, to be superior in turnaround time and most importantly also deliver superior experiences to customers. So technology and digital for us are very, very big enablers. So that we have that edge because we deal with smaller tickets, both on the deposit side as well as on the lending side. Now in that context, we have divided our digital strategy on 3 or 4 parts. The first one was our partnerships with fintechs our API banking framework, where again, we have released almost 90 out of the 150 APIs that were in scope. We have digitized our business processes with a focus on improving turnaround time and employee productivity. This also has a combination of digital workflows and robotic process automation. And investing in digital solutions, which will further improve the customer experience, including some that we are using for customer engagement through messaging and notifications, et cetera, which again is something that we've gone live with. Now this is going to drive a huge amount of value for our customers and certainly for the bank also. So coming to API banking and the fintech partnerships, like I said, 90-plus APIs, which is nearly 2/3 of the overall set of APIs that we are working on are ready and live. Our digital repayments and digital lending, which I spoke about in the context of businesses, are also live and there are lots of them which are in pipeline and will certainly drive a lot of cost efficiencies for us. We have ongoing 19 fintech partnerships on the lending side, payments, onboarding new banking. We've also done a pilot for collections, which has worked out very well. And I think we have a pipeline of at least another 25, 30 at the moment, which are pretty actively discussing with us. Now this was one of the things that I did speak about in our previous earnings call that we are talking to a lot of fintechs, and I'm happy to share with you that all of that work is now completed. We are live and we are kicking and we are also bringing in a lot of business. Our engagements are becoming deeper by extending the solutions across lots of other banking use cases, and we will also have a road map to cocreate products with our fintech partners in future. In terms of our internal processes, which results into a lot of manhour savings and cost efficiencies and improved productivity, so the first thing is that all our onboarding journeys are now digitized across all our business lines, whether assets or liabilities. Some are being scaled up, some are already in production and scaled up, but nonetheless, all that work has been completed. Again, something that we were working on to prepare ourselves for the post-COVID world. The turnaround time for various processes in the onboarding side through these fintech engagements that we did on the workflow side has actually helped us in reducing the turnaround time for various activities by almost 70% to 90%. So that is the amount of savings that we have seen. Now that has resulted into an increase in the processing capacity, effectively productivity, by at least 30% to 70% depending on the workflow that we're talking about. So this is very helpful. And this is something that we were confident about. And now this is also giving us the confidence that on the back of all of this, we can surely scale up the business in a cost-efficient manner. In robotic process automation, we have identified 100 plus processes, which are going to be automated. We've completed doing 13. We were also awarded -- we were given an award for Excellence in Cognitive Automation amongst -- I think we were probably the only SFB that got that kind of an award, so it's a great recognition for us, because I think the acknowledgment that the work that we're doing in the cognitive automation space itself is a big statement coming from a small finance bank. And the benefits of all of this is already visible across business verticals. Productivity is significantly above pre-COVID levels like I spoke about earlier. And while our headcount, you might have noticed on the investor presentation or you will, is lower by 1,000 people over December '19, yet our businesses are back to the same levels and our productivity levels across all businesses are higher than what they were with far lesser people because we are doing the same or much higher business right now. So this is really what we were trying to achieve in the last 9 months, improve our efficiency, improve our productivity, reduce our operating costs, make sure that we use digital workflows, make sure we bring in technology, make sure we bring partners, work on APIs so that we are completely ready that when we want to press the accelerator, there should be nothing ahead of us to stop us. Of course, we'll do it in a very, very risk-calibrated manner, not to say that we will take chances. So going into the future, I think we also have a road map for artificial intelligence. We have made a beginning with the multilingual bot that we introduced on our website. This is going to get more and more intelligent. And while right now it is assisting us in lead generation and some basic workflows, we do have a road map to bring in a full AI attack for which again we are partnering with another AI company. And we do hope to bring in AI into a lot of our internal workflows also through those engagements. And some of the other key investments that we've made are in marketing automation, which is also giving us good results in the limited campaigns that we have done. And we brought in some more implementation partners on the digital side for RPA implementations. And this will help us in: One, completing this in finite and a shorter period of time over the next 6 to 9 months; but certainly enough, we can start identifying many more processes in our internal workflows, which will also get automated once we have a steady set of partners onboard. Now coming to the -- and this is really the last part that I want to talk about, the IWG recommendations that you're aware. They do give us -- there is apparent intent that has been expected in terms of being able to reverse much after completing 5 years. So we have been -- we have sent our recommendations to RBI within the time line that was there. And we do hope that these recommendations are converted into guidelines. And as soon as these guidelines come, we will start working on that basis to prepare ourselves. So the other thing is that we have been strengthening our leadership team, like we've spoken about in the past also. Our most recent colleague, who joined us on the 1st of February is Ashish Goel who joined us as the Chief Credit Officer. He comes from ICICI Bank with 15 years experience in ICICI Bank and a lot of experience before that also. He is a very seasoned and well-regarded credit professional in the banking industry. Our investments in technology, digital capabilities and improving efficiencies are all delivering encouraging results as we've spoken. At the same time, we would be expanding the distribution through addition of branches in the next year. We are finalizing those plans also in this quarter. We do plan to scale up gold loans. We also want to introduce credit cards for our customers in the next financial year. We're already in discussion with credit card issuers. Our view is that we can go down the path of a white label card and then effectively learn that business to see if we really want to do it ourselves or not. If it doesn't make sense, we will be happy with the white label, but our customers would certainly get that product. We are also evaluating safe deposit lockers in a few branches. We are also looking at some of our premises from real estate optimization point of view. So a lot of this work is going towards making our customer interactions far more richer and meaningful for our customers, both in branches and on the digital channel. Our customer acquisition through our own branches, our teams, our sales channel and our partnerships continues to grow, and we're very confident of growing that further. So we are most definitely into a growth phase, having accounted for the expected slippages and the damage to the portfolio through the accelerated provisions that we have taken. And from now on, we believe we would be growing our business in a methodical responsible manner, and growing the value of our customer relationships and maybe also set foot into some new directories, either new businesses, like I mentioned, or maybe some new territories as such. I think we have set up a very, very strong base, both on the assets and liabilities and the other lines of businesses. And we are very well prepared to scale up and grow further from here. I'll stop here, and we can now take your questions from here on. Thank you very much.

