Union Bank of India (UNIONBANK) Earnings Call Transcript & Summary

[Audio Gap] 30th September 2021. The bank is represented by the Managing Director and CEO, Rajkiran Rai Gundyadka; Executive Director, Gopal Singh Gusain, Manas Biswal, Nitesh Ranjan, [indiscernible] and other members of the top management. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ranjita Suresh, Assistant General Manager, Investor Relations. Thank you, and over to you, ma'am.

Thank you, Stephen. Good evening, everyone. I welcome you all to the Union Bank of India Earnings Conference Call for the period ended September 30, 2021. The structure of the con call shall include a brief opening statement by MD and CEO, and then the floor will be open for interaction. Before getting into the con call, I'll read out the usual disclaimer statement. I would like to submit that certain statements that may be discussed during the investor interaction may be forward-looking statements based on the current expectations. These statements involve a number of risks, uncertainties and other factors that cause the actual results to differ from the statement. Investors are therefore requested to take the information independently before making any investment for our division. With this, I now [indiscernible] MD and CEO, for opening remarks. Thank you. Over to you.

Good evening, everyone. It is a pleasure and privilege to meet you all for Union Bank of India financial results for the quarter and half year ended September 2021. India's economic recovery is showing strong momentum with the onset of festive season. The domestic demand is gaining strength while supply conditions are recouping fast, followed by the robust performance of education sector and revival in manufacturing and services. A strong activity goes well for the banking system. Recently, Moody's ratings agency has revised [indiscernible] banking system to stable from negative on the back of stabilizing asset quality and improved capital drive. This also accounts confidence in banking sector. Coming to the bank's business and financials for the quarter and half year ended September 30, 2021. Operating profit of the bank grew by 25.66% Y-o-Y and show that INR 6,074 crores for the quarter 2 of the year '22. Net interest income reached at a growth of 8.52% Y-o-Y and stood at INR 3,829 crores. The global NIM stood at 2.95% for quarter 2. The net profit stood at INR 1,526 crores for this quarter against a net profit of INR [indiscernible] crores in the corresponding quarter of previous year, [indiscernible] growth of 195%. In terms of business, the RAM sector noted 8.48% Y-o-Y growth, raising its share in domestic loan book to 58.51%. And within RAM sector, the retail [indiscernible] grew by 9.35% and regulatory advances have grown by 13.06%. The liability slide -- the total deposits have gone -- grown by 3.15% year-on-year, led by low-cost contract deposits, which grew 10.7% year-on-year. The CASA ratio thus stood at 37.16% at 30th September, 2021, as compared to 34.61% a year ago. On asset quality, the gross NPE ratio stood at 12.64% as of 30th September '21, compared to 14.71% of the comparable quarter last year. The net NPA stood at 4.61%, which was 8 basis points lower sequentially. On the capital front, the bank has reached INR 1,150 crores under Tier 2 bonds during the current quarter. The CRAR for quarter 2 stood at 13.64%, and CET1 stood at 10.16%. Thank you. Now I will -- I welcome the questions.

[Operator Instructions] The first question is from the line of Mahrukh Adajania from Elara Capital.

So just a couple of questions. [indiscernible] or are there are some other write-offs in the quarter as well [indiscernible] That's my first question.

Yes. You wanted to know this write-off of the first quarter has any particular...

Yes.

No, this is a general process. Actually, wherever we reach 100% provision, we gradually write-off, but then we balance it such a way so that the credit growth is not impacted because the moment we write off the credit growth, like the outstanding credit comes down to that extent. But at this time, we took a cautious decision to write off. Generally, we write off about INR 4,000 crores, INR 5,000 crores per quarter. This time, we have taken a call to write off about INR 10,000 crores. These are various accounts, but where the 100% provision is there.

DHFL [indiscernible] subsequently recovered? And is that part of this quarter's on write-off?

DHFL was maybe -- I will answer that perfectly that when it is written off, I need to check, actually. But then the recovery -- like it is recovered as a written-off account only. That's why the recovery is in other income because it was a written-off account when the recovery came. I will check and confirm to you whether we [indiscernible] written off.

And our exposure would be around INR 2,400 crores, INR 2,600 crores, sir?

On Dewan Housing?

Yes.

It was INR 3,600 crores.

INR 3,600 crores, okay, sir. My other question is on margin. So basically corrected because of [indiscernible] loan growth, right?

