HDFC Bank - Q1 24/25

Transcript

Operator (participant)

Ladies and gentlemen, good day, and welcome to HDFC Bank Limited Q1 FY 2025 earnings conference call on the financial results presented by the management of HDFC Bank. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the brief commentary by the management. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Srinivasan Vaidyanathan, Chief Financial Officer, HDFC Bank. Thank you, and over to you, sir.

Srinivasan Vaidyanathan (CFO)

Okay, thank you, Neeraj. Good evening, and a warm welcome to all the participants. We have Sasidhar Jagdishan, our MD and CEO, with us today. Without much ado, I'll hand it off to him to get the meeting started, and then we'll take it from there. Sashi, ove r to you.

Sashidhar Jagdishan (Managing Director and CEO)

Thank you, Srini, and good evening to all of you. Yes, sort of engaging with you all after a quarter, just wanted to recap some of the guidance that we have been giving in the past couple of quarters. One of the things that we have been mentioning is that we would like to desist from providing any guidance of any form, as it is providing a distraction from our long-term objectives. So we would like to stay focused. This is a period of transition, post-merger, and we ought to stay focused and ensure stability of some of the key metrics and achieve some of the objectives in the medium to long term.

I know that the most important part of our strategy is deposits, and are we happy with the kind of numbers that has come about? Not really. It has fallen short of our expectations, but frankly, if you see this, this is not something new. There is a seasonality in the system, and the bank has been tracking this seasonality, being a large player in the system. Our net accretion to deposits normally is in the range that is similar to what is there in the system. But this time around, obviously, we were a little bit surprised on the period-end numbers because of some unexpected flows in the current accounts, which is more than what we had anticipated.

Of course, I would like to recap to all of you all that we did sort of give you a heads-up during the earnings call after the Q4, that we did sort of see lot more unanticipated transitory flows in the current account, if you recall, and that is what has gone out. A combination of this larger outflow, because we do have relatively higher share of the market in current account, and so as the balance sheet has been growing, the velocity of inflows and outflows have also been increasing in current accounts, which is the nature of the beast, because for us, a high economic activity in the current accounts is a sign of good is how we will achieve more larger transactional balances in the current account balances.

But on a period-end, You will see this kind of a high velocity. So a combination of outflows in current accounts and a combination of It's $160 billion... Uh, sorry, not dollar, INR 160 billion of the HDFC non-retail deposits which ran down, has given us a very tepid kind of a net accretion on a period-end basis. Now, if you have noticed, you may be surprised that we have started to even disclose in one of the decks in our investor decks, which probably you may have access to, on average deposits as well.

You may be wondering, why have we done that? And let me be honest as to why we've done it. It's not something to tell you that, okay, this is not so, the period-end is not good, so try and show something which is very good. Not really. This is messaging not just for the investor fraternity, but also to my people at large, because we've realized that we want our ground-level teams and in our large distribution footprint, to focus on basics on the ground level on a day-to-day basis. Focusing on certain period-end numbers is leading to some unintended performance-related pressures, which we want to avoid, and that is the reason why we want to converge, align or converge or align our internal and external metrics so that there is no unintended pressures that build up in the ecosystem.

If you've seen the numbers and once you digest the average numbers on a quarterly basis, which we have given from quarter one FY 2022 to quarter one of FY 2025, that will give you a reasonable amount of comfort that there is steady build up a secular trend upward trend in the momentum. There is some seasonality in some of the quarters, but that's fine. But largely, the secular trend is visible, and that's what we want to focus on. So, much as all of us are used to looking at the period in numbers, Iooking at a longer trend on the averages seems to suggest that the resiliency of the organization is intact and to continue to be so even in the future.

I have mentioned in the annual report recently, which is released to the world at large, that we will be growing slower in our advances as against our deposit growth. This is not something new. If you've seen our track record over a long period of time, this is something that has been there.

Probably, in the last couple of external forums or the public forums that we have come on, we did sort of focus, affirm that our focus is going to be on profitable growth and not just on growth. And yes, in the bargain, it is in our interest to bring down the loan deposit ratios much faster than what one would have anticipated. It is in our interest, and I'll explain that to you probably when one of you asks the questions. If you see the track record right from the time we merged on first July 2023, there was a starting pro forma financial, the day one financial, as one calls it, and probably this is also there and visible to each one of you in there today.

If you look at some of the key metrics, whether it's the NIMS, whether it is the CASA ratios, whether it is the cost to income, whether it's the GNPA, from that starting point to 30 June 2025, it's been range bound, rather stable and range bound. For example, the NIMS have been in the range of 3.4-3.5, with a increasing bias. The CASA ratio has been in the range of 36%38%. The cost to income has been in the range of 40 to41, with a decreasing bias. The GNPA has been in the range of 1.2 to 1.4, and if you exclude the seasonality of Agri, in fact, it's been properly on a declining trend.