[Operator Instructions] The first question is from the line of Amanjeet Singh from Excalibur Advisors.

So the lockdown lifted in August, and we had a last call in November. So in Q2, we made a provision of INR 100 crores, and now we made like a substantial provision of INR 583 crores, which has kind of taken away our 9 months profit. So my question is what changed between November and now? So has the macroeconomic environment changed? Or is it like that our earlier estimates were lower? Or is this in anticipation of some other future stress that you're expecting in some other states like Assam, West Bengal or something?

See, things have been changing. It's not like we had a completely clear picture when we last spoke in November when we were discussing October numbers. And at that point in time, the only metric which was of interest to everybody was really collections efficiency and how it had improved from July, August onwards, right? And we reported that on a fairly transparently disposed basis as to how it works across our business lines. Now that did not mean that the stress has gone away. It just meant that because people had come out of the moratorium, it was the second month that we had just completed from repayments point of view. I had very clearly also mentioned that we will get to know in Q3, and we will have to give the time in Q3 to really estimate what kind of stress we will have on the book, okay. So while we did take provisions of INR 100 crores in Q2 and we had also taken INR 140 crores in Q1, and we had also taken INR 70 crores in Q4 of last year because we announced our results in May, I think the appetite for more provisions has come only because of the changing scenario on the ground. It has nothing to do with our estimate then and our estimates now. And things are a lot more clearer now. I would say absolutely clear now because we have been able to complete a full cycle of 90 days with our customers. And therefore, it gives us a very good idea as to what is going on. The second thing, like you said, West Bengal, et cetera. West Bengal, like I mentioned, has improved, okay? But the impact that any of these territories have because of the lag, whether it's Maharashtra or Punjab or West Bengal or any localized market, even if it's a setback of 4 days because of Pongal holidays in Tamil Nadu, that continues. And you have to make up with recovery out of that otherwise that whole stress can stay and can build up, which we saw happening in some of these other places. And most importantly, in the market of Assam, where things were actually improving until October, and they have actually started to improve even in Q4, but then they came to a halt in the lockdown period. But after everything started going back to normal after the lockdown went away, we were seeing improvement in Assam, even though it was lagging behind. But now again, it's gone back into a bit of a tailspin. So we have to obviously provide for that. We have to take cognitive steps for that and say that, yes, it's a recent development as recent as January. So I think it's only prudent for us to estimate and then that's what we've done and gone ahead and taken the provision.