You're saying the net interest margins are lower because of the low credit growth?

Yes.

Like this may be partially correct when you talk of retail. But then if you talk of corporate credit today, the interest rates are so low, if you are pushing for corporate credit growth, particularly at the short end, Actually, like I don't think the interest margins will improve. It will further come down.

Got it. So basically, from here on, we can expect margins to decline somewhat?

May not be. I was talking about the present situation. Today, if I push for corporate credit growth, it comes and the corporate credit today is at very, very low rates. So that will actually squeeze the margin if you go for aggressive corporate credit growth, particularly short-term credit today. But as we go along, now we're already seeing signs of interest rate firming up at the short end of the maturity curve. Like if you're looking at some repos and variable repos, we are already seeing the rates firming up. And the indication from RB also was almost similar because gradually, they are going to suck the liquidity out of the system. So the short-term interest rates, which have gone very low are likely to come up. So as we go along, the interest rates will firm up and then the margins -- actually, we have played a projection that the net interest margins will be around 2.9% to 3% and we are sticking to that. I think we will not go below that because there is another advantage. Our CASA has grown well -- our proportion of CASA, which was 34% last year. Now it is around stable 37%. And the deposits that we are getting, they are coming at much lower rates. So the deposit rates don't get refreshed that fast. Loans get repriced very fast, whether it is getting lower or higher.

Sir, my last two questions, firstly, on total restructuring. So you've given for detail about Tier 1 and Tier 2 very elaboratively. But sir, would there be any MSME restructuring over and above that? So what would be the total restructuring including any past or current MSME restructuring?

Actually, you see, we have given you the details of restructuring 1.0 and 2.0 as per RBI credit length. The details are already there in the presentation. Last time I shared with you that there was a 2019 guidelines of MSME restructuring before the COVID came. There, we have a restructuring of about INR 2,469 crores under MSME. [indiscernible] MSME, we have INR 2,469 crores under that.

Got it. Sir, my last question is on operating expenses. So has there been any -- were any rough calculation of what will be the impact of your family pension loan?

Yes. Actually, we have taken a one-time provision of family pension of about -- 380? About INR 380 crores. This was an estimated basis because Reserve Bank has given the permission to spread it over 5 years. So for this year, actually, we estimate it to be around INR 380 crores. So accordingly, instead of waiting for March quarter, we have made a provision this quarter because we had the comfort this quarter because of the good recovery and the provision rate back what we had. So we have taken INR 380 crores. And as our INR 115 crores, we have made provision for the NPA because this new pension scheme moving from 10% to 14%, we have made a one-time provision of INR 115 crores. So roughly INR 500 crores, one-time employee cost is there in these numbers.

And sir, what will be the total liability of these two [indiscernible] estimate [indiscernible], which has to be firmed up budget or your current estimate?

It is [indiscernible]

Okay. And is the [indiscernible] absolutely one-time. [indiscernible]

Actually because up to now what should have been paid, so that we have made one-time hit, and now was it will be paid monthly. And family pension anyway goes out of the pension fund only. So there is no expenses to our book. We have to make -- we have to create a [indiscernible] cost for and then from the corporate, the extension will be. So this INR 380 crores will go to the purpose pension [indiscernible].

The next question is from the line of [indiscernible].

Congratulations to you and the entire team for such a splendid performance. I think lot of private sector banks will private banks will look at this performance. Sir, I have three questions. I hope I can take a few minutes [indiscernible] So we calculated as you have provided roughly INR 1.45 lakh crores in the last 5 years from 2015 to 2021 of the first half. So I wanted to understand from you that how much of this amount you think would get recovered, which has already been provided for and in what time frame? So we say, if I take a 3-year view, at; '22, '23, how much of this money will come back?

Difficult to give you estimate, but then looking at the progress of different recovery and the OTS going on -- actually, in the next 3 years, at least 15% to 20% should come back according to our estimates, like is very difficult to predict. It depends on how we are going because these are the accounts either written off fully provided and at various stages of legal resolution. But with the NARC coming in some of the big accounts going there. So we should expect that 15% to 20% of that will come back. And why I think I'll say that is you will see many quarters like this. This quarter, you had one big recovery, which came back straight to the profit. Similar accounts, we'll see in many of the quarters going forward. These are the good pans because already, the books are clean, huge provisions are made. We should see this write-back also happening. So like ultimately, if you take a longer time frame of 5 years, I say that about [ 30% ] should come back, at least 30%.