The ROAs have been in the region of 1.9 to 2.1. It may be this is not a new number, new metric that we have encountered. We have seen for a long period of time this number of 1.9 in the pre-merger levels as well. So what does it mean? The fact that we've maintained stability means that the inherent resilience of both the organizations is intact. So it's a period despite the kind of changed environment in terms of liquidity, in terms of competitive intensity, in terms of our so-called urge to slow down our loans so that we can get down the CD ratio, the loan deposit ratio, faster than what we had anticipated.

Despite that,We are maintaining stability in some of the key metrics. That's, that's something that I just wanted to reiterate and want you to sort of appreciate. I guess these were some of the things that we wanted to mention as a top of the mind recall. We'll be happy to sort of take questions from any one of you. Over to you.

Srinivasan Vaidyanathan (CFO)

Thank you, Sashi, for the opening remarks. Nirav, with that, we can open it up for questions. I do want to draw all the participants' attention that, if you do need to refer to your deck, It's on the website. You can refer to it if you need to at any time. Nirav, you can please prepare the queue and open it up for questions.

Operator (participant)

Thank you very much. [Operator's Instructions]. The first question is from the line of Mahrukh Adajania from Nuvama Wealth Management. Please go ahead.

Mahrukh Adajania (Senior Equity Research Analyst)

Hi. Sashi, my first question is on LDR. So, when you say you wanted to, or possibly LDRs could come down faster than anticipated, all the large private banks, of course, one is at above 90, but most of them are on a average of 83%-87%. So is that kind of an LDR you are hinting at? And over what time frame? Because that really sets things very clear, right? In terms of what loan growth to anticipate, and also in terms of loan growth. Right now, if you see, other than CVs, most of retail and most other segments have grown below 2% quarter-over-quarter.

I do understand the Q1 seasonality, but if you wish to have focus on profitability over growth, and growth remains kind of weakish relative to your historical trends, would it be very easy to then regain market share once you think your balance sheet has course corrected, right? Because you're possibly giving up share. You can do much better on growth, but obviously we know the constraints on deposits. So that's my question on HDFC Bank, and if you could explain the high provisioning on HDB Financials as well?

Sashidhar Jagdishan (Managing Director and CEO)

Thank you, Mahrukh. Number one is, we don't have, or rather, if at all you're expecting that, is there a prescription from anybody, including the regulator, whether there is a prescription for a loan deposit ratio? Not at all. As I mentioned, it is in our interest to have a glide path. Two, you, you're absolutely right. It's, theoretically, I would love to do this in one year, but is it, is it feasible? Is it practical when you have an objective of a profitable growth? Absolutely. You're absolutely right that it's not something that I can do, where I can just drop it in one go, and then, be done with this, et cetera. It's not practical. Now, let's go segment by segment. We have a machinery. We have to... There is a lot of buoyancy there.

Whether this much better, that, funding or providing financing or loans to customers, whether it's the retail segment, whether it is the MSME segment, whether it is the corporate segment, is actually a feeder for us in terms of the primary banking and hence liabilities as well. There is an optimal level that you can work with. You cannot drop the level. So therefore, This is a play that we have to manage very gingerly. There is a... The reality is, there is a tight liquidity environment. There is, as I mentioned to you, and if you really look at the averages, the UP period numbers are not a reflection of what is the underlying resiliency, in fact, of deposits.

In reality, the deposit momentum, when you look at it, maybe at some point in time, Srini will explain that. The gross inflows across the multiple products and deposits have actually been increasing. It's a very healthy trend. And as I mentioned to you, one of the things that we do not have some of the controls is the velocity of the flows in the current accounts, and which is what has created this kind of, a little bit of. It unsettles you, it unsettles us in terms of a number on a particular date. It has never happened before. Of course, there may be some instances where it has happened before, but it's all of you, rightfully so, are seeing a little bit of a disappointment there.

But when you look at the averages, which I'm sure you will compute, it's rather pretty steady over a longish period of time. So it's not that. And even on the advances side, what has happened in quarter one is not a reflection of what we plan to do. This is a kind of an adjustment that's happened. It's a matter of time that you would see in the next three quarters what we do. We will be, our relationship, since you spoke about market share, you spoke about relationships, we are very clear we have one of the best relationships on the corporate side. Even though you are seeing a little bit of a negative growth. We have high amounts of already great penetration levels with the best set of corporates in the country.

What we are losing is transactional business consciously, because it's not meeting our pricing thresholds. We are all right to do so because we maybe this is the best time for us to adjust our mix, which is what you are seeing a bit of a flavor in this particular quarter. We want to continue this kind of a mix change over a longer period of time. Of course, it cannot be forever. There will be during the period of adjustment, we may have to do it for some time before it sort of normalizes. But having said that, I don't have a specific number because then It will sort of bring in a fair amount of pressure on the system.

We have an internal benchmarks for ourselves as to what we need to do. As I said, neither have we received any regulatory prescription, but at the same time, the thought processes, can we, to the best of our ability, try and get this done as quickly as possible and still maintain the objectives of a profitable growth? All I can say is that it's best that you see what we do in the next three or four quarters. Yes, when I relate these numbers and what we are planning, I'm relating it to what we were probably thinking of at the time of announcement of the merger.

