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

Ladies and gentlemen, good day, and welcome to the Union Bank of India Earnings Conference Call for the period ended December 31, 2021. The bank is represented by the Managing Director and CEO, Shri Rajkiran Rai Gundyadka; Executive Directors, Shri Manas Ranjan Biswal, Shri Nitesh Ranjan, Shri Rajneesh Karnatak, Nidhu Saxena and other members of the top management. [Operator Instructions] Please note that this conference is being recorded. Now I hand over the call to Mrs. Ranjita Suresh, Assistant General Manager, Investor Relations. Thank you, and over to you, ma'am.

Good evening, ladies and gentlemen. I Ranjita Suresh, Head of the Investor Relations, on behalf of top management of Union Bank of India, welcome you all for this con call to discuss the Q3 financial year 2022 results of our bank. 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 statements. Investors are therefore requested to check the information independently before making any investment or other decisions. With this, I now request our MD and CEO for his opening remarks. Thank you. Over to you, sir.

Good evening, everyone. It's a pleasure and privilege to meet you all for Union Bank of India financial results for the quarter and 9 months ended December 31, 2021. There has been good upturn in economy. As per the CSO's Advance Estimates for financial year '22, the level of economic output is expected to surpass the pre-COVID level. Encouragingly, third wave of COVID has been milder and less disruptive. Thus, with Union Budget pushing for higher CapEx, there could indeed be virtual cycle underway to put economy on high-growth path. Banking and financial sector is well prepared to finance India's growth aspirations. Coming to Union Bank's business and financials for the quarter ended December 31, 2021. The bank has continued to post strong financials as net interest income grew by 8.88% Y-o-Y, and net interest income stood at INR 7,174 crores for Q3 of the year '22. Our Global NIM stood at 3% for Q3 of the year. The net profit stood at INR 1,085 crores during the Q3 and compared to the INR 727 crores of Q3 of last year, that by registering a growth of almost 49%. In terms of business, the RAM sector noted 9.17% year-on-year growth, raising its share in domestic loan book to 56.94%. Within RAM sector, the retail advances have grown 9.78%, and agriculture advances have grown by 11.08%. On the liability side, total deposits have grown 6.24% Y-o-Y, led by low-cost CASA deposits, which have grown at 11.06% year-on-year. The CASA ratio thus stood at 36.99% as of December 31, 2021, as compared to 35.38% a year ago. Of asset quality, the gross NPA ratio stood at 11.62% as of December 31, 2021, compared to 13.49% of last December. Net NPAs have stood at 4.09%, which was 52 basis points lower than sequential. The bank has successfully contained the overall stress from the level of approximately 16% of March 2021, the stress book has declined to 6% level in December 2021. [ Trends ]. The bank has performed well on recovery front by recovering approximately INR 13,000 crores on gross basis for 9 months of the year 2022. This is the robust recovery. We already revised our guidance from INR 13,000 crores to INR 16,000 crores of recovery for the full year financial '22. Strengthening our collection capabilities further, the region collection centers are open where in dedicated call centers and [indiscernible] model combined with the skilled pool of staff deployed to reduce the stress position of the bank on continuous basis. The bank raised INR 3,500 crores of AT1 bonds during Q3, apart from raising INR 1,447 crores of equity capital through QIP earlier and INR 2,000 crores under Tier 2 bond during the previous 2 quarters. Coming to developmental measure as per long-term strategy, the bank has taken several initiatives in its digitization journey under the Project SAMARTH 2.0. They've started reflecting in better customer satisfaction and greater digital adoption. There has been market increase in daily registration by 2.4x and daily transaction volume by 1.2x on U-Mobile, our mobile platform application. Taking customer connect further, the bank has also launched Conversational Banking, we call U V Conn on WhatsApp and e-bulletin Union Pr@waah for creating awareness about our products among our customers. To increase the credit availability to the MSME sector, the bank has revamped this focused MSME by launching Union MSME First branches. Union MSME First branches have been opened at 25 locations by offering multiple benefits to MSMEs and the leads worth INR 3,395 crores have already been generated. Towards sustainability, the bank has launched new products, namely Union Green Deposits, Union Green Miles, loans for solar rooftop in the quarter. Let me conclude by stating the bank's performance is in line with our guidance shared earlier this year to reiterate deposit and advances growth in the range of 6% to 8%. CASA ratio in the range of 36% to 37%, NIM to be around 2.9% to 3%. Credit cost to be around 2%, delinquency ratio to be around 2.5% on net basis, excluding one-off slippage of SHRI Group. With this guidance, I conclude my opening remarks. We are grateful to analyst and investor fraternity for their continued support and feedback that helps us to take informed decisions in our journey towards efficiency and profitability. Thank you, and we are now open for question-and-answer session.

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

Congratulations. Sir, my first question is on ECLGS. So what is the incremental ECLGS disbursed during the quarter? And what would be the outstanding figure now?

Okay. ECLGS upgrade data is there? Outstanding...

So ECLGS, I think, during the quarter in the Extension Scheme, we have done around INR 3,200 crores of sanction and out of that around INR 2,900 crores of disbursement. And on aggregate level, as of now, outstanding is around INR 8,500 crores.

