Yes Bank Limited (YESBANK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the YES Bank Q2 FY 2024 Results Conference Call. On the management panel, we have with us today Mr. Prashant Kumar, Managing Director and Chief Executive Officer, YES Bank; Mr. Niranjan Banodkar, Chief Financial Officer, YES Bank; Mr. Manish Jain, Country Head, Wholesale Banking, YES Bank; Mr. Pankaj Sharma, Chief Strategy and Transformation Officer, YES Bank; and Mr. Sunil Parnami, Head, Investor Relations. Mr. Prashant Kumar will now give you an overview of the results, which will be followed by a Q&A session. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Prashant Kumar. Thank you, and over to you, sir.

Thank you, and very good morning, and thanks to all of you for joining us today for YES Bank quarter 2 earnings call. Starting firstly with the overall macro. The operating environment continues to remain relatively bright with a number of high frequency indicators such as really robust manufacturing PMI at 57.5 and services PMI at 61. The retail auto sales number, like passenger vehicles, up 17.6% Y-o-Y. The 2-wheelers have grown by 22% Y-o-Y. Both GST and net direct collections, they are up 10% and 24%. Real estate sales, government CapEx till August, it was 46% Y-o-Y increase, together with softening of underlying inflationary pressures and monsoon season ending with near normal rains, all pointing to a sustained growth environment backed by active policy measures to support growth and contain the inflation going forward. System-wide credit growth continues to be robust around mid-teens levels. And deposit growth, on the other hand, remains a key focus. Against this backdrop, we continue to remain focused on driving growth with profitability at YES Bank through a number of our ongoing initiatives. Yield calibration and NIM improvement, the rightsizing and OpEx rationalization, leveraging branch as the key fulcrum of our business. And lastly, the productivity and the turnaround time improvement. Several green shoots of these initiatives have already started to reflect at our core franchise level, which is excluding the deposits in RIDF. And they are also evidenced through our product mix optimization within retail assets, acceleration of our SME and ELC franchise, expansion in our incremental loan spreads, sustained acceleration in our core fee growth, and lastly is slowing down of the quarter-on-quarter rise in our operating expenses. To further accelerate growth with profitability, we have set up a dedicated strategy and transformation office, which is headed by Mr. Pankaj Sharma, who has recently joined us. Last quarter, our retail advances crossed INR 1 lakh crore mark, and its share improved further to an all-time high of 48%. Strong movement -- disbursement momentum was maintained across all our asset classes. The growth in our SME and ELC businesses continue to drive our transaction banking flows and fees. On the deposit side, despite the challenging environment, our CASA NTB acquisition run rate further climbed up. We opened 3.91 lakh CASA accounts during the last quarter and maintained our CASA ratio at 29.4%, and incremental retail CASA ratio at 34.8% in quarter 2. And this is despite a very challenging interest rate environment. We garnered incremental deposits of nearly INR 15,000 crores. As YES Bank of today, we continued our strong emphasis on granular retail deposit franchise and strategically focused on acquiring affluent, mass affluent and MSME clients with strong traction across our YES FIRST, YES Premia and NRI segments. 93% of our savings accounts and 85% of the sole proprietorship current accounts have been opened digitally. As a future-ready bank, we made good strides in our digital banking capabilities. In August, we launched iris by YES Bank, a comprehensive mobile banking solution with more than 75 features for all banking needs of our retail customers. We also launched UPI payments through RuPay credit cards, enabled UPI interoperability on the RBI CBDC app and we became the first bank in the country to issue an ONDC Network Gift Card. Also during the last quarter, the bank launched a co-branded corporate credit card in partnership with Zaggle, collaborated with BriskPe to leverage from its capabilities in cross-border payments and offering the same to our SME clients. I would like to highlight that while the impact of many of these initiatives is already getting reflected positively at the core franchise level, however, at bank-wide level, the same sometimes gets clouded in the net-reported outcomes due to drag such a significant RIDF balances. To address this particular issue of large amount of deposits in the RIDF, the bank has formulated a comprehensive PSL strategy, which incorporates several organic and inorganic actions, including BC partnerships on lending, IBPC or PSLC purchase or acquisition, and we expect PSL drag to start reducing over the coming few quarters. Moreover, we have also made a very senior hiring with Mr. Manish Jain joining us as the Head of Wholesale Banking to drive our growth in our ELC and large corporate business. Recently, our Basel III Tier 2 bonds and infrastructure bonds have been upgraded to A from CRISIL, India Ratings and CARE. As regard near-term outlook, we believe that YES Bank is quite well placed to grow its loans and advances around mid-teens and liabilities, a tad faster and more granular. As regards margins, we believe that quarter 2 to be the end or near end of the margin compression. And going forward, we expect to see beginning of margin expansion from here. As regards to asset quality, our annualized gross slippage are expected to be around 2% to 2.5% of our loans and advances. And our credit cost guidance is maintained at around 50 basis points on the total assets. Also, we expect that the net carrying value of security receipts will significantly reduce by the end of the financial year. So to summarize, as a team, we remain excited about the immense opportunities around us, and at the same time, continue to work towards overcoming the challenges. The core franchise of YES Bank of today is gaining good momentum due to past interventions. This momentum is expected to be further fueled by our current structural interventions around PSL and business transformation, resulting in significant contribution to profitability for the bank and help us render our medium-term RoA target of 1%. Before opening the line for questions, I would like to take this opportunity to extend my best wishes to you and your families for the festive season. Thank you so much, and we are now open for your questions.