Obviously, things have changed, and we realize that maybe, as you alluded to a lot of other, there has been, literature which has been, spelled out in the monetary policy literature on, credit-deposit ratio. So we are very cognizant of the risks that are there in the system, and instead of being nudged on that, we want to do it ourselves because it makes the most economic sense to bring it as quickly as possible.

Srinivasan Vaidyanathan (CFO)

Two more things that you alluded to that I can describe is that the activity at that, this various distribution points, we did add 2.2 million new customer relationships in the quarter, so last quarter was very similar. So from that sense, the pace at which the ground teams are operating is quite strong. So we do get the new account value. It is those existing customers or the transactional balances in the current account that I've seen that flow. Now, coming to the other aspect that Sashi alluded to in terms of the inflows, we measure inflows monthly to see what are the credits coming into various customers' accounts at individual, aggregate, branch level, and so on. When we look at the inflows that come and compare those inflows that are coming to the similar time period last year, the monthly inflows are up over 20%.

So we do see enormous traction happening in the account, which means the credit flows that are coming, cash that is coming in, so when we say cash, I mean funds that are coming in, is of a good order. It gets deployed in various means, but again, this is across Current Account, Savings Accounts, across all of these and the salary. So when I say savings, that include the Salary Account that we have, is gaining good traction from the inflows that come at aggregate level.

Mahrukh Adajania (Senior Equity Research Analyst)

Thank you.

Srinivasan Vaidyanathan (CFO)

One other point you had was about the HDB IPO. I do want to.

Sashidhar Jagdishan (Managing Director and CEO)

HDB credit cost.

Srinivasan Vaidyanathan (CFO)

HDB credit cost. Okay. HDB credit cost, the GNPA ratio remained flat at 1.9. The stage 3 remained flat. The credit costs have been higher because seasonally, again, various reasons you can attribute to, various reaching ability during this quarter has been hampered a bit due to, they are far more distributed into the hinterlands than we are. The heatwave issue from the electoral preoccupation and various things. So there is a seasonality that was there. So the early flows have caused that, and the provisions to be higher, but the NPA has remained stable. So the forward flow into that NPA bucket is limited, but early they have to do more on that. That's where that is. Thank you.

Mahrukh Adajania (Senior Equity Research Analyst)

Okay, thanks a lot. Thank you.

Operator (participant)

Thank you very much. Next question is from the line of Chintan Joshi from Autonomous. Please go ahead.

Chintan Joshi (Senior Analyst)

Thank you. So, if I can start off with the deposit market share question. It's historically, you've done about 18% to 19%, if I look at the last five, six years. Last year was about 12%, if my numbers are correct, and it's a much more healthier banking system. Everybody is well capitalized on the forefront, asset quality risks are low. In this environment, like, would you hold yourself to taking a certain amount of incremental market share over the next 2, 3, 4 years? Do you think like that? And if you do, then what can we expect in terms of market share?

Because, when you think about deposit growth, that clearly is a challenge for the system. All the other banks, all the banks will face that constraint. But in terms of market share, would hope that, HDFC can show that historical trend. So that would be one question, and then I have one more.

Srinivasan Vaidyanathan (CFO)

Yeah. Chintan, on the market share, if you see that, yes, yes, you are right, that if you look at us over the last 3, 4 years, in March 2020, we were more closer to 8%, slightly above 8%. In 2024, slightly above 11%. So over a period of 3, 4 years, we got a little more than 300 basis points, out of which 50-60 basis points came through the effect of the merger. Other than that, call it 50-60 basis points a year is what we have added on market share. I do want to mention that the opportunity space to gather the market share remains.

I want to remind that our distribution market share, the distribution share that we have is 6%, right? So we are quickly, not exactly 2, maybe 1.8 times our distribution share is what we have from a value market share point of view. We do have about half of our branches, which are more than 10-year vintages, which are having a market share at least 20%-30% more than our average. And then another half of the branches are lower vintages. That means in the last 5 years or so, which have market share far lower than the average. So with an opportunity space as they mature to come and gain. Yes. Our objective of getting the distribution reach expanded and getting the customer onboarded is to work on getting this market share up.

We are confident that that's the direction in which we have previously gone, and the speed at which we are going now, it gives us the confidence that we are in this to get further deeper on the share. And this applies, this applies across all of them. From a time deposits to Current Account, we did, Sashi did allude to Current Account, how we got INR 530 billion in last quarter, and we did have a rundown of utilization of the customers of INR 450 billion in the June quarter. Despite all of that, we are the largest Current Account bank, right? We are the largest Current Account. Current Account constitutes currently 11% of our total deposit stack. In March, it was about 13%. So yes, it moves around that. Despite that, we are the largest between the Current Account or the Time Deposit and so on.

Sashidhar Jagdishan (Managing Director and CEO)

And just to, you mentioned that our incremental market share was around 12%. It's a bit higher, and there's different ways to compute it, but 12 doesn't seem to come through our math anywhere.