Wow. So that's the number which I was booking [indiscernible]. So we have INR 1 lakh 45,000 crores, let's say, which even 20% comes back. That will be roughly...

Yes. [indiscernible] coming back.

[indiscernible] crores capital which is before to our market share.

Yes.

Sir, what has been your experience in last 2, 3 years, whatever you have provided for 100% return of technical data? How much of the typical recovery has combined in the last 3 years?

See, I will just take it forward. I think are very active funded or everything and years time. The total exposure which we have this NPA around 500 accounts [indiscernible] around INR 65,000 crores. So all this [indiscernible] definitely, I'm expecting that by 2022, '23 and '23, '24, maximum 2 years span definitely [indiscernible] are going to take place. Because generally, if you take the 30 days original time period and some [indiscernible] two financial years, these [indiscernible] are going to happen now. Now with any last year coming in picture now. I think we have already identified a lot of accounts. So maybe in this quarter and going forward in the last quarter of this financial year, we are expecting around INR 13,000 crores to INR 14,000 crores, which we will be able to shift in the [indiscernible] And realization-wise, also, in fact, for the last 3 years, if you see the realization [indiscernible] SG&A if you see it is in the [indiscernible] for the last 3 years, it is in the range of around 30% to 35%. First year it was 40%, then 30%, 20%. It is coming down. But average realization very conservative if I take around 25% to 30% earlier realization. Definitely, it is going to [indiscernible]. So if you take that 60,000, which is already there in [indiscernible] also if you take define good summer is going to come through that [indiscernible] process. Other than [indiscernible] NCLT also, I think a lot of [indiscernible] are happening outside of [indiscernible] like better [indiscernible]. So all those things put together I see that -- this year, definitely, it is going to be a good year for our bank. Then '21, '22, '23, that also will be a good rewarding year. Going forward another 2, 3 years need, I think whatever things are round up, we will be in a position to unlock [indiscernible]

Yes. Further to supplement what Ashok said, on this INR 60,000 crores plus, which is in NCLT, our provision coverage is more than 95%. And in the first 6 months, our recovery from technical write-off is more than INR 2,000 crores. Just to give you a color to what you mentioned. So out of almost INR 10,000 crores recovery, about 20% is coming from technical [indiscernible] accounts.

So sir, this is what exactly my point even -- Mr. Ashok I'm sure we would agree with the sentiment in the real estate sector is moving specifically in the last 6 months, that will add to a recovery effort and also maybe the realization itself will improve from the return of account. And that is why I wanted to understand what is the true potential of this?

Yes. I agree with this definitely. I think Q3 and Q4 definitely. The realizations are going to be high.

I think a big question, Mr. [indiscernible] asked. When we look at this realization. Also, the realization comes because of the real estate value I think we have not factored the appreciation in real estate. When we say 25% and 30%, we are very conservative actually. So because the real estate is picking up, we may see much better realization also. But then it's very difficult to predict now, but then [indiscernible] that out of INR 7,000 crores slippage of June, INR 2,000 crores is recovered over the next 3 months. By September, out of INR 7,000 crores are recovered. By the way, one simple low piece because this is not motions. So people are quickly paying actually. So what you say is right actually because the appreciation of the market like real estate market will see uptick in our recovery.

If I may just give you more times from an investor perspective, if you can tell us that what will be the selected value maybe in the next quarter call out of this INR 1 lakh 45,000 crores, which has been provided for in the last 5 years, what will be the last estimated collateral value which you have. Then I think investors can be in a better position to take their own get that how much we use be able to recover. I'm sure we have that number, I request [indiscernible] you should discuss this number in the next quarter call.

We'll give that sir. We'll give that.

Okay. So now coming back, you gave a guidance of INR 15,000 crores for the slippage in the current year. But our first half you said [indiscernible] INR 13,794 crores in the first quarter. So is there any change in the guidance, sir? Do you expect that you will recover the loss which has [indiscernible] in the first 2 quarters?