And what kind of provision are you expecting in Q4?

Nothing. That's the reason we've front-ended everything.

The next question is from the line of Shreepal Doshi from Equirus.

Sir, my first question was more to do with restructuring for the MFI segment since this will be first time wherein we are seeing restructuring being done at a strategy level, so how do you see this impacting the credit discipline of this segment of customers?

See, the credit discipline has nothing to do with restructuring. Restructuring, you please look at the intent of restructuring as a policy. What was the whole idea of restructuring? That if there are borrowers who are stressed and they require more time, banks have given a framework of restructuring those loans in a permissible allowed framework with higher provisions, which RBI allowed us to do. But that was to be done on the basis of the call that some banks have taken. Obviously, if somebody is going to come and ask me, I will give it or not give it, like the way they also took calls on moratorium. In our case, we were in touch with our customers, and we were continuously evaluating and estimating the levels of stress that they had. And there was enough and more data by that time, which was good enough for us to take any kind of a view. So when we do this, and that is the reason I very clearly mentioned the numbers, that 73% efficiency of collections from the restructured set of accounts, it's very, very heartening because this is not really a problematic pool. But just to be on the safe side, we also estimated some sacrifices from the restructured pool, and that has again gone back into the estimation that we have taken as provisions. So we are not saying that 100% will come out because of restructuring, and neither are we saying that the ones which have got restructured are going to stop paying. In fact, what you should notice is that the customers who hadn't paid a single EMI until December, 25% of those have also paid because we restructured their accounts, and these are people who genuinely needed help. And that was permissible and that is exactly what we've done.

Okay. Sir, second part -- second question was at like in state of Assam like how has the collections efficiency been in the second half of January? So I believe the bill was introduced in the first half, like how is the collections efficiency in the second half?

See, first half and second half, I would say there is not too much of a difference because the announcement of loan waivers from the opposition party came in the month of December, okay? The bill was cleared in the month of December. It was just said that bill draft wasn't available for any public viewing, but the word had spread. You would also recall that there is one publication in Assam, which was every day giving out one little bit about the basis on a daily basis. Now all of that was resulting into a lot of noise [Foreign Language]. What does this finally lead to? Now when the announcement of loan waiver happened by an opposition party and then quickly followed by the ruling party, effectively, that changed the whole narrative with the customers and they stopped turning up for center meetings or they would say that [Foreign Language], "now what is the point of paying you." So I wouldn't even say it's first half and second half. It was a systematic deterioration in collections efficiency, which started to happen from December itself, end of December, I would say. But really speaking, if we compare January with December, our efficiency dropped by 9%. Now earlier, if you remember, the problem was restricted to upper Assam until at least Q2 of last -- Q2 of this year because the problem started in upper Assam and lower Assam was performing reasonably well. But with these kind of announcements, obviously the entire state is discussing the same thing, there is no more of a distinction between upper and lower.

The next question is from the line of Gaurav Jani from Centrum.

Some clarity on the GNPA numbers. So last quarter on a performance basis, we had about 169 odd -- yes, I mean, INR 169-odd crores, which has increased to ballpark numbers, and it's about INR 655 crores to INR 670-odd crores. So if you could just break out this entire increase into Assam? So is it the entire INR 360 crores would have strictly been GNPA? Is that a correct way to look at or how much was earlier GNPA and now how much is there?

Sorry, if I have heard you correctly. Your voice is very muffled, Gaurav. But I think you're asking that much of this is old and how much of this is new, right?

Yes, yes. You're right. Yes, yes.

See, if your question is towards the pro forma GNPA, our pro forma GNPA of INR 658 crores is recognized as of December end. And in the previous quarter, we would not have that kind of number because the moratorium period just ended on August 30th and the repayment started from September. So only after 90 days, we recognize and hence it is what recognized here in December.