[Operator Instructions] We'll take the first question from the line of Srinivas, an individual investor.

I'd like to know whether the cost-to-income ratio is likely to come down in the near future because I have observed that like over the last few quarters, it has been increasing. And what is the guidance for this?

So Mr. Srinivas, thank you so much for joining us. Our cost to income remains between 70% to 75% over the last couple of years. And the main reason was that we were investing for the future, like opening of branches, investment in our technology and the digital capabilities. Now we have started seeing in terms of getting the benefits coming out from this investment. But I think we would continue to invest in the future like we are planning to open 150 branches during the current financial year. But as I was sharing with you that we are going through a business transformation and strategic change in our business direction as well as taking care of the PSL drag, which is almost like a 35 to 40 basis points, okay? So I think what we are going to see in the coming time, the cost-to-income ratio would start reducing. You must have noticed that this time, our operating expenditure quarter-on-quarter growth is 0.5%. We would have a very tight control on the operating expenses, and we will continue to work towards improving our interest income. And we are expecting now going forward our cost-to-income ratio would have started coming down.

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

Prashant, just a couple of questions. One on the NPL line. We continue to see the retail slippage is kind of on the higher side and the recovery and upgrades being on the lower side. There is also some initial signs that even the disbursements have started to slow down. If you could just kind of broadly kind of give your views as to how are you seeing the retail portfolio?

So Mahesh, on the retail portfolio, we started seeing some amount of stress in the very first quarter, okay? And then we immediately took some policy steps in terms of corrections regarding the underwriting as well as the onboarding of customer. Similarly, we have strengthened our collection teams. So I think what we are seeing, definitely, and this is also disclosed in our numbers. Today, 2/3 of our gross slippage is coming from the retail portfolio, and this kind of stress we have seen in both credit card as well as the unsecured loans. But I think all the corrective steps have already been taken, and we have started seeing the improvement on this. That is one part. Second, since now we are focusing on the profitability, some of the prime retail asset products, like the prime home loan or a new car loan, which, in the current times, would not make a great commercial sense for us to be very, very active in these fields. So we have started slowing down on some of those products where the yields are lower. But definitely, in terms of strengthening the policies around how we underwrite and onboard the retail customers have been strengthened and we have started seeing the positive results out of it. But I think this is an industry-wide phenomenon, which has also been flagged off by the regulators in terms of the retail portfolio. But I think we need to be cautious. Already, our retail growth has come down to 27%. And strategically, we would like to have a very tight control on the retail side and maybe by the year-end, as we would see the retail loan growth coming down further to around 25%.

