HDFC Bank - Earnings Call - Q3 20/21

Transcript

Speaker 0

Ladies and gentlemen, good evening, and welcome to the HDFC Bank Limited Q3 FY 'twenty one 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 presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Sriniwassan Vedanathan, Chief Financial Officer, HDFC Bank.

Thank you, and over to you, sir.

Speaker 1

Okay. Thank you, Stanford. Appreciate the participants calling in today. We'll start with some background on the market context on what we have seen and are seeing to provide a backdrop so that that's the backdrop on which we will talk about the results and some of the business dynamics. As you know, after recovering sharply in the month of August to October, the payment of the festive season provided good economic relief.

The trend was good, suggesting that the overall economic activity remains in the positive territory, and there has not been a reversal in the recovery process. For instance, PMI manufacturing continued to strengthen in December and GST collections rose to a record high of INR 1,150,000,000,000.00 in the month of December 20. Looking forward, we expect the economic recovery to gather pace in Q4. We expect the rural economy to fare better than the urban centers and provide support to overall growth. Agriculture sector is likely to expand by 3.4% in FY 2021.

Overall, the share of agriculture is estimated to rise to 16.3% of GDP in 2021 compared to 14.6% in 1920. That's very healthy current output. That all goes well for us with our fitting in well with our service strategy. We expect GDP growth to turn marginally positive in Q3, 0.5% and recover further in Q4, 1%. After witnessing a contraction of minus 24% in Q1 and minus 7.5% in q two.

For the full year, our house view is that we expect GDP growth of negative 7% to 7.5% for full year '21, which is in line with our previous estimates. On the inflation, it cooled off sharply in the month of December, coming in at 4.6% versus 6.9% recorded in November. Moderation of CPI inflation was largely driven by contraction in food prices. Our core inflation remained firm at 5.5% as inflation in subcategories like health, education and recreation picked up. The near term inflation outlook has improved, and we expect CPI to print close to 4% in January.

That's again a house view. For February and March, we expect inflation to inch up somewhat as a base effect impact we have saw. On an average, we expect inflation at 4.4 to 4.7% in Q4 twenty one. We expect RBI to keep rates on hold till at least first half twenty twenty two at 4% and keep its stands accommodated. Further, we anticipate a graded CRL cut rollback in Q1 twenty twenty two.

The liquidity surplus in December continued to remain high, average of $6,400,000,000,000 Given concerns around the high liquidity in the system, we expect RBA to use special owners to manage yield curve. Some moderation in liquidity is expected in q four as the central bank slows down its intervention in the FX market, and the government goes into collection mode in the last quarter of the year. The fiscal deficit, again, very important indicator in the macro, for April to November touched 135% of budget estimates as tax collections continue to remain under pressure. We expect the Central's fiscal deficit to raise to 7.6% of GDP in FY '21 versus the target of 3.5% on the back of sharp revenue repeat shortfall while expenses likely to be slightly above the target. The combined fiscal deficit for FY '21, central plus date is likely to be 12.3% of GDP.

Now during the quarter, the equity capital markets in the equity capital markets, the private issuers raised 24,000 crore as against 80,000 crore in the previous quarter. Retail participation in IPOs and rights have been strong. The equity fundraising pipeline, both in public and private markets continues to be robust. During the quarter, we along with other syndicate members executed handful of deals. On the debt capital market, Indian debt capital market continued to witness witness good activity in Q3.

The total debt rate approximately INR 2.19 lakh crores was 25% higher than the corresponding quarter of previous year. For the nine months ended December 31, our bank was ranked number two arrangers for INR bonds. On the CSP and Suru front, with the rapidly evolving rural economy, there is a need to have a robust digital and rural strategy. Our association with CSPs is helping us offer cost effective services to semi urban and rural parts of the country, which in turn is working as a stimulus in measuring the digital digital era through the creation and studying of socially and financially inclusive banking model. We have signed up approximately 1.6 lakh village level entrepreneurs, of which 1.02 lakh onboarded as business facilitators and thirteen thousand five zero two business correspondence.