No. My question was -- am I audible now?

Yes, better.

Yes, yes. So my question was how much would be attributable to Assam in Q3?

The INR 600 crores and whatever you're saying, right? Out of that, how much is Assam? Because the book is INR 364 crores for us, I don't think there is too much in absolute terms from Assam. But on a stand-alone basis, if you look at Assam, yes, the -- on a stand-alone basis, there is stress on the book. But on an overall portfolio basis, it's not very material.

Can we come back to you with the exact number later on?

Sure. So if I have to look at the entire sort of stress on the book as of now, which is about 4.8% plus 6% of restructured and about 75% coverage, so historically -- and in your assessment, how much of this could be actually recovered? I mean could we see reversals going forward? That is one. And then how do you look at FY '22 in terms of provisions also since we've already upfronted all the provisions?

So we don't see the need to take provisions on this present portfolio in the next financial year. And that is the reason we've upfronted everything, every single rupee that we put account for, okay? So we don't believe that we will need to take any more provisions in Q4 or any more provisions in Q1. So this book is completely covered for to the extent of 8%. Is that what you asked?

Yes -- no, yes. And just an extension of that is, what is your outlook in terms of the recoveries since you've already upfronted about INR 1,000-odd crores of provisions, so...

Like I mentioned in my commentary also, Gaurav, collections is the key focus area for us. We have obviously estimated some floor rates to come up with the expected tariff costs and, therefore, the provisions. But the collections efforts are going to be an ongoing thing. That is why I am sharing numbers with you for the month of January to be very transparent. And as we go through the quarter, we can keep sharing those kind of numbers. But we do believe that from our past experience, a lot of this book actually rolls back to the extent of 50% or even more. This time around because we are putting a very systematic effort, that is far greater, evolved data science that we have, we have an extended team and that is again something that I do want to highlight that we've also onboarded over 1,400 people only for collections, okay? Now these people have been assigned on the basis of different buckets or whatever. And we started to put them in place over the last few months, and they are in place and they are actively collecting for us. We do believe that we should be able to at least repeat the experience or do even better than that with all the learnings that we've had from the new capabilities that we have.

Sure. Just probably last bit, if I may. The interest income this quarter was lower. So have you booked any reversals? I mean, if you could quantify that.

No. I think that is capitalized interest, right? Yes. So I think we've capitalized some 500...

INR 575 crores.

INR 575 crores. And that because we don't charge interest on interest. And after the moratorium period, this book has been kind of on standstill, if I can say that. So this has been a non-earning book for us, and that is the reason it's reflecting both in NIM as well as in the overall other issued interest income or even the PPoP for that matter to some extent.

So it would have been reversed from the interest income and then probably added to the loan book, is what you're saying?

I'll let me CFO handle -- answer that.

I just want to add some point. When we have capitalized this interest, it has become a capital. What we are trying to highlight is, is on this capital, we are again not charging any interest. That's what we're seeing, there is no interest on interest. So this book will show as an OSP, but we will not earn any income. That's a reflection of a slightly drop in our interest income. With the INR 575 crores, monthly impact what we have been worked out is close to...

I think INR 8 crores, INR 9 crores.

Yes, it's around 11 crores. So in the 4-month period, what we are seeing is roughly INR 42 crores of the interest income impact we have seen in the Q3 numbers.

Sir, appreciate that. Just last bit, if I may please. Any sort of guidance for credit costs for FY '22? I mean if you guys have budgeted.

No, I think we've just provided for everything, no? So that itself is -- for next year, I think, let's just go along the way we are growing our business. And that's the reason I mentioned that the collections efficiency there is 99.5%.

[Operator Instructions]

Yes. So I was saying that the provisions that we've taken is to account for the stress that is visible to us right now and what we anticipate, right? The new book that we have accreted this year, which already is 45% of the OSP for microbanking, is expected to be at a much higher share in the next few months itself at the rate that we're growing is not -- it's already behaving very well at 99.5% collections efficiency. So I don't think there is any need to worry about credit costs for the next financial year.

No, sir. So where I was starting from is probably we were seeing some pushover of stress for '22. Now that we've upfronted it, I guess, then probably provisions would come a little, that is where I was coming.