Okay. And just to clarify this, when you say the unsecured pieces have contributed to most of the slippages? Or do you say that it's been a disproportionately large one? Because the exposure that we see in the presentation on the unsecured side is much smaller for the amount of slippages that we have.

No. So it is disproportionately higher on the unsecured and the credit card. It is not like the entire slippage is only coming from there.

Okay. Sir, the second question is on the cost side -- on the cost of funds. Given where we are on the cycle, if you could just kind of tell us how much more is left in terms of repricing there?

Niranjan, would you take this?

Yes, Mahesh, from a cost of funding perspective, Mahesh, we believe that we, at least last quarter, we did highlight that there was about pendency of 15, 20 basis points on TD repricing. We've actually absorbed bulk of that in this quarter. So while -- if I were to just break the whole deposit repricing into 2 parts, there might be some tendencies of repricing in the retail deposits because these are slightly long tenures. But on the wholesale, it entirely has been absorbed. In fact, on the margin, we are seeing some beneficial rate structures already playing out. So on the whole, we believe that deposits have been fully repriced. And while we've not spoken about it, but we are also now seeing good momentum also picking up in our current account and savings account. So as a mix on the margin, we should do incrementally better from here on. So you combine all these factors, we do believe our cost of funding has played out at its peak.

Okay. So your argument is that cost of funds has played through. Yields can potentially improve as you're moving out of the super prime segment, allowing you for the margin to expand. Is that directionally the argument that you're making?

That's right, Mahesh, absolutely. We do see -- in fact, there's a significant wedge already that has played out between incremental disbursement yield versus portfolio. That's been happening for some time. It's just that like Prashant mentioned right at the start, a lot of our reported numbers get clouded by some other factors, RIDF being one of the most dominant ones, to be honest. So on the margin, we'll keep seeing marginal improvement, but underlying incremental business is really focused on improving the margin and cost-to-income ratio. Mahesh, I just also wanted to clarify, wanted to add a couple of points on the retail delinquency. So if we actually look at this quarter, there was one change that also happened in our NPA recognition policy. So when we look at the retail portfolio, the financial overdues were not actually getting accrued till 30th June. So we've changed that policy where the financial overdues are also getting accrued and getting recon'ed for NPA recognition [ to the classical penal interest ]. And that has also contributed to some increase in the retail delinquency. I'm not taking away the point that we are cautious and we have made the necessary interventions, but this is also one of the reasons why the delinquency has been slightly higher.

Okay. You're saying that penal interest part of it is now getting added to the slippages line?

So what happens, Mahesh, is, so let's say there's a financial overdue, the interest on that was not getting factored as an accrual and, therefore, not getting factored as days past due for the NPA classification earlier. We've actually changed that policy from 1st of July, which means that if there are delays in EMIs on the retail portfolio, you are also accruing the interest on those delays and that is also triggering a 30 past -- a 90-day past overdue recognition.

Okay. I'll take this offline. But earlier the concept was that it will be an interest derecognition item, right? It's not a slippage item.

No, no. So Mahesh, let me clarify again. So let's say, you have a loan at 11% accrual coupon. And let's say there is a default in that particular loan, there is a penal interest that used to get levied on that overdue amount. That penal interest earlier was not getting accrued as income. It was getting recognized on cash recoverability, right? So there are cases where that penal interest could have been maybe even 60 days overdue, could have been 180 days overdue, but was not getting recognized as NPA. But with effect from 1st July, we've changed that policy where the financial overdue interest actually gets -- now becomes -- it goes through the overdue counter of 1-day, 2-day overdue. And gets -- if it is not paid for 90 days, actually, we will have an NPA classification for that particular account. So that has also added to the slippages.

[Operator Instructions] We'll take the next question from the line of Chintan Shah from ICICI Securities.

Sir, firstly, so my question is on the corporate. So corporate growth has been kind of slow. It has been degrowing. So any -- I mean, what would be your strategy on the corporate growth going -- since we are also slowing -- kind of slowing down a bit on the retail? And also are we getting cautious or getting -- or slowing on the corporate? Or what is the plan there?