These business correspondence are not only executing financial transactions through the use of other enabled payment system, which works on biometric authentication, but also but are all have also enabled them to sell multiple products, including Tata, fixed deposits, loans, including gold loan, two wheeler loan, car loan, tractors, and home loans. On the TNC business side, we have been able to keep the momentum and have seen good uptake in CASA accounts where more than 2.3 lakh accounts have got opened during the year so far. Now on the retail branch banking side. During the quarter, our sustained efforts on new customer acquisition complemented with video KYC led full KYC accounts and digitally powered smart accounts has enabled us to register growth of 20% in savings account acquisition and 15% in current account acquisition over the corresponding quarter of the previous year. On an overall basis, we have opened 2,000,000 new liability relationships in the quarter, an increase of 18% over the same period in the previous year and 9% over previous quarter.

During the quarter, we have launched Next Best Action, an AIML led analytical tool for engagement with customers, giving our staff sharper recommendation to follow through for conversion. This has improved conversions and maximized return on efforts of our colleagues in the branches. QuickLoan Shopee, which was launched on from September 1 onwards as an integral part of the branch's permanent in house element of merchandise and shopper activation with an aim to transform the branches into a financial solution supermarket has helped increase retail assets throughput by way of higher customer inquiries and leads. With the launch of the Video KYC, liability and personal account personal loan customers are onboarded through V KYC through digital channel. This facility is also being extended to auto loan, two wheeler loan and card customers in the future.

On the payments business, Q3 showed an even better recovery compared to Q2 on both issuing acquiring and and consumer finance, which is the financial point of sales business, albeit helped by a festive festive season which spanned both October and November. Card sales volumes in sequentially up 32% in q three. Spends were up smartly, riding on the wave of enhanced customer engagement programs. Further, opening up of markets post lockdown, enhanced acceptance of electronic payment modes as an ecosystem trend, enhanced marketing spend for most luxury and high street consumption brands. First two treats lend a boost to consumption with this larger than last year format covering, larger numbers of numbers of participating merchants across physical and online formats, as well as close to 15,000 plus local and regional physical merchants offering a wide variety of discounts and offers.

Smart customized and personal personalized digital marketing. Significant penetration of small ticket spending onto debit and credit, increased activation and engagement levels. December spends matched October leading to optimism and growth prospects in '21. Strategy will be to continue to keep customer engagement to enhance wallet share, thereby making bank cards as a primary source of electronic strengths. We ran exclusive TV campaigns during the IPL and also increased our presence on digital and OTT platforms.

Festive Treach's microsite attracted over 7,000,000 unique visitors to the offers. On the merchant acquiring side, the similar recovery of spends were reflected in all acceptance form factors, which is the cost, UPI, net banking, etcetera. Announced merchant sign up, deep customer engagement through one bank approach, bank staff visitations, value added services, driving EMI at point of sale has helped in gaining counter share and float. Merchant acquisition volumes is sequentially up 20% in Q3. Rending across merchant types to take care of short term working capital needs will be the core component of strategy going forward.

On the retail asset front, retail advances continued a point of recovery aided by the festive season with the disposals surpassing pre COVID run rate and talking of 40% sequential growth. Given the solid foundation of our retail asset franchise, we are confident of sustaining this momentum and making strong gains in market share. Arjun will have more color on this as we go later in this call. On the wholesale and SME segment, the performance of wholesale business across large medium and SME corporate was a part with the pre COVID case. Bank continues to gain market share with a diligent adherence to sales process.

We'll have Rahul cover this later as we go along. On the collections front, the bank entered q three with a closing strategy to manage the volume increases and expected going to the end of moratorium release. The bank's primary goal was to stabilize the resolution rate within short order to progressively reduce the quantum of accounts flowing through into higher levels of delinquency. Jimmy Tata will talk more about credit and collection as we go along in this call. Now getting on to a few comments on the franchise balance sheet side.