Yes. Actually, like our guidance on the net basis will still stand because INR 13,700 crores includes INR 2,600 crores of [indiscernible]. So like if we exclude that, the slippage is around INR 11,000 crores. And INR 11,000 crores, excluding [indiscernible], is a gross slippage of two quarters. So as I already mentioned, INR 2,000 crores of June slippage is already recovered. So according to -- if you look at the first half, we say, it's only INR 9,000 crores plus [indiscernible]. So if you're taking INR 9,000 crores, so our slippage for the next half year, we don't expect that it will be more than INR 5,000 crores. Because looking at the way it is shaping up because even this quarter, if you exclude [indiscernible], our slippage was a INR 4,000 crores. So it is still moderating. Our collection efficiencies have reached almost 96% level. So we don't foresee much slippages going forward. The collections have been very robust. Our [indiscernible]. So the net slippage for the year will still be between INR 14,000 crores to INR 15,000 crores.

That is [indiscernible], including [indiscernible] or excluding [indiscernible]

Excluding [indiscernible]

Excluding [indiscernible]. That still will [indiscernible] Now coming back to operating profit, of course, we saw a big jump in this quarter from [indiscernible] crores. How do you see the trend will be for over the next 4, 6 quarters? Do you think we will be able to maintain this rate of around INR 6,000 crores operating profit per quarter?

No, sir. We have given a guidance that our operating profit will stabilize around INR 5,000 crores per quarter til we see some good uptick in the credit growth, which is likely to accrue maybe end of Q3 and Q4. Till then, our operating profit will stabilize around INR 5,000 crores. This time, actually, we have the advantage of [indiscernible] housing coming in. But then when we add 1,500 to the [indiscernible], about 500 one-time provisions also, we have taken above the line. That is particularly for the pension and the new pension scheme. So about INR 1,000 crores, you can say that is contributed by the [indiscernible] to the operating profit as of now. So we can estimate that it will be around 5,000. But we will also see some divestment in subsidiaries in the coming quarters, which is at advanced stage, which will be [indiscernible] And also some of the settlements, which are likely to happen and also will add value. Otherwise, in the normal operations, our operating profit should stabilize around INR 5,000 crores for the next two quarters, INR 5,000 crores per quarter.

That is fantastic. My last question, sir, when do think will be less than 2% net NPL [indiscernible] you have any internal targets or any aspiration to be by this time, we should be less than 2% in NPL?

Yes. Our estimate is that by March '22, we should be close to 3.5. And '22 to '23, we should be like close to the number what we are mentioning.

Thank you so much, sir. All the best, I must admit I was dispersed to meet your people since then have been very, very positive that the public sector banks are doing a fantastic job and all the very best go there.

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

Sir, a couple of questions, sir. First on restructuring. So you have given a Phase 1 and Phase 2 and then SME number that you have also called out separately. But is there any other erstwhile restructuring debt that we were carrying. So what is the total stock of standard restructure number and if you can [indiscernible]

Actually this numbers, what we have disclosed, this is the restructured group. There is nothing else.

Right. And the outstanding provision would be closer to 10%, right, on all the [indiscernible]

Yes.

Understood, sir. And second thing, sir, is there -- how do you account for this slippages out of restructuring? Is this still the 90 DPD? Or there is some regulation wherein you may have to downgrade the restructured account, even if they are below 90 DPD. Is there some conservative accounting there?

So when it comes to retail and MSME, basically, this restructuring is only elongation of repayment. There is no restructuring of debt here, actually. It is always simply giving them more time for repayment at the restructuring, which has happened. So here, the 90 DPD works. What you are mentioning is some breach of covenants, which can happen only in the corporate book. but we are not seeing that happening as of the corporate relations.

Understood.

That actually, that [indiscernible] possibility comes if there's a breach of covenant.

Right, right, right. And secondly, sir, you've given the SMA2 numbers, which is currency data. If you have the number handy for the entire bank, including INR 5 crores ticket price also.

INR 14,344 crores [indiscernible]

We have disclosed INR 5 crores, which is 0.8%. And all SMA2 without any filling of flows is around 2.3%. If you compared to last quarter, I think we have shared, it was around [indiscernible]

SMA2 book is 2.3% [indiscernible] all accounts included.

Understood, sir. And the last thing, sir, it looks like you have added the [indiscernible], I just wanted to double check that.