Chintan, before I would ask Manish to give you color in terms of our strategy for the corporate side. Currently, if you see our mix, it's 48% retail, okay? Another, say, 15% on the MSME. And ELC, which is the emerging large corporate, is 14%. And the large corporate has come down. I think overall balance sheet construct, we would like to maintain this ratio where retail would be around 50%, retail and MSME not going beyond 65%, and the ELC and the large corporate would be contributing to the remaining 35%. But it's not like we are not disbursing. We have made disbursement in the past also, but there have been some large repayments where we were not willing to match on the pricing side. And at the same time, there were certain exposure where strategically, we wanted to bring down those exposures. So that has happened. And that is also one of the reasons why the overall book on the large corporate has come down. But Manish, would you please like to share what is our strategy?

Thanks, Prashant. So clearly, if you see a lot of reshaping has happened over the last few years. Our focus is to build a very granular book, and that is what we will keep doing in future as well. Our strategy will be to keep reshaping to improve returns, build scale and positioning in the corporate banking segment where we will the grow client base and also cross-sell to our existing clients. There will be a high focus on returns as well as risk management. So with robust risk management, adding new clients and cross-selling to existing clients, we will start increasing the income while we continue to reshape.

Sure, sir. And sir, one more thing. So sir, in terms of the PPOP. So our PPOP currently is like kind of static around INR 800 crores odd. So means, what are the potential use? I think you also spoke on the margins. We are likely to improve somewhat from here and then cost-to-income is expected to decline. So any guidance you would like to give us on what could be the PPOP to assets in the medium term?

So Chintan, PPOP to assets, I think we've kind of stayed at about 90 basis points, that's 1% is the range in which we have been moving. And just to quickly recap. While at a core level we continue to work on improving the margins predominantly on account of RIDF, there is a drag of almost upwards of 40 basis points on our net interest margin side. So there are 3 things and -- sorry, before that what we've also faced in the last 3 quarters is the fact that deposit repricing has also played out, coupled with pressure on the overall CASA mix, right? So you combine all these factors, cost of funding has been put under challenge and that has meant that the PPOP to assets has been under pressure. But if you actually break this down now, if you look at these 2 assets, we've been actually doing quite well in improving our fees to assets to about 1.3% from 0.9%, now about 18 months back. And again, within that, the split is quite strong coming across various retail fee lines. We're also seeing good momentum coming on our fee line item from corporate. So trade, FX, gross sales is also playing out quite nicely. So fees is looking quite strong. I think for us, we do believe that we will continue to see expansion in the fee line item. Cost to assets, we are currently at about 2.6%. We've said that there might be some increase in the near term in the cost to assets only to accommodate PSLC purchases. We've done some this quarter, but we've been quite efficient to manage that by reducing some of our other costs or being optimal about other costs. But I think 2.6% PSLC is kind of play out, we might get into a 2.65%, 2.7% range on the outside. If the PSLC's come in earlier than some of our cost initiatives that kick in. But really, the work and where we see the maximum expansion in net interest margin. So we're currently operating at about 2.3%. We are already at the bottom. Over the medium term, again, it's a 2 to 3 year at a minimum place that we're kind of looking at. We do believe that we should operate at 3% plus, and we listed out our reasons and drivers for that. We don't see a reason why PPOP to assets should not start working in the range of 2% plus in the medium term. So that's really our medium-term outlook. And net interest margins on the incremental basis is already visible. But as I said, it's the RIDF and some of the degrowth in the corporate businesses has resulted that we are not able to expect that on the balance sheet in that way. We've also set up -- Prashant mentioned right at the start, he's mentioned a transformation office to make sure that all these execution initiatives that we're talking about are looked at in priority and we're able to deliver the outcomes in a timely manner.

Sure. This is very helpful. Just one last question for now. Just one thing on the current quarter, for the credit cost, it seems a little elevated. I don't know if I've missed any comments, if you have given any comments on why the credit costs have been a bit higher. If you could just throw some light on that, yes.