Chintan Joshi (Senior Analyst)

Understood. I was looking at the flows, but, we can talk about that offline. The, other question I had was, in terms of, just detail, a couple of detail questions. So what is your current shortfall in the SMF category PSLCs? And were there any, was there any impact on the NII from the classification of investments?

Srinivasan Vaidyanathan (CFO)

Okay. Can you repeat the last sbit?

Chintan Joshi (Senior Analyst)

So was there any impact on NII from reclassification of investments, and then the shortfall in SMF category excess PSLC?

Srinivasan Vaidyanathan (CFO)

Yeah. So the SMF category as of March, which we have published in our report or in various disclosures, the SMF category target is, of course, the obligation is 10%. We reduced to 9% in the past year. But as of June, we did not see much. We tried to close in as of June, and it's an ongoing number. Every quarter it changes. So that's one. Then from a reclassification, when we reclassified the new accounting on investments got adapted. On a post-tax basis, it was slightly under INR 500 million, INR 480 crore or something, that has gone to general reserves.

Operator (participant)

Thank you very much. Sorry to interrupt you, Chintan. Kindly come back for a follow-up question. [Operator's Instructions]. Next question is from the line of Suresh Ganapathy from Macquarie Capital. Please go ahead.

Suresh Ganapathy (Managing Director)

I have two questions. One is on the PSLC itself, if I were to look at your annual report, your total RIDF plus- [crosstalk].

Operator (participant)

Your voice is breaking. Can you please come in a better reception area?

Suresh Ganapathy (Managing Director)

Am I clear now and audible?

Operator (participant)

Little better.

Suresh Ganapathy (Managing Director)

If I'm looking at last year's RIDF bond and PSLC that you have bought, it's gone up 25%, right? I mean, this is November, when your base is INR 16 trillion, and it shifts up to twenty-four because of last year's high gains. Now, are you confident, you can meet some of these obligations, especially the shortfall in the SMF, and still protect your margins? Because it is getting a bit tougher now going ahead. So that's the first question. And the second question is on cost itself. Now, it's been three or four quarters into the margin. Cost has been broadly very range-bound at 40%-41%. I remember, Sashi, you kind of giving a target.

I know this was pre-target, pre- those days, and you have to give target that longer term, you want to take it down to 30%. Are you very confident that you are well on that path, considering there are so many, so many pulls and pressures now in the system? I'll stop there.

Suresh, on the PSLC. See, the way the math works is the RIDF is for the entire book, including what was the past shortfall. So you cannot compare the book RIDF. The PSLC is a flow through the PNL. So it's. The way to compute this is not to see whether the book RIDF and the PSLC divided by the balance sheet to see whether there's growth or not, right? [crosstalk]. It's cumulative, needs to be thought through differently, and then we'll chat offline on that one. But it's from a direction-wise, if you see annual report as well, you'll see that year-on-year, we have become much better in terms of compliance, and that's something we shall continue to do. Sashi, Do you wanna do the cost?

Sashidhar Jagdishan (Managing Director and CEO)

So, Mr. Ganapathy, on Cost to Income, yes, in the medium to long term, that is the Glide Path that I have, and I'm reasonably sanguine that we will do. But as I said, and probably, if you recall, there is a period of adjustment that we have to go through, where unfortunately, there are some long-term borrowings, where I'm sure even that, those kind of maturities, would be there at the annual report. So we have to wait for that fillip or the lift that will come in revenues as the bond matures and get substituted by probably deposits.

We have to wait for that. But having said that in a period of this, as you alluded, tough economic environment, maintaining stability of the, of the cost to earnings with downward bias is itself, I would say, is very commendable for a large organization, where we are not gonna be compromising on strategic investments like distribution or technology. I'm very clear about it. What we are trying to do is, how do we juice out on efficiencies out of digitization, out of better productivity? So the intensity is now there across the organization, how we can step up that. So I'm, as I said, the proof of the pudding is in the eating.

You have to be patient, wait for this particular FY 2025 for you to see it for yourself as to where we land, and then, that'll give a lot of confidence to you that, yes, we are in the trajectory of having the numbers that we had envisioned in the medium to long term.

Suresh Ganapathy (Managing Director)

Okay, and then we are on this HDFC One App, where you can, not exactly an app, but where you want to really cross-sell and bring everything, every group product under one umbrella. Are we far away from that? Are we very much in that direction to get it executed?

Sashidhar Jagdishan (Managing Director and CEO)

Good question. The first step was to ensure that the franchise, especially the home loan franchise, starts to get incrementally the primary banking or the savings accounts of the home loan borrowers. This has been probably, it's in the public domain, where, incrementally we are now doing what percentage of our home loan borrowers are taking [crosstalk] upwards of 85%. This very well, and still you are asking me these questions. Very good.

As I said, the bundling of other products, such as the consumer durable loan, the credit card, the insurance and all, has commenced. That was the first one that we wanted to, but now we have commenced. The journeys from the subsidiary companies, especially the insurance, is expected shortly, then probably the seamless, frictionless experience for the frontline people to cross-sell with one-click experience will probably even enhance it even further. We, whilst we are talking about this, I must also sort of add, whilst we've not put in the public domain, there has been, and the reason for that, we want to have a sizable amount of success there, and then we will try and put this out.