Yes. Yes. Actually, last time also shared this that we are going to like there is a deferred tax asset to the extent of INR 14,000 crores, which gets reduced from our equity and CET1 and book value. So we have taken a call that we will reverse it -- So this last time, we reversed about INR 500-plus crores. This time, we have reversed about 8% INR 823 crores. So this INR 823 crores actually like when we reversed, so that gets reduced from that deduction. So it gets added to the set In addition to that, about INR 400-odd crores of a provision, which was getting reduced from the equity actually. So that we made full provision during this quarter and not return. So these two put together at about INR 1,250 crores to CET1. That's why it is that level.

Just to understand this, sir, how do you work that you have a stock of [indiscernible] above a certain threshold, it gets reduced from network, right? And as you utilize that, the amount becomes successively lower. And hence, capital gets released.

Actually, that gets debited to my profit actually like when I reverse like DTAs are reduced, we have to make provision from profit actually because this is which complicated structure we create -- this was created when we were making very huge provisions earlier. And we were incurring losses because our provisions are made more than our operating profit on. So that's like a way of creating -- Now since we are deciding that we have to move to the new tax region in the 1- to 2-year time frame. So this actually PTA adjustment will entitle a loss of about INR 5,000 crores is our rough estimate. So we decided that about INR 2,500 crores will knock out this year and we 50 next year. So by March; 23, we'll be prepared to move to the new tax gain. So that is our strategy. In the meanwhile, when I'm reducing these deferred taxes, you are right because beyond the point, it gets reduced from the network. So that actually comes down. The reduction part comes down. So this time, it has come down by this INR 823 crores. Plus, actually, this fraud provision differs also gets reduced from the [indiscernible] So this quarter since we had [indiscernible] INR 400-odd crores of fraud provision, we have made full provision. So this has returned back to net worth. So about INR 1,250 crores gets added to the network.

The next question is from the line of [indiscernible] from Antique Stock Broking.

Sir, am I audible?

Yes, yes.

First question is on the NPL provision. So even if I reduce [indiscernible] and I reduce for the 4 billion that you mentioned, even then the credit cost provisions are quite high at INR 28 billion, INR 29 billion. What is the reason there?

[indiscernible] you would like to come

So that's a normal raising provision plus the provision for the NPL during the quarter.

And any estimate of how much aging provisions are led to be done for this year?

So maybe for the rest of the year, it will be close around 60 basis points.

60 basis points of the [indiscernible]

[indiscernible] That is the 2 quarters, next 2 quarters, that is the aging provision.

That is INR 3,200 crores?

Roughly. This can vary a bit.

So [indiscernible], we made 15%, right, for this quarter?

[indiscernible] remain 65%. We were 30%. So we made another 35%.

I think this is one of the reasons you see a higher producer because this was a stat we had kept 30% provision in that -- Now this quarter is to NDA and that 30% is standard provision has also come here and add to 35% also termed. So 65% provision we have made in the NPA. So that is the reason I think you are observing that number is high. Earlier, 30% was in standard asset provision.

Got it, sir. And sir, also you mentioned the 4 billion in the last participating question that was also included in the provisioning right? The 4 billion that you mentioned that you [indiscernible]

Yes, that is a deferred provision on fraud. So that also came in this quarter. So we made a full provision of INR 400-odd crores, yes. So that's why actually this credit cost doesn't necessarily relate to the present slippage.

Got it. Sir, secondly, on the recovery and [indiscernible] expectations for the second half?

Actually, the first half, we have given a position of INR 13,000 crores of [indiscernible] upgradation for the full year. So we have got about INR 10,000 crores in the first 6 months. So we have increased our target. So we are planning at least another INR 6,000 crores of recovery and upgradation in the next 6 months. So the recovery upgradation target for the full year is about INR 16,000 crores.

And this also includes the upgrades and recoveries?

Upgrades and recoveries, yes.

And sir, on the [indiscernible] sale, how much have we -- how much will be transferred in the first phase?

[indiscernible] last time we made this...

INR 8,000 crores.

Roughly INR 8,000 crores is marked. But then now the advantage is even the accounts that are declared as fraud also can be [indiscernible]. So we are identifying the next set of accounts also. So we think that this year, we should be able to transfer about INR 12,000 crores. We should be able to transfer INR 12,000 crores.

This is in both the phases, Phase 1 and Phase 2, INR 12,000 crores?

Phase 1, phase 2 is already identified. So I think, yes, Phase 1 and Phase 2. So this will be the Phase 3 before March. The foreign accounts and other accounts. There it to be because the process -- actually, we have processed the first lot [indiscernible] the second lot.