We are further built on the strength of the franchise and continue to be positioned well to reach the market opportunities. The recent customer relationships that we have built are performing well in accordance with our vintage models. It has enabled a robust buildup of deposits thereby maintaining strong liquidity position. The bank's average LCR for the quarter was at 146. It is INR 95,000 crores of surplus or approximately $13,000,000,000 considering 110 LCR at the floor.

Capital adequacy ratio is at 18.9%. We have seven seven point eight percentage points more capital than the regulatory minimum of 11.075%. Our CET1 at 16.8% is 9.3 percentage points more than the regulated minimum of 7.575%. The balance sheet is resilient. The floating and contingent portions totaling to approximately INR 10,000 crores built over a period of time helps in derisking the balance sheet.

We continue to originate loans in accordance with our proven credit models. We have handled diligently the restructuring request, which we will cover more as we go along on credit. Now getting to the results highlights for the quarter. Net revenues grew to INR231061 crores driven by an advances growth of 15.6% and deposit growth of 19.1%. Net interest income for the quarter was at 318 crore, up 15.1% over previous year and grew by 3.4% over previous quarter.

For the quarter, the core debt interest margin was at 4.2%, prior year was also at 4.2%, and prior quarter was at 4.1%. As mentioned earlier, the bank's average liquidity coverage ratio was at 146, while the excess liquidity positions the bank to cater to potential demand in future, it impacts current NIM by around 15 basis points. This drive was offset by monetizing some of the investments in the form of trading gains that we have

Speaker 2

done in the past quarters.

Speaker 1

Moving on to the details of other income. Total other income, 7,443 crores was up 11.6% versus prior year and up 22% versus prior quarter. Fees and commission income constituting about two thirds of other income was at INR 4,975 crores grew by 9.9% compared to prior year and 26% compared to prior quarter. Retail constitutes approximately 94% and wholesale constitutes 6% of the fees and commission income. FX and derivative income at INR562 crore was higher by 7% compared to prior year of INR526 crores and was almost flat to prior quarter.

Trading income was at INR1109 crores for the quarter. This represents the ALCO strategy of monetizing some portion of the gains from excess liquidity investment similar to prior quarter levels. Other miscellaneous income of rupees $7.97 crore includes recoveries. On the expenses, operating expenses for the quarter were rupees 8,575 crore, an increase of 8.6% over previous year. Year on year, we added 282 branches and added 55 branches during the quarter.

We opened 231 branches during the nine months of this financial year. These levels of branch build accomplished on an average accomplished on an average are slightly above one branch build per working day. By the end of this financial year, we expect to open approximately another 100 branches also. Since last year, we had a 1,008 ATMs cash deposits and withdrawal machines and 249 during the quarter. We have thirteen thousand five five hundred and two business correspondence managed by common service centers, including 1,532 opened during the quarter.

During the nine months ended December 31, we have added 8,123 business correspondence. The staff count increased by three thousand five seventy nine during the last twelve months and is at one lakh seventeen thousand five hundred and sixty. Cost to income ratio for the quarter and year to date was at 36%. Our expectation is that the spend levels will increase driven by sales, promotional activities, discretionary spends, investments. Thus, the cost to income ratio will be reverting to a recent historical trends of 38, 39% in the short run, while our goal while our goal remains to bring this down again in the medium to longer term period.

Moving on to PPOP, the pre provision operating profit at 15,186 crore grew by 17.3% over previous year. Now coming to asset quality. As mentioned in the past quarter, the Supreme Court passed an interim order dated 09/03/2020 stating that those accounts that have not been declared NPA till August 3120 should not be declared as NPA until further August. The bank has complied with the Fed directive and has not classified any account which was not NPA as of 08/31/2020 as per the RBI rec norms and will not be classified as NPA till such time the Supreme Court rules finally on the matter. Similar to previous quarter, the bank as a matter of prudence uses analytical models to estimate potential NPA in an expedient manner on a pro form a basis and has provided for corresponding contingent provisions towards the same.