So simply, PCR credit cost, I mean, there is a continuous endeavor of the bank to -- and we've said this earlier as well. We were a bank that was sitting on almost 6% NNPAs and security receipts as an overall pool. Actually, that was not too long ago, it was almost in March 2021. We were almost at 6% NNPA to SR. Our continuous endeavor has been to make sure that, that pool actually comes below 1%, right? And it is a function of two things. One, the continuous momentum that we've seen in our resolutions and recoveries. So every quarter, we see recoveries and resolutions coming through. What we do as a combination, whenever we see the resolutions and recoveries, we should make sure that our provisioning coverage on the residual book is increasing such that the residual carrying value of this pool keeps reducing. So if you look at last quarter, we were at 2.4% as security receipts to NNPA. That ratio has now come down by 40 basis points, both as a function of recoveries, resolutions we've seen as well as some of the provisioning that we've taken. And the bulk of that provision is also a reflection of our intent to continue to work towards improving our NPA PCR. So this quarter, if you see 48%, actually has been increased to 56%, right? So both are -- I mean, these are objectives at which we continue to play. And you would appreciate that given that we were dealing with a stock of 2.4% SR plus NNPA, many a times, aging-related provisioning -- the timing mismatch between aging-related provisioning requirement and the recoveries is not always a very smooth or a linear curve, right? So it's kind of -- it's always prudent from our standpoint to use this to keep reducing the drag. And as Prashant said right at the start, our expectation is, by the end of this fiscal year, a bulk of the security receipt carrying value should be off our balance sheet. I'm not saying it will be 0. But clearly, as a pool of NNPA and SR, our endeavor is to see how it can be as close to 1% as possible.

Sure, sir. And sir, just one last thing, you are kind to follow up on this. So PCR now currently is around 56%. So like are we now sticking comfortable with this? Or would we like to further range this up, since already, we plan to take it further from here on, then that could also put some pressure on the credit cost?

No, I think by the year-end, we would like to definitely improve the PCR. And I think around, say, 70% to 75% is something which we would like to have.

Sure, sir. But the credit cost guidance remains intact, that's what you'll do?

Yes. Yes.

We'll take the next question from the line of Srinivas, an individual investor.

Sir, this JC Flowers segment of debt happened almost some 10 months ago. So having observed the recovery track record for the last 10 months, is it better off as compared to what YES Bank was doing earlier? YES Bank itself was recovering more than INR 5,000 crores earlier on its own for the last 2 years or 3 years. So JC Flowers, has it contributed its part? And have we seen any bigger resolutions, I mean, big-ticket resolutions under the JC Flowers' regime?

So Srinivas, as of now, if you see last 3 years, bank was able to recover more than INR 5,000 crores, okay? During the current year also, we are in the same line. I think if you see like every quarter, we are able to make the recoveries of more than INR 1,200 crores, including the recoveries made by the JCF ARC. So I think as of now, we are seeing the kind of recovery which we were expecting from the pool of the NPAs. Almost similar recoveries are coming from the JCF. Some of the resolutions which they are doing, I think the value out of those resolution would start flowing from the next financial year.

The next question is from the line of Namit Arora from Indgrowth Capital.

My question to Prashant is that historically, the bank was an early mover in terms of technology and related initiatives. If you could please give us an update on what has been the continued progress on the front? And how you are viewing it into your strategy because this could be a competitive differentiator for the bank?

Namit, like what you rightly said that bank was always the frontrunner in terms of both technology as well as the digital side. And last 3 years, despite the challenges, we have not stopped investing on both technology and the digital capabilities. And today, we are in a situation where like if you see 3 years back, the UPI transactions which were just like 2 billion to 3 billion transaction a month has already reached 10 billion transactions. And we continue to retain our market share of around 38% on the UPI side. So it means currently, we are handling almost 3.5 billion transaction per month, and this market share would continue to remain intact. That is only one part. Second, in terms of, if you see, we were the first group of banks which were identified by the regulator for participation in the CBDC. So that also demonstrate in terms of the confidence in the bank about the digital capabilities. And we started with the wholesale CBDC and then subsequently on the retail CBDC also. In the month of August, we also launched our new mobile app, iris, which is having facility for customers more than 75 features. So I think this is something which continue to remain very strong for us. And only because of these capabilities, today, we are a preferred banker for the new-age businesses. And that is also giving us a very good -- the float fund, which is contributing as a current account to our total liability. So today, we see the digital and the IT capabilities is helping us in getting new age businesses, contributing to current account, contributing to the fee income. And if you see like on the large corporate, the transaction banking, transaction banking continues to remain very strong. So even the corporates where we are not the large participant on their asset side, their flows -- transaction flows are happening through the bank. So I think we continue to remain focused on the technology and the digital capabilities and that would be our key driver.