We've had reasonable amount of success in the stock of, home loans, which did not have an HDFC Bank account, the kind of success we have seen. I'm not sort of, I'm probably, I know you'll be very eager to know what's that number, knowing you very well, but, give us some more time. Let us see, the success at a substantial, momentum, and then we can sort of publish it. It's not gonna be too long before we start to do that, but, you will be surprised, the kind of effort that's going down at the ground level ever since the announcement of the merger.

Obviously, this is something that even surprised me of the effort, and when I do that, you will see that. This is not something that can happen overnight in terms of the impact, but whatever we were, it gives us a lot of satisfaction as to what's happening. Now, coming to the other aspects of the subsidiary leveraging on our distribution strength, you may have, since you cover the insurance sector as well, by now you should tell me that we have seen a fair amount of step up in the distribution of the subsidiary, especially on AMC, especially on the general insurance, especially on life insurance, where the share of their businesses have also been stepped up reasonably well.

It's not that we are favoring one, it's purely we continue to patronize open architecture, so it's a lot of hard work that all of them have put in together to to sort of enjoy a higher distribution from our franchise. It's moving in the right direction. If anyone is expecting a magic wand, and it's gonna be a very dramatic progression overnight, that's not, that's not a fair expectation. But there is a positive glide path, which is moving upwards, and you probably have these numbers, and at some point in time, we may even call out these kind of numbers appropriately. Thank you.

Suresh Ganapathy (Managing Director)

Thank you.

Operator (participant)

Thank you. Participants, kindly restrict to two questions per participant. Next question is from the line of Ravi Rohit, from SiMPL. Please go ahead.

Ravi Purohit (CIO)

Yeah, thanks for taking the question. So two questions. One is basically, the debt reduction that we've seen in the last two quarters, there has been a significant drop in the borrowings: INR 75,000 crore in the March quarter and about 60,000 crore in the June quarter. So this basically helping us kind of deleverage the book. But can you just help us understand what is the? In the annual report we mentioned that about 15% of the HDFC borrowing book is due to kind of mature every year for the next three years. Last two quarters we've seen this big drop in borrowing.

So if you could just kind of help us understand the path where these borrowings are getting repaid. And second question was on the deposit side, there was a fair bit of amount which HDFC Limited used to have, so, and a lot of corporates used to have deposits with them. So is it fair to say that a lot of those deposits kind of vanished the minute the merger happened, and therefore, what we are seeing in terms of deposit accretion, within the system is actually, is, there's a large part which got, taken out, which were slightly larger size or corporate deposits kind.

So if you could just kind of give us some sense of where this thing is moved between then and now.

Srinivasan Vaidyanathan (CFO)

Okay. Ravi, your thought process and assumption is correct, that on the ex-HDFC Limited deposits that came INR 1.5 trillion, certain components of that was corporates or trusts or certain institutions which have been pricey. And you saw that over the last three quarters, in the December quarter, we alluded to some extent, March we did, and even in this quarter, we gave you even the number in one of those other questions, INR 160 billion that went down in the time deposits. They are of the right order, and we prefer much more retail branch-driven, and if these are rate sensitive, or if the other participants in the market pay a higher price to take it, that's fine.

So that is, that is that. So that is one on the deposits that you asked. Second aspect on the borrowing, yes, even if something more needs to go, it will go, because we will not be bidding for a higher and higher price to keep larger ticket size deposits with us. Secondly, when the question you asked on the borrowing, yes, in the quarter, we did take down close to 60,000 crore or INR 600 billion of deposits down [crosstalk],Borrowing down. About INR 150 billion was commercial papers, which matured, and we have to run it down anyway.

We don't like that because we don't do, banks don't do. And so when the maturity came, it went out, and we had enough to pay that down. And the second thing is that of the balance borrowing, roughly half and half. Part of them, half of it was maturity, which we paid down, and part of it was we had an opportunity space to pay it down, which we did. Which is what even in the average balance sheet that we have published, you will see that it is, borrowings are down by close to INR 600 billion, that this is most of that.

Ravi Purohit (CIO)

Can we sustain this run rate or would bulk of it has already been kind of done for the year?

Srinivasan Vaidyanathan (CFO)

There is a maturity, there is a maturity profile for the year which we have published. For the year, the maturity profile is about INR 650 billion for the year. That is, scheduled maturity, INR 600 billion for the year. Out of which, maybe 250 or so, INR 250 billion were maturity that got paid in June quarter. And we did pay in, on top of that maturity, we did do certain other payments. We exercised certain options to do that. Certain other debt, certain other borrowings we did. And so more to come in the year, that's part of what we published in the annual report, the profile. Over the next 3-4 years, we published that profile of maturity.