Got it. So my other question is on recoveries to now after a lot of lumpy recoveries from NCLT, what is the outlook on recoveries for the next few quarters?

We can't expect lumpy recovery every quarter. So this time, the recovery has come from normal accounts. So Mr. Ashok Chandra, you want to add further?

Ma'am, in fact, we are expecting some good recovery to happen, maybe something can happen in this fourth quarter. But some good recoveries we are expecting '22, '23 through the NCLT process. And there are some [ tractions ] are happening outside NCLT also. I think that route also, we are expecting some good recovery in this quarter. NCLT is, of course, yes, it is -- not much recovery is happening through the NCLT process.

So I think we have touched about 13,000 crores in 9 months, and we are -- here last time we had indicated that our annual target for recovery is revised to INR 16,000 crores, and we are confident of reaching -- crossing that level for the full year. This will be like a record recovery comparatively. So this year, recovery has done well. One lumpy account, but mostly it's all smaller accounts.

I can just [indiscernible], I can give you one data which indicates what is the potential that is lying. Like we have 50 accounts, which is already approved by NCLT, and we are waiting for the implementation to happen. And through that itself, we are going to get around INR 2,500 crores. So we need to wait for yes, how long it's going to take for the implementation. But since it is already approved, so we are expecting some part in this quarter, around INR 900 crores we are expecting in this quarter. But going forward '22, '23, I think this entire amount will come.

Got it, sir. And what could be the write back on our government account? And would you have made any incremental provisions on SHRI or Future this quarter?

Like you may be mentioning about Air India. So like Air India we see the total recovery came, we had almost INR 500 crores of provision, which came back, which we used for some other provisioning. On SHRI, our provision remains at 65%. We didn't make any further provisions in this quarter because we think at this point of time, maybe that's the adequate provision. On the Future, without NPA as of 31st December. But even then on the total exposure, including investment book of Future, we have close to 30% provision. Not exact amount, but like that disclosures we'll make at the write off time but then at the right relevant time. But it is close to 30% provision on the total exposure of Future Group, we are [indiscernible] as of now, but they will be reflected in the standard as a provision.

Got it, sir. Sir and the exposure to Future would be [ 2,500 crores, 2,600 crores]?

Yes, total, including investment book, yes.

Got it, sir. And any thought of the Air India recovery came through NII? Or it was just provisioning reversal?

It's only provisioning reversal for us.

The next question is from the line of Nitin Aggarwal from Motilal Oswal Securities.

Sir, if you can provide some color on the corporate slippage this quarter as to what has driven there some -- any comments on granularity?

Yes, I think this is the data we always share. So our slippage of this quarter, INR 504 crores is from retail, INR 839 crores from agriculture, INR 874 crores from MSME and INR 1,194 crores is from the corporate book. So this is the information generally we share upfront so that people ask question on that. Since your question is on corporate side, we had one lumpy account, which belongs to a state government account, civil supply. But for that -- but like it is not very big. There's only one lumpy account.

Okay. And so we are expecting like what is the outlook on this account, sir?

This is actually the government account. So we are making efforts. So most probably, we may recover the money quickly because the status is different in different banks as of now. So because of certain rollover issues, actually, the account had to be classified as NPA, so but then technical issues. So we are expecting that it can be upgraded or recovered. We are making our efforts.

[indiscernible] post the results.

And secondly, sir, we have made a fair bit of detail this quarter because of the charged tax, it has been very high in this quarter as well as during the 9 months. So how do you see this tax rate moving going ahead?

No, no. Please repeat your question. I missed somewhere.

So I was referring to the tax rate, it has been [indiscernible] this quarter.

Actually, we are not paying any taxes. Actually, what is reflected there is reversal of deferred tax assets. Actually, that column is there so it comes there. Because we have accumulated losses, carryforward losses. Because of that, we have a [ set of ] available. So actually, we are not paying any taxes. What we are doing, we are using these quarters, where since we have good profitability, to like reverse the deferred tax assets. So we already brought our DTA book to about INR 12,000 crores now because we are planning to move to the new tax regime maybe by March 23, for which actually, at this point of time, we would have taken a INR 5,000 crore sit one that. So this year, we took a call that we will reverse part of that DTA and next year, we'll reverse the other part. So that by March 23, we're capable of moving to the new tax regime without [indiscernible]. And the advantage of DTA reversal because this DTA is reduced from the net worth also. So if you see our net worth is increasing because the DTA is coming down every quarter. So this time, we are more cushioned, so we have reversed about INR 1,500 crores of DTA. So the net worth has increased to that level. You can see that.

Okay. Okay, sir. And sir, lastly, how much is outstanding security receipts for us? And what sort of provisions are we carrying on them?

Outstanding security?

Security receipts, outstanding SRs.

SRs, I think yes, INR 2,400 crores, SRs?

INR 2,237 crores.

INR 2,237 crores and provisions?

Okay. Nitin, we'll come back to you on this.

The next question is from the line of Rakesh Kumar from Systematix Group.

Am I audible to you?