The bank holds provisions as on December 31 against the potential impact of cold COVID nineteen based on the information available at this point in time and the same on an excess of the RBA prescribed notes. For the credit update for the credit update that we will provide in the next few minutes, we will first mention the reported number, and it will be followed by the pro form a number which is analytically arrived. If you consider the potential NPS as as just mentioned using analytical models, the pro form a annualized slippage ratio for the current quarter is at 1.86 as against 2.31% in prior year and 1.98% in prior quarter. Year to date nine months pro form a annualized slippage ratio is at 1.67%. The GNPA ratio reported was at 0.81 of gross advances.

The impact to the NPA ratio by use of analytical model in determining the NPA, as I mentioned earlier, is about 57 basis points. Therefore, the pro form a GNP ratio for the quarter was at 1.38% as compared to 1.37 in the prior quarter and 1.42% prior year. GNP ratio for the quarter on a pro form a basis, excluding NPAs in the agriculture segment was at 1.2%, prior quarter and prior year levels are also at 1.2. Net NPA ratio reported was at 0.09% of net advances. NNPA ratio for the quarter on a pro form a basis was at 0.4% as compared to 0.35% in the preceding quarter and 0.48 in the prior year.

The restructuring under RBA resolution framework for COVID-nineteen was approximately 50 basis points of total advances. Now on to the provisions. Specific loan loss provisions reported were to be $6.91 crore. If you were to follow a regular recognition process without any constraints of core directive, the specific loan loss provision would have been higher, resulting in the specific loan loss provision on a pro form a basis of INR 3,170 crore for the quarter as against INR 2,884 crore for prior year and INR2371 crore during the prior quarter. The total provisions reported were INR3414 crore as against the INR374 crore during the prior quarter and INR344 crore for the prior year.

Total provisions in the current quarter included continued provisions of approximately INR 2,500 crore. The contingent portion in the form of incremental specific loan loss provision is reflected here. These pro form a contingent provision will be reversed to specific provision as and when final court order becomes available. The reported specific provision coverage ratio was at 88% as against 84% in the prior quarter and 67% in the prior year. There are no technical write offs, so redoxes and branch books are fully integrated.

At the end of the current quarter, contingent portions towards loans were at approximately INR8600 crore. The bank's floating portions remained at about INR1450 crore as of December 31, and general provisions were about 5,000 crores. As on December, total provisions compared to specific floating contingent and general were 260% of reported gross nonperforming loans or 148% of pro form a gross nonperforming loans. This is in addition to the security held as collateral in several other cases. Now coming coming to credit cost ratios.

The reported credit cost ratio is a specific loan loss ratio was at 0.25% of advances. If you were to follow a regular recognition process without any constraint of co directors, the specific loan loss ratio would have been higher by 91 basis points, resulting in the specific loan loss ratio on a pro form a basis of 1.16 for the quarter as against 1.22 for prior year and 0.91 for the prior quarter. As you are aware, recoveries are recorded as miscellaneous income. The recoveries amounted to 24 basis points of gross advances for the quarter as against 35 basis points for prior year and 21 basis points for the prior quarter. After factoring in the contingent portions as previously mentioned, it has an impact of 91 basis points.

The total credit cost for the quarter, current quarter was at 1.25% as against 1.41% in prior quarter and 1.29 in the prior year. The reported profit before tax at INR11772 crores, which is roughly INR128 crores per day during the quarter grew by 18.9% over prior year. Net profit for the quarter at INR878 crores grew by 18.1% over prior year. Net profit for the nine months ended December 31 was at INR22930 crores, up by 18.6% over the corresponding nine months of prior year. Some balance sheet items.