[Operator Instructions] We'll take the next question from the line of Jai Mundhra from ICICI Securities.

Sir, first, on your PSLC stock, right? So as per annual report, we had around INR 300 billion of cash deposit. How is that moving? And what is the way out? I mean as long as this remains a significant proportion of the balance sheet, your margin will remain under pressure. So what is the way out of this? And what is the stock right now? And just to understand how are we moving directionally.

So on the balances in our RIDF, so currently, we have INR 32,000 crores, okay? There is a possibility that there would be some more demand coming in the second half year of the bank. And the INR 32,000 crores would inch towards around INR 40,000 crores or INR 41,000 crores. But like I was sharing in the beginning, we have taken certain strategic calls in terms of how, going forward, there should not be any further demand from the RIDF side. So I think we are working on the multiple strategies. One of the strategy as of now in our strategy is more in terms of what we can do organically through our branch network, through the BC channels, okay? Also on lending to the microfinance NBFC and also to the NBFCs who deal with certain -- these kind of products. But simultaneously, we are also looking like I shared last quarter also. We are also looking for some inorganic acquisitions, which can take care of the RIDF balances. So I think with these kind of initiatives, we are quite confident. But next year onwards, we will not see any further demand coming because every year, it is always for the past year. And we would start seeing the reduction in our balances in RIDF from the FY '26 onwards. So currently, our RIDF balances are 9%. And to our total assets, I think we would like to take it to around, say, 3%, but it will take some time, okay? It was always -- there is a maturity of our RIDF. But fundamentally, what we are looking at that we don't add anything to the RIDF from FY '26.

So just to understand just correct, sir, so maybe in the second half, the balances may go up. But from FY '25 onwards, at least the percentage share should start declining or the decline will start from FY '26?

Decline would start from FY '26. FY '25, we would be -- because it's always the average balances for the fourth quarter. So I think the average for FY '25 and FY '24 would be almost at the same time.

And lastly, sir, on security receipts, right, so we are doing INR 500 crores, INR 600 crores per quarter for redemption. When do we see that the redemption start accreting to P&L? I mean would you believe that -- I mean, what is the time line for all these SRs to get liquidated and the recovery starts adding to P&L? When would be that time? What would be the time line for that?

So there are two things around this. If you see even in the current quarter, the redemption of the SR has resulted into a P&L contribution, something around, say, INR 300 crores. Niranjan can give you the exact figure. So even in the first quarter and the second quarter, whatever redemptions has happened in the security receipt, there has been an accretion on the P&L side also. But still, if you see the current book on the security receipt is 1.1%. We are expecting if it is not 0, but I think it would come down very, very meaningfully by the end of the current financial year. And next year onwards, the entire recoveries would add to our profit. So the current recoveries would be used in terms of making some more provisions. It would start coming down. But I think in the next quarter also, there will be a contribution on the P&L. But next year onwards, the entire recoveries from this pool would add back to our profitability.

Right. And just a technical question, sir. So sir, I think -- I thought our philosophy or the requirement was that all the proceeds from security receipts would be utilized toward increasing the provisioning coverage on the other pool. So how is it impacting P&L of, whatever, INR 300 crores this quarter?