Ravi Purohit (CIO)

One thing from Mr. Jagdish. Sir, at the time of the merger, and subsequent to that, in some of our communications, we had mentioned that, the merger is likely to be EPS accretive for us on day one, from day one, right? Now, was that, did that have certain assumptions from either the regulator, allowing us for, let's say, for infrastructure bonds or certain other classifications, and those have not materialized, or is there something else that, was in terms of assumed and that has not played out? If you could just kind of help us understand a little bit on that, it will kind of help appreciate why, what deviations have happened between then and now. Those are all my questions. Thank you very much for giving me this opportunity.

Srinivasan Vaidyanathan (CFO)

Yeah. Ravi, yes, at the time of merger, the economic conditions, including the liquidity, system liquidity and RBI stance on how the economy and the funds in the country were managed, was at one state, and today it is at a different state, right? So the conditions have changed. That's number one. And number two, some of the full variances, for example, the full variance on infrastructure borrowing, qualifying to fund the affordable housing [crosstalk] or on certain of the deposit category, the non-withdrawable deposits category that we took over, some of those assumptions are different.

That's the second aspect. Third aspect, I do want to draw your attention to the EPS, since you mentioned it. The EPS for the bank, June pre-merger was 21.4 and last year June and in this quarter, it is 21.3. So thereabout, right, it is similar levels. And then if you look at this quarter, it's between that 21.1, 21.6, 21.7, and 21.3 and thereabouts, right, from an EPS point of view.

Ravi Purohit (CIO)

Okay. Thank you, and all the best.

Srinivasan Vaidyanathan (CFO)

Thank you.

Operator (participant)

Thank you. Next question is from the line of Kunal Shah from Citi. Please go ahead.

Kunal Shah (Equity Research Analyst)

The question on PSL again, when we look at it almost like 53%, but again, that's on last year's balance sheet. But I'm looking at it in terms of the sell downs also which have been there in PSL, what we have disclosed in the annual report. And the overall CD growth also being lower, is it giving an indication that we are relatively more comfortable on PSL? And then in that context, how should we look at the overall CD growth vis-à-vis the overall loan growth?

Srinivasan Vaidyanathan (CFO)

Yeah. Kunal, on the PSL, two aspects to keep in mind all the time, which is, there is, a small and marginal farmer, a weaker section, which could have a dual qualification. If you get a small and marginal farmer, it could have dual, it will have dual qualification, and Weaker will be satisfied. So that is one category where, it's in greater demand. We, we need that, we need more of that, right? So that is something. Other than that, you alluded to CRB, that is why I'm talking about it. That particular segment is driven largely by CRB and by non-CRB, which is Agri segment, the SLI segment, and various other, businesses, business lines which have some linkage to Agri or allied Agri also bring in, but largely CRB.

But out of the rest of CRB, when we think about the business banking or think about certain emerging enterprises and, and the commercial vehicles and lot of other categories which are also enormously PSL driven book, it qualifies as total PSL, but we are quite comfortable. We are surplus in all of those categories. So our focus, if you think about PSL for us, which we've always said, is that our focus is: How do we get as much as possible the small and marginal farmer and with the dual qualification for weaker? That is there.

It's not that we are reaching out to 225,000 villages to get that reach to be there, but even if you get in all of those small and marginal farmers, for the ticket sizes that we could offer to them, so that's what our credit will offer, cannot be offering outsize to the land, because the small and marginal farmer is having a small farm. So the credit could be only to suit that farm and not 2x, 3x, 5x the farm requirement. So that's where the constraints come from, so we need to look outside of our organic approach to see if anybody else having that we can buy. So I hope that helps you. So you don't need to directly link to what CRB is in PSL. It is only a component of the CRB, Small and Marginal Farmer, that we are more focused on.

Kunal Shah (Equity Research Analyst)

On PSL, are you relatively more confident in the achievement? [crosstalk] No, so I was saying maybe in terms of the overall PSL, are we more confident in terms of the achievement? We have been the net sellers of PSLC as well?

Srinivasan Vaidyanathan (CFO)

We have good amount of confidence to be there, where it is available. It's a question of supply, right? We are there creating the demand. We are there to buy, we are there to originate. It's a question of availability. That's where we are constrained. We last year we managed close enough, this quarter we managed close enough, but the future I will not be able to talk what's available and, and... But we are present, that's all.

Kunal Shah (Equity Research Analyst)

Yeah. And secondly, on the deposit side, as you mentioned, like, not really, so Sashi also in the opening comments highlighted, not really happy and it has fallen short of the expectations. Earlier, we alluded in terms of the aggression on the field staff, plus the expansion in the branches, that is something which will drive the deposit, but somehow it's not coming through. So what could be the initiatives now, and would rate ever be looked upon?

We are not getting the benefit from the other two, getting reflected in terms of the incremental deposit share. And similarly, when we look at the borrowings, almost like, say, 60% of the borrowings are coming up for a maturity in less than three years. So, we and we mentioned, like, we would weigh some prepayment opportunities as well. How do we gather that deposits or maybe loan growth could be much lower?