That's what, no? And that's why we've upfronted what is visible to us, what we have anticipated. And all of this was going well into Q1 of next financial year. We decided to make this call of taking everything upfront, and then move ahead with no worries and just focus on building the book and collecting and improving our collections efficiencies.

So just to answer your previous question, out of INR 658 crores, Assam has INR 64 crores.

Okay, okay, okay. So the balance will be spread across probably the troubled states of Punjab, Maharashtra and West Bengal?

Yes, yes.

The next question is from the line of Saurabh Dhole from Trivantage Capital.

Sir, I have 2 questions. The first is when I look at your PAR numbers with -- those are very high and continue to be sticky. So at provisions of about 9%, don't you think that there is a fair amount of ground that you have to cover in terms of providing more? And won't that spill into Q4 of this year as well?

No, we don't think so because the PAR that you see is largely in the 0 days to 30 days, okay? And that's the reason we want to continue reporting that transparently. And almost 70% or thereabout collections efficiency is also coming through. Therefore, we don't see a reason why that should be a worry. In any case, the simulations that we have done to estimate slippages from the past is exactly taken into account for our provisions that we've taken. So we don't really think we will need any more.

Also I'd just like to add. Recoveries are upwards of 60% in the last few weeks. So a lot of it is going to stabilize in the SMA bucket system and not flip forward. And we have taken that into account while making for the provisions during Q3.

Right. Because I was just looking at your numbers from demonetization because that was the only time we can look at for a reference point. And then there, at that point in time, the PAR was around 4% and eventual credit costs for the entire industry are -- and I think even for you, came out to be about 4%, 5%. So I'm just thinking as to why your total trade cost would not mirror your PAR.

Okay. Look, I just want to also clarify during demonetization, our complete portfolio at risk was over 10%. And finally, we ended up taking a cost of about 3% to 4%. And this pandemic is very different from what we have faced in the past, considering that the stress is across all the states of the country. And a lot of these customers are still in the recovery phase. Yes, having said so, we believe that recoveries this time around are going to be significantly better because we have strengthened our collection capacity right now, and we are also seeing the results upfront in terms of recoveries from the overdue accounts. Also, the restructuring that we have undertaken is going to reflect positively in the performance during Q4 and the next financial year as well. Because a lot of the customers who needed support in terms of reduced EMIs, all of those customers will also start paying up now because they were in significant stress. And because of this support, we do expect a positive reflection on the bank's performance.

Right, right. And madam the other question I had was on your non-MFI book. So what I understood -- or the implied provisions on the non-MFI book come out to be around 3%. So I'm just curious to know as to why the provisions are so high in the non-MFI book when largely the book is a secured one?

Is it 3%? No. How you arrived at the 3%?

Yes. Because -- yes. So total cover on the book is about INR 1,000 crores, of which about 9.3% cover is on the MFI book, which means the total provisions on MFI is INR 911 crores approximately. So the remaining would be non-MFI, right?

Yes.

Yes. And so that is INR 118 crores on a book of about INR 3,800 crores, that gives me about a 3% kind of number.

You're right, you're right. So it would come to approximately that much. But that book if you break it up into different businesses, like affordable housing, we've not needed that kind of a power. MSE, if you break it up into unsecured and secured, even though unsecured is a smaller book, would have required a higher bit of cover. And likewise, in personal loans, we have also taken a slightly higher cover because that's again a new book for us, and I mentioned that in my commentary also that we are treading that cautiously. So from that point of view, I think there is no harm in keeping a slightly extended cover even though MSE and housing is largely secure. But we have these small, small portfolios of unsecured personal loans also, which we need to account for.

Okay. And this -- and for the non-MFI portfolio, is there any geographical -- some kind of geographical color on the NMP -- NP on this non-MFI book that you can highlight?

No. Nothing.

And I just wanted to add, as of now in the non-MFI book, we have shown only that's part of the pro forma GNPA. The discussion and the review on the restructuring book will be there. But as a prudent policy, we have upfronted the provisions. Once we take the final decision, which is the customer's requirement and the income assessment, there is a possibility of some write-back of those provisions.