Yes. 66%. Yes. Just a minute, for earlier Nitin's question, we'll finish that. 66% is the provision on SR book. This is for Nitin. Yes, please go ahead.

Something similar question, sir, on this security receipts. So as per the loss of accounts like a couple of SRs are falling into [ RR 3 ] and below. So the possible recovery in those SR would be like how much? And what is the average tenure?

I think this data we'll share with you because right now, I don't have that much minute details because what we hold as of December '21 is INR 2,237 crores, for which we have a provision of INR 1,481 crores, about 66%. So on that low-rated cases, we have a higher provision. And I think last 1, 2 years, we have not issued any fresh SRs. These are the old ones. So we'll be able to give you some final data on this offline. Right now, I may not be carrying that data. That is not much, yes.

Okay. Any income that we have taken into account this quarter on the [indiscernible] sale this quarter?

No, not this quarter. No.

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

I have 2 questions, sir. First is on restructuring. So if I would -- what is the nonoverlapping MSME restructured, which is over and above OTR 1.0 and 1.2? I think last quarter, it was some INR 2,400 crores, INR 2,500 crores.

He is looking at worst like because they double comped otherwise. So they want to know what is the overlap.

Yes. So other than [ RF ] 1 and 2, the MSME restructuring is INR 1,932 crores. And [ RF ] 1, you might be having the number is INR 2,258 crores and RF 2 is INR 3,130 crores.

Right. So over and above R 1.0 and 1.2 -- 2.0 is INR 1,932 crores.

Yes.

Right. And sir, secondly, on your -- with ECLGS, I think Nitesh has mentioned that we -- but I just wanted to double check, if I look at our slides, we have given detail on ECLGS. And it looks like there is not too much of a change, right, from -- in the ECL 1, 2.0. So I mean it looks like that the number has not moved. Only by maybe INR 100 crores or something. And the [ UGECL ] 1 is INR 8,500 crore amount sanctioned. So amount sanctioned has not changed, right? So because I heard that there is some INR 3,200 crores kind of a sanction in this quarter. So I just wanted to double check that.

No. So I think on the slide, Extension Sanction amount is not mentioned. Old ECLGS 1 scheme only mentioned on the slide.

Okay. Understood. So even the outstanding would be INR 8,500 crores plus, the disbursement amount INR 2,900 crores, is that the right way to understand?

No, you are right in some sense, but we'll come back to you with the exact number by the end of this call.

Sure, sure, sir. And secondly, what is the family pension outstanding number or family pension liabilities. And I think -- is that being netted off from capital when we report CET1 and what is the amount?

No, it is not netted off as of now. Actually, last quarter, we had been -- made a rough estimate and made about INR 380 crores of provision, which we made a disclosure also. So -- but in March, we will estimate. And based on that, either we will provide or otherwise, it will be netted from the capital. But in March only the actual estimates will come. We'll take a call then in March.

Understood. Understood. And just on MTM, so you have given the -- I mean the duration -- but was there any MTM investment depreciation on pertaining to G-Sec in this quarter? And what would be your PV01 kind of certain threshold, if you have that number? [indiscernible].

This quarter, there was no mark-to-market.

And even at the current yield, we are MTM positive on the G-Sec. The PV01 for the G-Sec would be, I think, around INR 3 crores.

Okay. And this would be benchmarked to what rate, sir? I mean current yield, current rate or maybe slightly higher?

Which one? PV01? PV01 is at the current rate. But the MTM that I'm telling you today also it is positive, is obviously at the current rate.

Understood. Okay. And last thing, sir...

The duration of the portfolio is around 1.3. So we are well protected even in the current environment. Already yields have moved up. So even if they, let's say, there is an inch up of 20, 25 basis points, we are covered for that risk.

Right. And INR 3 crore PV01 would mean that every basis point, you may help to -- I mean, this could be a [indiscernible] delta.

Yes, yes, yes.

On AFS book, right. Not on entire HTM and everything.

Only AFS book. That I'm telling you for the G-sec portfolio. If I include the entire portfolio, it could be around INR 11 crores, INR 12 crores of the AFS.

Understood. And last thing, we used to disclose the SMA-1 plus -2 for maybe [indiscernible] data or maybe the all inclusive. If you have that number for this quarter, I mean, as of December?

Since you have done it last time you have to do it now.

That we have disclosed this time also. SMA INR 2 crores and above, but...

INR 5 crores.

INR 5 crores and above. But overall, SMA, if we look at SMA-2, so September, we had said 2.3, it has come down substantially for the quarter ended December, now it stands at 1.9.

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

[indiscernible] for the full book?

Yes, 1.9 is SMA-2 full book. Only on the INR 5 crores and above, which will be 0.4.

0.9.

0.4.

0.9 has come down to 0.4.

Just for clarity -- just for clarity, SMA-2 of INR 5 crores and above for September quarter was 0.9, which has come down to 0.4 this quarter. And if I look at the entire SMA-2 book, it was 2.3 for September quarter, which has come down to 1.9 for December '21.

Sir, my first question is what data are we going to take next year for the DTA divestment?