There not factor earlier because guidelines have come subsequently. So that amount in our bank itself is around INR 12,000 crores.

Sir, just last question on the MSME side, how much [indiscernible] are you seeing now? And on the restructuring, and restructuring how much do you expect to slip?

We have seen much slippage in MSME now. We're stabilizing and the collection efficiency also substantially has gone up. So this quarter, we saw slippage of INR 1,526 crores from the MSME book. So it includes the slippage from the restructuring book also. So like roughly, we see -- like if you look at the restructured book of INR 5,000 crores of MSME yes, from the 1.0 and 2.0, about 10% has slipped from that book. From the resolution 1.0, resolution 2.0, roughly if you are taking it that is INR 5,000 crores, about 10% has slipped from that book, and it has gone to NPA now.

And any further expectation? How much can the incremental slippage can be from this?

Difficult to estimate. In MSME, we feel that the worst is over. The numbers are moderating. We are looking at the numbers presently. So the run rate should come down substantially because last quarter, we saw INR 1,500 crores. And maybe as we go forward, it will be substantially less than this for the next 2 quarters.

The next question is from the line of Rishikesh Oza from RoboCapital.

Sir, my first question is that our PPOP is on a good track. So I just wanted to know if we are maintaining guidance on you know INR 12,000 crr to INR 13,000 crores of provisions for this year?

You are talking of the credit cost?

Yes, yes, credit cost.

See, actually since the profitability is [indiscernible], so we are trying -- because we have a net TNT, which is slightly higher than the peer bank. So our strategy needs to reach a NPA, net NPA level of below 3% as early as possible. So we may do some aggressive provisioning on the NPA accounts more than what is regulatory required. Because we had a cushion on the operating profit now. And the aging provisions are coming down substantially. So this is not necessarily because of the regulatory requirements. It is because of our strategy of NPA and bring the net NPA down fast.

Okay, but are we maintaining within 12 to 13 for the whole year? Because we have already taken like around INR 3,500 crores and INR 3,700 crores of Q1 and Q2.

Yes, that number we are likely to maintain. So if there is a one-off income coming in the next two quarters, then we may increase our provision. Otherwise, these numbers should stand.

Okay. Okay. And my second question is that you have reversed around INR 1,400 crores of [indiscernible] for H1. And you're saying you will be doing 2,500 this year, correct, FY'22?

Yes.

So roughly around INR 1,100 crores more will be [indiscernible] for the next 2 quarters, like for the H2 [indiscernible] Correct?

Yes.

The next question is from the line of Himanshu Taluja from Motilal [indiscernible]

Most of the questions have been answered. Just one [indiscernible] detail. What is your DHFL recovery during the quarter? And if you can further give in terms what was the cash recovery and in terms of the bond recovery?

Can you give the number?

Yes. The recovery of INR 1,650 crores. So in that INR 700 crores from the cash and remaining INR 954 crores was from the bond.

Okay. Sure. And sir, how do you see the trend in terms of the growth because our business growth has been muted. So any credit growth expectations where you see over the next -- in the next few quarters?

Yes. Actually, see, the RAM sector, we are okay. I think the growth will further pick up, particularly retail space, agitation space and to some extent, MSME space. The problem is the corporate book, which is really pulling us down. The problem is basically if you are focusing on corporate credit at this point of time is particularly at the shorter end because -- which is actually the market. So we have to compromise our margins and the interest rates are really finally low. So like that is a difficult market to operate because that will shrink our net interest margins and the interest income. So like -- we just hope that the [indiscernible] bank steps taken on variable repo and [indiscernible] that they're doing and the short-term rates are stabilizing around 4%. So going forward, we will also participate in this market as the rates are firming up. So then like maybe the credit growth will be back. And on the long-term credit, we have a good pipeline, actually a robust pipeline, but somehow the utilization levels are not there. We have line up credits of more than INR 30,000 crores not used. We have more than INR 20,000 crores of sanctions, which are like at various stages of documentation, which has to be discussed. And we have in a very locust pipeline now that we'll [indiscernible] given. So my expectation is that corporate credit by the end of the year, for us, also, should touch about 6% growth rate. So accordingly, we have revised our credit growth number to 6% to 8% range.