The next question is from the line of Ankit Choudhary from Networth Capital.

Sir, my first question is on the base at which collection is calculated. So we have a pro forma NPA of around 4.8%. And then additionally, there is around 6% -- close to 6% of restructured book. So at what base the collection efficiency is exactly calculated? I mean are these numbers also considered while calculating collection efficiency?

Yes. So those are taken against the monthly dues, right?

Yes.

I mean whatever is due by different categories, let's say, the nondefault accounts, any other bucket, restructured accounts, everything is taken against the due for that month. So that is how the collections efficiency has been computed. And we have been maintaining the same thing right from the beginning. There was confusion on this account due to multiple kinds of disclosures by other lenders. But I think we have maintained that consistently all across.

Sir, next question is on the write-offs. Is there any write-off that has happened during this quarter? And what is the total amount of write-off that we have done in the 9 months?

No. This quarter, we haven't done any write-off. And for the 9 months, I don't think it would be significant.

And sir, also on the ECLGS, do we plan to do any ECLGS for the next quarter as well?

No. We've just done some INR 55 crores, and we don't see that anything significant even in Q4. Like I had mentioned earlier, we are not very confident because earlier we were dealing with the informal and the semiformal segments. For most of these customers, it's not even a meaningful extension of credit because the loan ticket sizes were very small. Secondly, because of the lower yield, it doesn't come into our overall risk-based pricing framework. So we have not really done that on a -- other than the INR 55 crores that I talked about, and we don't expect this to be anything beyond a certain range closer to what we've already done.

And sir, lastly, on the restructuring book, what is the quantum of additional funding that we have done? And do we plan to do some more funding in the next quarter?

Funding, I mean -- what do you mean by funding?

Sir, have you funded any customers? Have you given any fresh disbursement to the customers in the restructured book?

No, no, no. Absolutely not, absolutely not. That is different from -- I mean I don't know who are those, but we are very different that way, and we have gone completely by the policy that RBI came up with. And I think it's also equally important to acknowledge the fact that all the lenders went to RBI asking that, please come up with a restructuring framework, all right? RBI did that. Now we chose to obviously do what we asked for and what they asked us to do, what gave us the framework to do. And therefore, there was no reason for doing anything that we have never done in the past, and we will never do. Why should we fund any customer.

Sir, lastly, sir, so on the 73% of collection efficiency in the restructured book, so where do you see that number going forward in the next quarter?

I don't want to put a number, but like I said, our collections efficiencies are going to be improving across all kinds of buckets. And even this one, we are working systematically to improve. As we improve, we will obviously keep you all updated. I mean I just wanted to highlight the fact that 73% in the first month of having restructured is very, very encouraging sign for us.

Finally, I just want to add that we are seeing customers who haven't paid us anything so fast. Even 25% to 30% of those customers have started paying us after the restructuring is done. So that is a positive sign. And I think this is only going to be better in the next few months.

The next question is from the line of Abhijeet Sakhare from Kotak Securities.

First question is just clarification on the -- trying to reconcile the collection efficiency numbers with some of the other data. So from -- let's say, from September to December, the collection efficiency improved from 84% to 94%. But during the same period, the 0 DPD has not moved at all. So do we assume that the CE data includes the prepayment share or past payments?

Past payments meaning?

So does it include the arrears? Is that what is causing the difference of 10...

That's only 2%, Abhijeet, in the 94%.

No, no, no. So September collection efficiency was 84%.

Right. 86%.

December was 94%.

Right, right.

But during the same period, the 0 DPD is nearly flat at 16%.

Right.

So the movement or the improvement in collection efficiency, is that only because of the arrears or how do we reconcile the 2?

So I just want to extend this. Collection efficiency is calculated against the due for the month. And PAR is something even if you have 1 or more EMI pending, it will continue to reflect in the PAR, portfolio at risk.

1 day.

Yes, even if it is 1 day. So I mean, even though PAR remains flat, your collection efficiency can improve. And this collection efficiency also includes some of the arrear collections. So if some...

Understood. Second one was, now that the restructuring window is essentially closed, how would we deal with any incremental stress because the collections are yet to normalize or reach anywhere close to the pre-COVID levels, right?