Srinivasan Vaidyanathan (CFO)

Okay. Kunal, Kunal, the first thing is that rate is not a predominant determinant or a driver for us to have an engagement. You see that if you compare our rate, we don't get into rate competition. We have priced fairly with our peers. So rate is not something that we want to use to get or gather more deposits. So that's one. So let's get the rates out of the way. That's not something that predominantly influences us. Having said that, it is about that engagement and service delivery. That is what we endeavor to distinguish, differentiate, get on more customers, and that is the reason I alluded to talk about the inflows.

That means the engagement and the service delivery, delivery should create more of our customer funds coming into our accounts, which is what I alluded to in another context of someone's question, that when we look at the June quarter, we measured that monthly. And the monthly inflows that come are in excess of 20% higher than what it was similar time period last year. So we see the traction gaining. It's a question of both environment and other opportunities, and the same level that the customer sees that balances it out. Essentially, we are there, the opportunity is there, it is going to take more, but probably we are fixing, and resting with us is far more.

Sashidhar Jagdishan (Managing Director and CEO)

Kunal, do sort of look at the 12-quarter data that has been, that is in front of you all, and look at the quarterly momentum. That'll give you a reasonable amount of confidence as to how the buildup is reasonably resilient, and there's a lot of hard work that the team is doing at the ground level. That's a real reflection. Our earnings come out of these averages, the daily averages, so this is, it's a, unfortunately, historically, we have been reporting period-end numbers. But I also realize that maybe it's not the right way to reflect, things which are, where there are lots of volatility.

Yes, it may, as I, again, reiterate, it's a bit disappointing to see on a period end something very tepid, but in reality, my teams have done a lot of hard work, and I want to acknowledge through this particular call, that, for them to continue the intensity of engagement, and the kind of hard work that they have been putting. Of course, so that there is no pressure on them on period-end numbers. They continue to work hard on a daily basis to be able to deliver the organization goals. And, I'm sure and very confident that my team is gonna surprise all of us, including you all, when we publish the full year numbers.

Operator (participant)

Thank you very much. Kunal, I'll request to come back for a follow-up question. Participants, please restrict to one question per participant. Next question is from the line of Rahul Jain from Goldman Sachs. Please go ahead.

Rahul Jain (Managing Director and Head of Equity Research)

Yeah, hi, good evening, Sasidhar, Srinivasan. I had three, four questions. First is on the margin trajectory, right? So the governor recently talked about, again, the transmission of pricing. We are seeing massive, fight going on for deposit market share, and, HDFC Bank has been very, very disciplined on pricing. Any point in time, do you need to relent and start increasing the deposit rates? So how do you see the scenario shape up for you all, and, and what will be the impact on margins? Because you're trying very hard to kind of maintain it or keep improving it. So in this scenario, how do you envisage, this, profitability to shape up for you all, in the coming quarters?

Srinivasan Vaidyanathan (CFO)

Yeah, Rahul, if you look at the, there, there's one publicly available data, is this weighted average 10 deposit cost. It's published by the, by, in the regulatory website or something. You can look at it. And when we look at it, and you can look at it over the last 12 months, by, by month, you can see what every bank reports. The top of the page is what you will see, the PSU Bank weighted average 10 deposit cost going up, and the 3 line graph, if you draw, one on top being the PSU banks, the second being the scheduled commercial banks, and below that will be the HDFC Bank, right?

So we have tried to remain disciplined on price as much as possible to win over the customer through engagement and service delivery. So we've not gone to this term and in terms of the rate as such, and we hope to keep that up as we go along. So that's not something. Now, how do we get the margin? Right. So again, by the way, if we talked about it, CASA market permitting, we know that in this quarter, the market did not permit the CASA growth. We have only time deposit growth and market, the CASA ratio through the cycle as it changes, we'll have to move up, and that is what has happened historically.

That is our confidence level, that our engagement will keep that CASA to go up. Bringing new customers, when the customers are coming in, we are getting in with the balances, savings account balances, and the cohort, the month-on-book of those savings account balances, of the customers we bring in, are behaving quite encouragingly. And we want to bring in more of the new customers to move that up. So we keep going up on that, and we have to wait it out, for the cycle to turn and customer preferences to change, for the CASA mix to come favorable to us.

The second, whatever the CASA mix you see today is impacted by about 3 percentage points or 4 percentage points due to the merger, because when we came in to the merger, we got time deposits only, as part of the merger. So that's an impact that is coming in addition to the market dynamics of customer preferences over the last 2 to 3 quarters. It is also the merger impact that is impacted there. I just want to leave it there and go to your next.

Operator (participant)

Thank you very much. [Operator's Instructions]. Next question is from the line of Manish Shukla from Axis Capital. Please go ahead.

Manish Shukla (Executive Director)

On unsecured personal loan, your growth has been sharply lower than some of your peers. What's your thought process on that segment, and how do you think that changes?