The next question is from the line of Ashok Ajmera from Ajcon Global Services.

Sir, compliments to you, sir, for yet another set of good numbers. You have been performing very well in the last 3, 4 quarters, especially. And basically, the treasury and the other side is the recovery. These two departments are doing fantastically well according to me. Most of my questions have been answered, but there's still a few data points and for more information. So sir, you said about this write-off the huge write-off recovery for reducing the NPA number of INR 10,740 crores. What was actually the thought suddenly in this quarter only? Because it is an exceptional number of write-off. So number one, how many number of accounts have been written off? And how many of them were more than INR 100 crores?

I think I do not have that much in detail. But I'll tell you -- see, if you observe us for the last few quarters, we are generally writing off about INR 4,000 crores, INR 5,000 crores every quarter that we do regularly because that's the only way to bring down the gross NPA below 10%, that is a strategy that we should bring the gross NPA to single digits. So by way of recovering all that some things are happening. But then we need to write off where the accounts are fully provided, as a strategy, every bank does it. Why we moderate it is because when we write off, it goes out of the credit outstanding also because your credit growth gets affected. S Banks have been conservative in writing off. But this quarter, we thought like -- because we were planning that this time, it should come below -- So we took a call to write off a bigger amount, bigger amount. But then this happens not in very small accounts. This happened in large corporate exposures where we have full 100%. So like maybe offline will share how many number of accounts and all that. Right now, we [indiscernible]

It's okay. Yes. So sir, when we are talking about the gross increase of the ARP will come very handy. We got the entire INR 12,000 crores will go off the gross NPA.

It may not because some are written off. So like about half, yes, it will reduce by gross NPA by another 1%.

Yes. So that will be a major thing in percentage and you have to come also. So sir, it's the number of 12,000 as you are estimating for the [indiscernible], including now the product on also cannot be transferred. So roughly about 20%, maybe the valuation comes around that. So you will get around like according to INR 2,400 crores of total credit out of that 15% at INR 360 crores will come in the real cash, which in any case will be income. So this bond which will come, which is a guaranteed government guaranteed bond, will that also be considered as a full income? Is it turnouts provided for the reduction in the program. Is that correct? The entire INR 2,400 crores -- odd-crores benefit we are going to get in the next two quarters?

We are not very sure how RB will look at it at this point of time. So yes, cash part, there is no doubt it will be booked as income. But the bond part, whether we have to continue the full provision of not -- there is not much clarity on that. the permitted to the impact the provision because of the full government guaranteed yes, definitely, that will be above our estimate what we are giving now. But then I have my own dot with rising will fund it actually, they may advise us to continue the provision. So we don't know. At this point of time, the question is not answered by the regulator as of now.

So sir, what treatment has been given to the [indiscernible] bond of 10 years, which is a private bond, which premium [indiscernible] taken in the security. So you're taking the market price of INR 79 or -- and then provided INR 21 in that bond? Or what treatment actually has been given to the DHFL recovery, the position of the bond from the [indiscernible]

So because the [indiscernible] is a AA rated bond issue. It's a fresh bond. Nothing to do with the DHFL. We issued [indiscernible] there's a discount on that. Why there's a discount on that?

No, sir, because the valuation was...

It is like any other bond. Today, if I take a bond of any other business group which is AA rated, I take it as the face value.

I'm not sure, sir. I think face value -- you will have to take the -- either the market value or the -- whatever the haircut is to be given.

[indiscernible] AA Rated [indiscernible] reissuance of bonds.

There are two things. One in the we have to take. And second is the take of management is here. So it is not a DSL bond. So both the factors put together, the provision has to be taken [indiscernible].

Sir, my -- just last question, is that in the SMA2, less than INR 5 crores, there is a large number of accounts and the amount is also large. So sir, have you formed any kind of strategy of reaching those because I believe that many of them must be a small borrower for SMA2 below INR 5 crores. So the strategy you've adopted and have it implemented? And what kind of results it is giving because so we have some idea of the -- about the future of the SMA2 below INR 5 crores.

Okay. Actually, I don't know which chart you are referring to the. SMA2, above INR 5 crores is only 0.79%. It's a very small...

I am talking about Below INR 5 crores.