Actually -- we have actually about INR 12,000 crores as of now. We may take some more like reversal in March, depending on the cushion what we have. So we expect that another INR 5,000 crores, we may reverse next year because actually, up to 10% of net worth, there is an exemption for the DTA. So with that, we get an exemption up to roughly about INR 5,500 crores. So beyond that, we would like to reverse because that is reduced from the net worth.

So another additional INR 5,000 crores are we planning, right?

Yes. So depending on what we take in March, depending on the cushion available the remaining thing will be for the next year. But we may not -- actually, this is a call we have to take based on the cushion available. Seeing the credit cost has come down substantially, and the operating profits are very stable. So we are taking a call because it's as good as raising equity -- it is coming back to the net worth. So we are doing that. So maybe next 1 year also, we will have to continue to do this.

Okay. Got it. Got it. And sir, my second question is what loan book growth and credit costs are we looking for in FY '23?

Okay. See, if you look at the credit growth from September to December, these 3 months, it has been 5.5% growth. When you look at Y-o-Y [indiscernible] but these are quarters which were very disruptive. But September to December, growth is 5.5%. That gives us the confidence and the sanction pipeline that we'll be able to achieve 6% to 8% growth by March. Next year, it will be definitely a double-digit growth. So like 11% to 12% growth is what we are assuming at this point of time. But then again, like we need to see how the things play out, but 11% to 12% is the assumption with which we are going at this point of time. On the credit cost, this year, we had projected that we will be between 1.5% to 2%. I think we'll tend to be closer to 1.5% rather than 2%. Because I think in the first 9 months, it is around 1.7%, so we are hopefully like tend to be lower to -- closer to 1.5%. Ideal credit cost for next year will be something between 1% to 1.5%. So again, like since the provision coverage is quite high, unless there is some major slippages from the restructured book of MSME and all that and we -- like we are [ conventional watching ]. But then like otherwise, the traditional credit cost should be closer to 1%. But then 1% to 1.5% will be the range we are likely to project for next year.

Next question is from the line of Dixit Doshi from Whitestone Financial Advisors.

Thanks for the opportunity. My questions have been answered.

The next question is from the line of Mahrukh Adajania from Edelweiss.

Hello again, sir. Sir, I just wanted to check what would be your EBLR linked rate, loans?

EBLR is -- around 25% of the book is EBLR linked.

Okay. And then any more -- and that's the only benchmark -- that's only external benchmark link, right?

Under EBLR, we have repo rate linked also, we have [ BPLR ] linked also. Total book under EBLR is around 25%, 26%, and within which around 6% to 7% is even the [ BPLR ] linked.

The next question is from the line of Rakesh Kumar from Systematix Group.

Just a theoretical question, sir, that essentially in the previous quarter, we witnessed that short-term paper is moved much faster than longer-term papers. So like keeping the AFS book overall in a smaller size -- and with a higher duration, would it make sense to protect or it would be better still to just keep lower duration -- because we have seen much higher volatility in short-term papers?

This is the wisdom which treasury carries because we have seen these cycles earlier. So in their wisdom, they think that this is the right way and maybe we are proved right because in the kind of fluctuation what we have seen in the last 3, 4 months. In the earlier cycle, we already had lot of mark-to-market losses, in earlier cycle if you remember. This year, we are yet to have any mark-to-market losses. So I think there's a prudent call. So because the short-term fluctuations and all that may be there, but then it is very difficult to adjust our books to this kind of market phenomena. So we take a very proper call looking at a very longer-term view and the price fluctuations. So we are proved right till now.

Got it. Just one more rather a theoretical question, sir. So which T-Bill we are using. It is like 81 days, 364 days, which T-bill be use for...

3-month T-bill we're using.

3-month. And when we are using 3-months T-bill, so what kind of loans we are sanctioning or disbursing using that external benchmark.

These are very short-term loans. Basically, there is a demand from AAA rated borrowers for short-term loans, which are typically 30 days, 60 days kind of thing. And since the market rates are very low, they demand at a low price, and that's why this product is developed. So these are very short-term loans.

Got it, sir. And on the liability side, sir, like because some old gen bank, we have seen that they have priced their savings deposits on external benchmark also. So do we have any product or any plan that -- which would have some liability product or maybe deposit based on external benchmarks, just to keep the ALM more better priced?

On the savings deposit, particularly CASA, they are not that very sensitive to the pricing. Because there is more for convenience and operating part, actually, they keep it. So what we have seen, actually, we have fluctuated this price and seen, it doesn't effect much. So I think we are not using pricing as a tool because the CASA is growing at 11% as per the system. So we are okay with that at this point of time. So we are not getting into any external benchmark at this point of time.

[Operator Instructions] The next question is from the line of Ashok Ajmera from Ajcon Global Services.

Thank you for giving me the opportunity, though first time when I pressed the key my name was not recorded somewhere. Anyway, most of the questions have been answered. But sir, I have had a couple of observations and some numbers to be sought from you. You see this, our operating profit has been this quarter has come a little under pressure. And the treasury is already under pressure. And because of that, it is resulting in the lower profit. Even on the recovery front also in this quarter, the recovery from the return of account competitive are low, maybe because of a lumpy recovery in last quarter. But overall 9-month performance is, of course, very good and it needs to be congratulated. My question is, sir, that in order to meet the profitability targets or in order to make the bank profitable, since we are not going to have much treasury income profit now, I mean, the way we look at it. What actions are you taking towards the credit side? I mean, is to the NBFC, you have a co-lending space also available. You've got a lot of SMEs also where one can look at where you get a higher rate of interest. So what are your plans on that, sir?