You mean the restructuring window is closed now, is that what you're saying?

Yes. So the restructuring window is now closed. So whatever new stress that flows over 90-plus how do we then deal with that or the sticky part of the book, let's say, in Assam or some of the other states.

Yes, yes. So see, one, it's closed only for the personal loans category. The MSME loans, we have time until 31st of March, and there is a significant microfinance portfolio also which qualifies as MSME, okay? So we do have time for that. But we don't intend to do too much of that because basing improvement and collections efficiency in that portfolio also. If we have to do any more of that, we will take good calls during the quarter. And in any case, we have estimated those kind of stress positions and accounted for that in our provisions. So we don't expect anything more than what we've already estimated and forecasting the stress even from the ones which have not been restructured, and we don't have a chance to restructure anymore or otherwise. And all of that is exactly what we've upfronted. So we have taken that into account for the modeling. I mean we are not leaving anything to imagination anymore or you know that's value for price.

Yes. And just a clarification on the restructuring, do we restructure the entire group because we're not sure how the other members will be hit?

No, no, no. It's based by borrower, individual borrower.

By borrower and by -- again, it is based -- it's basis how our customer assessment is done on their current cash flow capacity.

Okay. And the other one was that like because of the whole moratorium thing, the normal repayment cycle or the borrowing cycle for a lot of borrowers has been disturbed in some ways. So how are customers sort of reacting to it? Are we allowing early retirement of older loans in exchange of fresh loan growth? Any such thing?

No. It's like funding the -- what Ankit was also asking that are you funding these customers? That's almost like doing that, which we are not. And the reason why they are highlighting this whole group of customers, the set of customers who haven't paid at all and have started to pay to the extent of 25%, 30% of those after restructuring is indulging enough for us to establish that these customers indeed were in stress and they needed help and support through the restructuring framework. Now, of course, you can argue that some customers might have lost the habit, some customers might go into intentional. But all those kind of probabilities and possibilities we have accounted for in this whole simulation for which we estimated and took the provision for.

Got it. Just last 2 clarifications. Why has the MFI yields gone down almost 200 basis points? And second data point question was that, could you give us the number of field officers in the MFI segment at the end of December, and let's say at the end of September or March last year?

You mean including collections, Abhijeet?

Yes. So yes, in MFI specific, the field officers, including connections, yes.

So that number in September was closer to 7,000 and right now, that number, including field officers, who are dedicatedly doing collection will be closer to 8,000 plus.

And the yields on the MFI book, that's it.

As far as the yield on MFI book, what I explained last time, INR 575 crores of the book is not earning any income. And that's the major reason of drop in the yields.

Not only yields, there are some other issues also.

Yes.

The next question is from the line of Prashanth Sridhar from SBI Mutual Fund.

Just 2 data points. What would be the total disbursements under ECLGS in the 9 months until now? And is there any restructuring apart from what you've disclosed for the MFI?

No. There is no restructuring other than what we've disclosed. And the ECLGS number is INR 55 crores for the MSE.

Okay, cumulative?

Yes, yes, cumulative.

The next question is from the line of Dhwanil Desai from Turtle Capital.

Nitin, so the first question is I wanted to understand some context regarding the data points. So our total restructured book is INR 852 crores and provisioning towards that is INR 69 crores. And we are saying that the collections efficiency in January is 73%. So does it mean that since we've only take provision of INR 69 crores, and we don't expect any more provisioning for the existing book that our collections efficiency from restructured book also will reach to 93%, 94% level. Is that what is the underlying assumption?

No, no. We are not saying that the restructured efficiency will go to 93%, 94%. We are just saying the restructured efficiency would have been a lot lower and was indeed a lot lower, okay? If you -- if I can share that with you, that was actually around 45% in the month of November, right? So once we've restructured these accounts, given assistance to these customers, they have come up to 73%. Now we do expect that this will continue to improve because we are putting extended focus on this through our dedicated collections effort. And of course, we have done the right thing for the borrowers, and they are also happy with the fact that we have indeed assisted them and helped them when they needed it the most. Therefore, I am not commenting whether it will go to 94%. I am also not commenting whether it will stay at the same level. But we do believe that it will improve. And if it doesn't, then obviously, we would have simulated those kind of slippages in the overall modeling that we've done. And we have done it.