Sashidhar Jagdishan (Managing Director and CEO)

No, that was a very conscious call. I mean, as I said, our internal, early systems probably picked this up rather early, and obviously they have been, rather conservative, and that is the reason why we were, all right and happy to sort of slow down growth, and we were. Of course, this synchronizes with what, the regulator has been sort of highlighting as well. It is being contrarian to what we've seen in industry growth, and we have been contrarian to, not just now, but even in the past. At the right time, we will step up the pedal.

Manish Shukla (Executive Director)

One data point, what is your share of repo-linked book as of June?

Srinivasan Vaidyanathan (CFO)

Sorry, sorry?

Manish Shukla (Executive Director)

Share of repo-linked book for you on the loan side. Repo link.

Srinivasan Vaidyanathan (CFO)

Market link.

Manish Shukla (Executive Director)

Market link.

Srinivasan Vaidyanathan (CFO)

Market link is about, mortgages is about, a total 30-30-70 or so 36 and 70 is, is external. Mortgages will have about 27. Non-mortgages is about 30, which is external EBLR link.

Operator (participant)

Thank you. We move on to the next participant. Next question is from the line of M. B. Mahesh from Kotak Securities . Please, go ahead.

M. B. Mahesh (Executive Director)

Yeah, hi. Just one question on the non-interest income line. This miscellaneous income has gone up quite sharply, so just trying to understand what's driven that. Also, on the fee income line, there's a slowdown, but largely the growth has come from third-party products. If you could just kind of kind of give an explanation to that, sir?

Srinivasan Vaidyanathan (CFO)

So, Mahesh, two things happened here. The third-party product is seasonal. March quarter, highest. Q1 comes down. Miscellaneous income has got recoveries, credit recoveries, as well as it has got dividends from subsidiaries. That is also seasonal, and they're more or less offsetting, right? As you see there, because the third party seasonality comes down in the Q1, and then you have the dividends coming in, and so they are, they are offsetting. So these are the two items there.

M. B. Mahesh (Executive Director)

Thank you.

Operator (participant)

The next question is from the line of Sameer Bhise from JM Financial. Please, go ahead.

Sameer Bhise (Co-Head of Research)

Yeah, hi. Thanks for the opportunity. Just wanted to ask on the HDFC Limited borrowing that you have mentioned, is there a case for any repricing in terms of floating versus fixed for what is due for repayment over the next three years?

Srinivasan Vaidyanathan (CFO)

No, a good amount of that is fixed.

Sameer Bhise (Co-Head of Research)

Okay.

Srinivasan Vaidyanathan (CFO)

Two, two good amount also we have hedged. We have hedges on some of them, and where there is a floating rate, that is again subject to periodic discussion and negotiations.

Sameer Bhise (Co-Head of Research)

Okay, but you would say a large amount is fixed indeed?

Srinivasan Vaidyanathan (CFO)

There's a combination of fixed and floating. Both are there, and if it is fixed, we have some hedges. If it's floating, some are negotiable and some are not, and so, it's a combination. It's a quarter-to-quarter month, actually month-to-month, review in our ALCO to see how to optimize it, what are the opportunity space that opens up. So there's no one aspect that we can think ourselves to say, "This is what we'll do.

Sashidhar Jagdishan (Managing Director and CEO)

In fact, I'm not too sure whether this data is there, but when you look at the modified duration of our assets and liabilities, the very fact that it is more or less in a very narrow band, gaps are much lower, means that what Srini is saying is what we do, and this is not something that we are doing it now. We've been doing it for a long period of time to ensure that these are matched in a very narrow band. So that's one of the reasons why we are able to see the margins in a range bound, in a band of whatever that I have specified or I laid out at the beginning of the conversation.

Srinivasan Vaidyanathan (CFO)

So that's true before the merger and true after the merger. So the gaps remain very closely and tightly managed.

Sameer Bhise (Co-Head of Research)

One last thing on staff costs. While there was a one-off last quarter, there is a bit of a jump, even on a sequential basis for this quarter. Anything to read into it?

Srinivasan Vaidyanathan (CFO)

Other than a quarter-to-quarter impact, because some people additions of last quarter could have been part of the quarter coming into the full quarter this, this quarter. Those kind of changes will be there. And certain compensation changes will happen, will continue to happen as we go along. So there's nothing new other than the ex-gratia amount that was there last quarter and not this quarter.

Sameer Bhise (Co-Head of Research)

Thank you very much.

Srinivasan Vaidyanathan (CFO)

I do not know where you are seeing an increase, but that's, but that's a different.

Operator (participant)

Thank you, sir. Ladies and gentlemen, we have come to the end of the allotted time. I would now like to hand the conference back to Mr. Vaidyanathan for closing comments.

Srinivasan Vaidyanathan (CFO)

Thank you. Thank you. It's the end of the call? Okay. Yeah. Okay, thank you. Thank you. Thank you to all the participants for having joined today. We appreciate your time and, thanks for engaging with us. If you do have more questions, comments, suggestions, any other inputs, feel free to engage with us. Our investor relations team, headed by Bhavin, will be available, anytime, and or I will make myself available sometime, we could engage. Thank you. Bye-bye. Have a great weekend.

Operator (participant)

Thank you very much. On behalf of HDFC Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.