Thank you, Ajmera ji. Many of the questions you yourself have answered because operating profit is definitely impacted by the treasury income. Because this quarter, we have given that breakup and treasury income is bound to go down because it -- like you know, the whole ecosystem, the interest rate is going up. So like I think we had that impact, because of that the operating profit has come down a bit, actually, because of the treasury income. And going forward also, I think the treasury income will be always under challenge. But then there will be some basic income, which we'll be making. It is not that it will become zero. So around the level what we have this quarter, maybe slightly less than that, but that kind of numbers, you can see every quarter because we'll always have something to sell and make money. So that is something, which we'll have. While one compensating thing we'll have will be the net interest income. So whatever we lose in treasury, we will definitely make up in interest income because the interest rate is moving up. Because today, there is a lot of money passed that short-term rates, either T-billing or other this thing at a much lower rates. So they will all get repriced now because the system interest rates are moving up. So our interest income is bound to move up. Added to that, the credit growth from September to December, you have already seen a good credit growth and already we have a good pipeline. So I'm very confident that net interest income will grow much faster and compensate for the treasury. The other side, which can compensate is other income. In other income, actually, we have write-off recoveries and the other fee-based incomes. So we are working on both the sides because my recovery department has totally digitized the processes now. I think we may be one of the banks which has end-to-end digitalization of all the NPA accounts and including the recovery actions. So this will play out and definitely the recovery from the normal NPA and also write-off accounts will go up substantially and will compensate. Fee-based income, we are working because there is a trade finance software, which we are implementing. Already the trial run is on in 4, 5 branches. So with that, actually, we are expecting that our other income, particularly on the import/export side will go up substantially because there are very few banks, which are having these trade finance module, which will give end-to-end solution to the customer. And we are quite ahead of the curve in implementing it. So that will help us. So like next 2, 3 years, our plan is that as the treasury income goes down, we should supplement it by interest income and also by other income. So already, the strategies are there. And hopefully, we should be able to compensate.

And then the NBFC space and co-lending space because some smaller banks also have tied up for a huge amount, and they are getting good results from that. So have you done anything of that kind? And what are the expectations for future for this, NBFC and through direct lending as well as for co-lending?

Yes. Co-lending, we have started already. We have booked -- like we were a bit late actually, last 2 months, we have built about INR 200 crores of book now. So hopefully, like by December, we can reach close to INR 1,000 crores. And next year, it will add substantially because we have 4, 5 tie-ups now, which are -- like out of that 2 are already working, other 3 in the process. So hopefully, this co-lending also will supplement on the retail and MSME side.

Sir, my question is, Mr. Ashok Chandra ji has replied just now some time back, there are good recoveries are expected from the NCLT and some other outside NCLT, some OTS settlements and other things. And he gave the figure of 50 accounts of INR 2,500 crores expected amount. But that is, again, out of the accrued account, but among the non-accrued good recoveries can be quantified. Can we get some amount on that also in addition to the INR 2,500 crores?

I am [indiscernible]. I will just give you some breakup. Like 50 account, I have already mentioned that is approved by NCLT. We have 66 accounts, which have been approved by COC. And it is filed in NCLT, for which we are waiting for the approval to come. And in that, we are expecting around INR 2,700 crores of recovery. Running ledger itself is -- principal outstanding is INR 6,522 crores. So this is one [indiscernible] is there. And in 155 accounts, the CIRP process is going on. So if you assume that '22, '23 the entire year, I think the time line, if you go by the NCLT, I think [indiscernible] in those [ 153 ] accounts also, some tractions should happen in '22, '23. So these are the projections for going forward.

Yes, my last question is, sir, on the digital space, the entire bank. Like you said that trade credits you are doing end-to-end recovery you are doing end-to-end, but many banks are at a very advanced stage of complete digitalization, like even of course, SBI is the lead bank, but we have seen even Bank of Baroda yesterday, like saying that they're almost -- what is that, bob World, they will introduce in a big way, and Canara Bank has also come a long way in this. So what -- where do we stand in the complete digitalization of the banking operations, sir?

We are not behind actually. That much I can assure you. Because actually, we are not like put out everything in -- like if you just go and use my mobile app, you'll know that our mobile app also is equally good like any other bank in today's date. There are so many products, and it is so smooth today. So we are continuingly upgrading on this. And see, we may be the one bank which has already digitized the loan processes in some products. Like today, if you -- Mudra loan up to INR 50,000, including documentation, we have digitized. It is right from applying for the loan process, sanction and documentation. So somebody is sitting even in a fishing boat can get the credit of INR 50,000 of Mudra loan through our bank. This is something we have built the capability in the last 3 months. It is working. We have not given much publicity to this because we want to expand it from INR 50,000 to INR 5 lakh gradually as we get more and more experienced because these kind of digital products we should not make a big [indiscernible] then say. So we are very conservative on that, but then products are already working. Similarly, on the personal loan side, if I have your mobile and if you are in the approved list, your personal loan can get credited over account and where the documentation is also digital. So that way, we are quite advanced in most of these products, but we can expand to other products quite quickly, but then we have not made much publicity for this because they're all in a test basis. And maybe by April, once we are confident that this can really work smoothly without hiccups, we will make the announcement. So we have not come big on those things. But I can be -- I can assure you that the digitalization process, which is going on in our bank is no less than any other bank.