So if you look at -- Jai, if you look at our P&L and in fact it is part of the investors presentation as well, if you look at our provision for investment, actually you would have seen a release of about INR 290 crores, right? That's predominantly coming from, like Prashant mentioned, the security receipt redemptions, which have resulted into a provision write-back. And what that has been used effectively for -- through P&L flow is for -- up in the provision for nonperforming advances. And you're seeing the consequence of that, which is the PCR has improved from 48% to 56%. So again, when we look at the security receipts, there are 2 kinds of redemptions we see: redemptions which resulted into a P&L write-back; and redemptions could also mean that there is a reduction in the carrying value. So we've had about INR 580 crores of redemptions, of which about INR 315 crores has been P&L write-back. And there is some incremental provision that we had to take on the remaining stuff, which is about INR 30-odd crores, resulting into about INR 280-odd crores of net write-back. And the balance, which is INR 580 crores, which was redemption -- provision write-back was about INR 308 crores, the balance is that we've seen a reduction in the carrying value of SR. That's how the flow happens.

The next question is from the line of Saurabh Kumar from JPMorgan.

Just on Page 11 of your presentation. Sir, this government banking deposits, is it like -- is there a one-off there or -- which would you roll off? Or this is as you would expect this to sustain that INR 20-odd crores, which you have?

This is quite sustainable, and this is quite granular. So like if you see after reconstruction of the bank, the bank was not able to get the government deposits. But what we have done, the entire government banking is working very closely with the branch banking, and we are going very deep into the government business. And the deposits which are coming to us, they are very, very granular. So not only these are sustainable, but I think in the coming times, we would see a good growth on the government deposits, but the focus would be continuously on the granular and without offering a higher rate of interest.

Got it, sir. And sir, of this INR 234,000 crores, how much will be the branch deposit? I know retail is INR 120,000 crores. But just branch-oriented, how much will be the branch contribution? Or should I just take out this [indiscernible] wholesale?

Saurabh, all of that, because the way our model works is we do render all the deposits through the branches.

Okay. Entire thing is branches.

Yes.

Okay. Got it. Got it. And just one final question, sir. Just I know you addressed this on the slippage piece. But the -- just the retail slippage, is this BAU? We should think about this next slippage as a BAU? Or how should we think about the retail to slippages vis-a-vis?

No, I think the question is in terms of going forward? I think going forward on the net slippage side, okay, we'll start seeing improvement. But I think we are still one quarter away, I would be saying. I think because whatever corrective actions we have taken, it would start giving result in the December quarter. But I think after 31st December, we would start seeing reduction of the net slippage on the retail side also.

The next question is from the line of Srinivas, an individual investor.

Sir, if you look at the decrease in the net interest margin, what are the various factors to which we can attribute this phenomenon? Is it because YES Bank is still in the process of requiring some microfinance business which can contribute in terms of margin, higher margins? Or it has already been done? Apart from the other factors like higher cost of deposits and lower yielding assets like the retail side and all?

So Mr. Srinivas, fundamentally, I think we have -- also like Niranjan was explaining, there was a repricing of the existing deposits, okay, which has now been -- it has taken place in the quarter 2, okay? So our cost of deposits, because of the repricing, has gone up. That was one thing. Second, there was no further improvement on the yield side, okay, where one of factors is definitely the RIDF and other is also in terms of the market pricing. But the repricing on the deposit has already been completed now. And going forward, we are going to see the improvements on the NIMs because there would not be any further cost -- pressure on the cost of deposits. And we have also started already seeing the improvement in our interest yields on the loan products, which we are offering in the market. It has no connection with any inorganic acquisition of the MFI kind of thing because it has not happened so far.

So how far are we from that like? I mean when the last quarter's con call, as I understood, the bank was in the process of acquiring some microfinance business. So how far are we from that?

So we are still exploring that, okay? Once like anything which would be certified, I think we will disclose to the market, but we are still in the process.

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Prashant Kumar for closing comments. Over to you, sir.

Yes. Thank you so much for joining us so early in the morning and showing interest for our performance in the quarter 2. Again, wish you and your family a very happy festive season. Thank you.

Thank you, members of the management. This brings the conference call to an end. On behalf of YES Bank, we thank you all for joining us, and you may now disconnect your lines. Thank you.

Thank you.