We have. So while we underwent the entire restructuring exercise, we have taken into account that there will be slippages even from the restructured book. However, having said that, we are confident that a good number of customers will repay since we have supported them during their difficult times.

Okay. So we won't expect any more provisioning on the restructured book as it stands today?

Yes. So this provisioning on restructured book is largely coming from the regulatory prescription, requirement. In addition to that, while taking the modeling, additional provision has also been taken. So this number is only for regulatory reasons, which is highlighted in the presentation.

Okay. Got it. And second question, Nitin, is that if you look at our business model in last several years, it's quite prone to the various events, including some national, some regional, and that is the nature of the microbanking business. So -- and we have been trying to diversify our business away from microbanking. But at a strategy level, how do we -- how should we look at our bank? I mean, will microbanking remain a core part of the business, constituting 60%, 70% of the business? Or will we transition to more secured book over a period of time? And are these events prompting us to accelerate that process?

So that is a well laid out plan, much ahead of all of this happened, and it's not like we are talking about this because the pandemic came in. We have been talking about this for a fairly long time that we do have plans to diversify to the extent of 50% microfinance and 50% non-microfinance in 3 to 5 years' time. I think we are on track for that, okay. If you do notice, in this quarter, the share of microfinance in the overall book is now 73%. Last quarter, I think it was about 76%. So every quarter, it is changing. And like I mentioned, the thrust areas for us in the next financial year, affordable housing, MSE, some of the new business lines, will obviously grow at a faster rate also -- which they also have in this financial environment. Even in December, on a year-on-year basis, they have grown by anywhere between 25% to 28%. So the diversification will happen, but the event risk, I don't think that this kind of an event exposed only microfinance customers because we saw the same impact even with large lenders. We saw the same impact with HFCs. We saw the same impact with people who deal with vehicle finance. We saw the same impact with people who deal with MSEs. And with lenders themselves, NBFCs themselves. So I don't think an event like this can be only seen from the lens of microfinance. Yes, microfinance is more probably vulnerable to event risk like this, which could be domestic, national, localized, whatever it is. But that is where it helps us to build a book, which is reasonably well diversified across the country, which is what we have done. So we don't have at least a geographical risk. And that's the reason Assam, for us, for example, is not a very big worry. It is a worry, but it's not a big worry. And for the rest of the market, I think we are in control. And wherever we do have any doubts, we just provide for that, which is what we've done. But more importantly, I think from our point of view, we are building the retail portfolio on the liability side, which is going to be feeding into our cross-sell of retail assets separately by adding retail assets, like I mentioned in my remarks also through multiple distribution channels, including partnerships. And the accelerated growth on the non-microfinance book is going to continue for the next few years until we achieve a balance which we are comfortable with, which insulates us from these kind of event risks. The third thing is that we will also be in a position, which we had wanted to in this year, but we could not because of the pandemic, but we will also start keeping aside some countercyclical provisions, which would be good enough for us for events like these. But events like these even whatever kind of provision you keep aside, you can never be sure. So I think it is more a long-term thing. It is more a calibrated thing. But that is something that we had disclosed, and we have been working on methodically for the last several quarters now and we are moving in the right direction.

Okay. Got it. Just last -- if I can, one question. So any interest income reversal this quarter? And if so, how much? Any reversal on interest income this quarter?

Yes. So on the pro forma GNPA, we have provided for INR 25 crores as interest income, which is across. There is a provision against that. Amount is INR 25 crores.

So as and when the hold on the NBFCs is lifted, we will be able to write back that provision.

Thank you. Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to Mr. Abhishek Murarka for closing comments.

Thanks, Nitin, and thanks, everybody on the team for the detailed explanation, and thanks to all the participants for logging on to the call in the evening. Thanks, and have a great quarter, Nitin and team. Thank you.

Thank you, Steve. Thank you, Abhishek. And please, in case we've not been able to give you all the answers, do reach out to us to our IR group or otherwise. We will be very happy to provide any kind of clarification that you would need. Thank you very much once again.

Thank you. Ladies and gentlemen, on behalf of IIFL Securities Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.