Point well taken, sir. Just last parting question, sir. In the credit growth, I observed that metal and metal products growth was INR 7,500 crores in this quarter, which is quite substantial. So is it across the industry or 1 or 2 larger accounts in this metal and metal products of INR 7,500 crores, which you sanctioned in this. And with that, power, infra, you already have the infra, NBFC and food processing. Other than that, any other industry where you are finding green shoots, other than maybe 3, 4 industries where you have given a good amount of credit?

See what happens, this categorization of RBI, like it will include some steel or some other things actually -- so like somebody who is in the metal space will easily come in. So I'll not be able to give you that data, but we have done a lot of sanctions, but then INR 25,000 crores of sanction pipeline we already have. Out of that major chunk is on infra and NBFC. And we have already shared the kind of rating profile we have in NBFC. So like we have a very good rating profile of NBFC. So the expansion, particularly the sanction is more on infra and NBFC. We have other spaces also, but then these are the 2 major areas we have the sanction pipeline now.

That is A plus all this -- A, AA [indiscernible]

Yes, NBFC, we have shared one of the slides where we have given the rating profile of NBFC, AAA, AA and A, so that will give you an idea that what kind of exposure we are taking on NBFC. Again, we have given a break up to that, how much is government? How much is public sector? How much is backed by large corporates? And that category of NBFC also we have given.

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

My question is regarding what kind of GNPA and net NPA level we are targeting by FY '23 end? And my second question is how much we are going to transfer in NARCL? And is it expected to be done in the current quarter?

Okay. I think the gross NPA like our projections, we said that we will try to get closer to 10% by the end of this year itself. We are 11% plus now. Hopefully, if everything goes as per the projections, we will be slightly below 11% by March '22. That is the expectation. Similarly, on the net NPA side, for March '22, we want to be below 4%, and that was our target in the beginning of the year, and we are likely to hit that range. So by March '23, our aim is to reach closer to 2%, 2.5% kind of net NPA. So again, like the way the book is behaving now, looking at a very, very small stress book, particularly on the corporate side now. The slippages are likely to be very low next year. So suppose if we are able to keep the delinquency below 2% next year, somewhere around 1.5% to 2% and the credit cost...

[indiscernible]

Yes. So I think we should be able to reach a net NPA level between 2% to 2.5% by March '23.

Okay. And regarding NARCL?

NARCL, actually, now there are some revision in numbers which we initially shared because some of the accounts are in advanced stage of resolution, and we have taken them out. Now it is roughly estimated to be around INR 50,000 crores in the first lot about [indiscernible] In fact, we have exposure in 11 accounts amounting to something like INR 4,100 crores. So that will go in the first lot.

And it will happen this quarter.

Yes, yes, yes, yes.

The next question is from the line of Pranav Tendolkar from Rare Enterprises.

Why it is the processing charges are negative in spite of loan growth picking up?

Could you please repeat?

Yes, yes. Loan processing charges growth is Y-o-Y and Q-o-Q negative in spite of loan growth picking up. So this will be on the Slide #27.

Now we had a festival dhamaka going on, where we had waived processing charges. All your housing loans and all that. This was a scheme driven. So I think that would have gone down because of that. So most of the retail loans all the banks did that.

Right. Sir, also on the balance sheet, what is the optimum level of split or ratio of interest-bearing liabilities to interest yielding assets. So if I just take advances plus investments plus bank balances with bank as a percent of, say, borrowings and deposits, what is the scope here to improve? So on other way excess SLR, when we will get rid of excess at investments in low-yielding investments?

Yes. Actually, this was a burden on us because of the excess liquidity in the system. So we tried to correct it by growing slow on time deposits. Actually, you would have seen that we have corrected our growth on time deposit to a great extent. But then I think the C-D ratio as it goes up, I think this will be corrected. So the surplus investment -- at this point of time, the yield on that is not very bad compared to what we get on the advances also. So I think you should not go with the assumption that surplus investment is low yielding at this point of time. So maybe the scenario will change as interest rates will go up, then we will have a cushion to take this out and put it in credit. So I think the basic assumption that the investment book returns are lower than advances returns may not be correct at this point of time. Nitesh, you would like to supplement.

It initially has improved to 71.4...

Yes. So we don't have the exact number of interest being assets to liability ratio right now. But as our MD said, see, once the advances starts picking up, and since the interest rates are also moving up, therefore, bank will be in an advantageous position actually in terms of -- while the ratio may remain same, but there will be some substitution of lower-yielding investment towards the higher-yielding competitively advances. That advantage bank will be getting. At the same time, we have also given the data on one of the slides, that while interest rates move up, on the liability side, a good quantum of term deposits are actually non-callable term deposits, which will not be -- which will be price insensitive actually. So that will again come to the advantage of the balance sheet.