So below INR 5 crores, naturally, a lot of the SME and the retail accounts will be there. So we have a good strategy. Actually, we have a call center and yes, this term. basically, we have devised like we can explain you, but then we have devised a very good system of follow-up. And the recoveries are almost like the correction efficiency reach our 10% to 6% level. So we don't expect that this will slip -- So we have a very good collection mechanism. So -- and the amount is quite small. Actually, it is not that big, but number of accounts are huge, spent over various places, but we have very good mechanism of follow-up and the thing, including our branches plus call center, plus some outsourced also for calling on the customer.

[Operator Instructions] The next question is from the line of Dikshit Doshi from Whitestone Advisors.

Most of my questions have been answered. Just one thing I wanted to understand, when you say that in the first half, our recovery and upgradation is almost INR 13,000 crores, INR 14,000 crores, I assume you're including the write-offs also, the actual recovery or upgradation of the...

We said it is INR 10,000 crores. Recovery and upgradation is INR 10,000 crores in the first half about INR 8,000 crores of actual cash recoveries plus upgradation, INR [ 2,000 ] crores of recovery in write-off accounts. That is the INR 10,000 crores of recovery in the first half. Write-off is not included in that.

Okay. So recovery and upgradation is around INR 10,000 crores and write off around INR 15,000 crores?

Write-off, yes, in the first half about INR 15,000 crores.

Okay. Now my second question is regarding this NARCL. So obviously, most of these accounts are already written off and our NPA for many years. So how things will change once it is moved to NARCL? It's not been recovered. -- amounts are not recovered in the books of the bank. And what will change once it is moved to NARCL?

Actually...

How the recovery will change?

Yes, I know it's a limited point you are mentioning, but I should give you a brief background actually see why we thought of APL as an institution because actually, when we were resolving these big accounts, many accounts, we saw that there is a potential of higher value -- But through the process of liquidation or NCLT, we are not able to give the value which actual otherwise is assets deserve. So our simple process of legal process of is not maximizing the value. So we thought that should be alternate mechanism to like get a better well. That's why we thought of NARCL. And the gain advantage of NARCL is debt aggregation. Today, one other problem we face is there is a multiple creditor system. And like taking a decision because it's very difficult. In NARCL, there's going to get aggregated at one level, and there is one decision making authority, which can take any call on a resolution of asset. Another thing, we are enabling NARCL with a resolution company, what we call idea like a debt resolution company, which is going to have people from the private sector. And we are enabling them with the incentives so that they can go to the market and do the value maximization for the assets. [indiscernible] we could resolve in large assets we have [indiscernible] The remaining accounts are slightly complicated and they have to be delta different. Otherwise, through the [indiscernible] process, they will go to digital liquidation and we'll get only scrap well. We have seen some of the companies where our debt is INR 10,000 crores, going at a scrap of INR 5,600 crores. That should not happen. So that is why this is created. We should understand the purpose behind this Yes, short-term gains is something which we look at, but then this has gotten much long-term play.

Okay. Okay. Got it, sir. And just one last question. In the last quarter, we have this one off [indiscernible] Is there any big account where you feel that may slip into NPA over the next 6 months?

Hopefully, no.

Ladies and gentlemen, due to time constraints we take that as the last question. I now hand the conference over to the management for closing comments. Over to you, sir.

Thank you. Thank you for participating in this conference. So we -- like we have actually initiated a lot of digital indicative because I like all the questions which are coming on the recovery side and all that. So particularly, we are into an era of operational excellence. We have started a lot of digital projects. We are investing heavily on this and it will result in a lot of improvement technology, elimination of redundancies and also on improving the compliance. So -- and also the automation is complete now. We are seeing the synergy benefits [indiscernible], actually. And as we go along, like we will see these operations efficiencies and synergy benefits adding to the bottom line of the bank. And I will conclude with like the guidance for the year. we feel like the deposit and advances growth will be in the range of 6% to 8% by the end of the year. The CASA ratio for the bank should be settling around 36% to 37% during this year. The net interest margin, we are maintaining the guidance of 2.9% to 3%. The credit cost to be around 2%. Delinquency ratio on net base, as I already explained, should be around 2.5%. With that, I conclude my remarks, I'm very grateful to the analyst community and illegal investor facility for their support and feedback that helps us take inform the decision in our journey towards efficiency and profitability. Thank you so much. A very happy Diwali to everyone.

Thank you. Ladies and gentlemen, on behalf of Union Bank of India, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.