So just to put the exact number, advances as a percent of, say, interest bearing liability, that is deposits and borrowing, this is 62% whereas the mandated SLR and CRR is actually just, I think, around 18%, 19% and 3.5%, which is just 21%, 22%. So you could theoretically have 80% of advances?

Right.

Just 62%. So I'm saying that some simple measure like this could actually pull our yield or pull our NIM and ROA to a different level. So I would just like to know your opinion about it. Is there any theoretical limit to this? Like can 62% become 80% like advances?

62% will not become 80%. 62% can become towards 70% because you'll also see that some of the possibility of 62% to rise is capped because we have already raised the capital bonds. If there was a space in nonequity capital, then perhaps that was possible. But today, if you look at our Tire 2 ratio and AT1 ratio, both of them are close to the -- in fact higher than the regulatory minimum. So 62% can move to 70% definitely in the next 12 to 18 months depending on how the business grows.

Got it. Perfect. Thanks a lot and congratulations for a great set of [indiscernible] other numbers.

The next question is from the line of Sushil Choksey from Indus Equity.

Thank you for a stable performance. Sir, if any wish list which you have to take up in your tenure, what would that be?

Thank you, thank you, Sushil ji. Thank you for the compliment. The wish list is too long. Actually, maybe I would like to end with a double-digit credit growth like close my [indiscernible], that's one thing. Second thing is like maybe announcing to the outside world, all the digital initiatives we have taken in the last 2 years. So like by the time the team confirms everything is workable. We have done a lot of work on the digital side. So to showcase to the world that what Union Bank has issued on the digital side is something which I want to do before I leave. And I think these are the 2 things, which are in top of my agenda.

But credit growth is a function of the entire team of Union Bank. So your wish list is positive, but the entire bank has to function for that.

I know that. Let us see because maybe they will give me a parting gift.

Okay. Second is, as my connect with the bank over a period since listing, I have seen great leadership emerge out of the bank. As the same, I wish happens in future, what are the initiatives the bank is taking to throw in talent to the industry?

I think we have already proved that. Actually, the number of executive directors who have gone from our bank in the last 3 years is better than any other bank. So many EDs have gone from our bank in the 3 years. This is because -- we are working closely on the HR side. See, the leadership development program which we started with McKinsey in 2017, '18 has really helped people. Further to that, actually, we continue to work on our people, particularly identifying the talent, working on them. And it is not only on the technology side and knowledge side, it is basically, we are working on the personalities of the people like trying to identify their strengths and weaknesses and working on that. And this has really helped us. And of late, we have also tied up with ISB to train our DGM and GMs. So this is a program which is currently going on. So we are investing a lot to change the attitude of people, fine tune their approach towards issues and all that. So I think this is paying out. And maybe there is one more initiative since you raised this issue, we are one bank which has a program -- project called HR [indiscernible], which we have implemented along with BCG. So this is actually performance appraisal tool. So today, majority of my officers are actually having KRAs and their KRAs are linked to the MIS of the bank. And every month, they get a report card based on the actual performance, based on the data, what is [indiscernible] the system and what is available in the system, gives the KRAs which they've already accepted at the beginning of the year. So this will improve in substantial improvement because the monitoring has become real time for every officer. It is not like a typical public sector set up that people can get away with whatever performance. Here, it will be very, very objectively measured and it will be available for all the viewing authorities. And in addition to this, this tool also has transferred and posting tool. And also we have talent management tool, including the training. It captures all what kind of training they're going through. What kind of e-learning modules they have to crack. So they will be continuously updated on the issues because they will be forced to do certainly e-learning modules and all that. So we have implemented a lot of things on the HR side. And I'm really sure it is not only the top leadership, even at a lower level, a lot of [indiscernible] happening on the human resources side.

Sir, you've answered the question, which I'm asking now that digitization, we have taken all initiatives, and we are not far behind from peer banks. But to achieve the results which you are seeing right now in the bank with technology, do you see whether it will take 12 months, 24 months or beyond that, whether it is cross-selling, digitalization for MSME, product lending or co-lending? When do you see this would actually fructify where shareholder value creation would happen.

I think maximum of 12 months, most of the initiatives will be rolled out. Because in addition to the trade finance module, which we are implementing through Finastra. We also have onboarded Zoho for the CRM. Now cross-selling what you're talking about will be more of a customer relationship management. And Zoho is already onboarded. And I think maybe next 3 to 5 months, they will be fully equipped to roll it out. And similarly, on the digitization side, we have created a full-fledged digitization department. And Board has already approved a substantial budget for this investment. We have already floated many RFPs and we are also taking on contract lot of technology people under different verticals, like AI, analytics, on the digitalization side and all that. So already that recruitment process is on. We already have received a lot of applications. And in the next 1 month, many of them may be onboarded. It's not only we are taking the top leadership at GM level, we are also recruiting the talent at the second level. So that they will be also assisted with the right kind of people. They're all being taken on contract basis at market-related salaries. So this is how I'm strengthening my digitization department. With all these initiatives, I'm very sure in the next 1 year, most of these initiatives will be rolled out.

Best wishes to team Union for years to come and all the best to yourself also. And share some data on the question which I asked you in person.

Yes, thank you.

I would just like to update for the benefit of everyone. There was a first question on the ECLGS and then there was a subsequent on the clarification. If you look at Slide 12 of the presentation, the number of -- the details given about the sanctions from the various ECGL scheme from 1 to 4 is there, which comes to a total of around [ INR 10,600 crores ] of sanctions, which is marginally above what was reported in the September quarter. However, this slide does not actually reflect the new sanctions and disbursement done under the ECLGS 1 Extension, which was announced by the government sometime in September and October. So if we include ECLGS 1 to 4 and the 1 extension, the total sanctions will be around INR 13,800 crores. And the total disbursement under ECLGS 1 to 4 and extension included will be around INR 12,250 crores and the outstanding as on date for all the ECLGS, including extension, will be around INR 10,750 crores. I hope that clarifies for all.

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

My question is more on the bookkeeping...

Sorry to interrupt you, Mr. [indiscernible], the audio is breaking from your line, sir. please check.

Am I audible for now?

Yes.

My question is more on the bookkeeping front. So I can see there are a few line items [indiscernible] other income and provisions [indiscernible] on a year-on-year basis for 31st December 2020. So may I know the reason behind this?

No, which item are you referring to something in the presentation or the result -- slide number?

The BSC filing Page 2. So in the stand-alone numbers, other income number of 31st December 2020 as indicated.

BSC filing, do you have the copy. Okay. Okay. We'll come back to you on that.

No, what was the issue actually.

The new line items we have introduced. So he just wanted to know why...

Okay. BSC filing, you have any [indiscernible]. You'll be knowing.

Actually because of that [indiscernible] circular that has come under the presentation about [indiscernible] segment and others. That some reclassifications we have done [indiscernible]. That we have done this segment. So we have done last time also. That maybe what he is referring to.

Okay. That's what you have mentioned.

[indiscernible] is a regulatory compliance, basically some directions from RBI. So they have complied with that. I think the last quarter also it was there [indiscernible]. We'll verify and come back to you.

What is the note number, if you can specify? What is the serial number of the note 2 accounts?

[indiscernible] You have [indiscernible] provisions and other income number in the BSC filling [indiscernible].

Okay. So one reason could be that as per the new accounting reporting given to the RBI, on the investment side, whatever was the provision because of the depreciation in the investment book. Earlier, we were showing below the operating profit line. But as per the revised criteria, it has to be netted off from the other income, treasury profit itself. So that could be the reason for that mention in the note.

The next question is from the line of Anil Bang from AGFR Financials.

This is Anil Bang from Marshall Wace. A quick question, given everyone is worried about interest rate. You would have some offset in terms of pension liabilities, right? Because that liability would be getting repriced every quarter because of the change in the interest rate. What would be the size of that? And what would be the duration of that?

Actually, we do it by way of actual assessment in March. So right now, very difficult to predict in number but then we don't think that there'll be any substantial difference because we have already anticipated and made provisions whenever required. So in an upward interest rate cycle, generally, it doesn't go up to that extent. When the interest rate go down, the provisions increase. So I'm not seeing much increase in the pension provisions as of now. My CFO can [indiscernible].

That's what I was thinking that you should get a benefit because the interest rates are going up, right?

No, no, we don't reverse that way. We don't reverse that way. If there is a higher provision, we generally carry on with the provision. And if there's a lower provision, we bridge the gap.

And what would be the size of the total liability pool which you are carrying like...

For the full pension INR 20,000 crores?

Around INR 18,000 crores.

Around INR 18,000 crores, I think.

Okay. Got it. And second question...

Today, it is a separate trust, which manages it.

Got it. Got it. And in terms of your total loan book, what would be the percentage of floating loans right now? I mean it's all floating like MCLR or internal rate or T-bill rate, but floating in nature?

So MCLR plus EBLR, which are basically the floating in nature, is around 85%, 86% of the loan base.

Okay. Got it. Just this one last data point. I know there have been a lot of assessment on the tax side, but you mentioned that you would be adjusting most of it this year. When we look at next year, what should be your tax rate for the full year?

Next year also we'll have a very bit of this thing.

Next year, we have not yet decided whether we will be moving to the low tax regime. So [indiscernible] for next year.

Yes. But there will be certain advantages from the accumulated losses as well as the deferred tax rates. So one can assume around 20% of average tax rate for FY '23.

20%. Okay.

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

Thank you for all the questions. And as a practice, these questions help us to relook at our book and sometimes relook at our strategies also. Thank you for all the probing questions and analyzing the numbers. And wherever the data is not available, we will definitely try to share it. Most of the data we are for -- we are able to provide. And like we are definitely looking at a much positive year ahead. The growth is back and the bank balance sheet is continuously improving. So I'm very confident as we go on your bank will deliver better and better numbers. And thank you. Thank you for all the cooperation.

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