The balance sheet size as of December at INR1654000 crores is an increase of 18.6% over the prior year December level. Total deposits amounted to INR1271124 crores, an increase of 19.1% over prior year and up 3.4% over prior quarter, which is an addition of approximately INR42000 in the quarter and INR204000 crores since prior year. Retail constituted about 80% of total deposits and 100% of incremental contribution during the quarter. With our persistent focus on granular deposits, copper deposits grew by 29.6% ending the quarter at rupees 546,747 crores with savings account deposits at 374,639 crores and current account deposits at rupees 172,108 crores. Kapha deposit also registered a robust sequential growth at 6.9%.

Time deposits at Rs. 724,377 crore grew by 12.2% over previous year and 0.9% over prior quarter. Cost of deposits comprised 43% of total deposits as of December. Credit deposit ratio was at 85% for the current quarter as against 88% in prior year. Total advances were 10 lakh 82,324 crores, an increase of 15.6% over prior year and a sequential growth of 4.2%.

This is this is an addition of approximately 44,000 crores in the quarter and rupees INR146000 crores since prior year. Retail advances on a Basel basis grew by 5% year on year and sequentially grew by 4.3%. And wholesale advances on a Basel basis grew by 26% year on year and 3.8 sequentially. Moving on to capital. With regard to capital adequacy, total capital adequacy ratio as per Basel III guidelines stood at 18.9% as against the regulatory minimum of 11.075%.

Prior quarter was at 19.1% and prior year was at 18.5%. The Tier one capital adequacy ratio was at 17.6% in the current quarter as compared to 17.7% in the prior quarter and 17.1% in the prior year. CET1 capital stood at 16.8% in the current quarter compared to 16.2% in the prior year and 17% in the prior quarter. In the nine months ended December 31, the bank generated net capital of 40 basis points. To provide further context during the financial year twenty nineteen-twenty twenty, the net capital generation was 140 basis points to the total capital ratio.

Now some highlights on S and P Financial Services under IGAP, which was made for consolidation with the bank. Disbursements for q three were at last year level and sequentially up 23% for q two with difference across product lines gaining traction. Total AUM reached 60,176 crores. Net interest income for the quarter was at 1,010 crores, a growth of 1.5% over q three last year, while sequential growth was at 9.3. PPOP for q three was at 748 crores, growing seven and a half percent over previous year.

Provisions for the quarter were at 1,818 crores, which included dental provisions made during the quarter. For the quarter, STB Financial Services has reported a small loss of 44 crores. For the nine months ended December 31, the profit reported was 218 crores. STB Financial Services has given impact of Supreme Court order and passed NPAs passed NPAs at the August and held the and held the status of the of these accounts as standard. As on December 31, gross and net NPAs were 2.71.7% respectively.

If HDB Financial Services have classified borrowers, accounts as NPA after August 3120, along with the NPSB recognition methodology, the pro form a GNP ratio would have been higher at 5.9% as on December 31 as against 5.1% as on September 30 and two point nine percent as on December 31 last year. However, no benefit of standstill is taken in the PLL as adequate general provisions have been made to neutralize the benefits. STB Financial Services had adequate liquidity and LPR as on December 20, which was at 285% LCR ratio. STB Financial Services is also able to borrow at attractive rates coupled with the strong capital position of 19.5% and are well positioned to maintain growth momentum built in q three. Now coming back to the bank, and particularly on the December 2 RBI order, we want to mention that progress is being made on the plan of action forwarded to the regulator.

We have taken it positively as it will raise the standard. The regulator will institute a process to inspect the action plan and the progress, which I'll give updates in the future. In summary, our teams across functions enthusiastically handle customer engagement in implementing our strategy regardless of the challenging atmosphere. Is reflected in deposit growth of 19%, advances growth of 15.6%, operating profit growth of 17%, profit after tax increase of 18%, delivering the return on asset slightly above 2% or so. With that, may I request Jimmy Chatter to give a few comments on credit, and then we'll have some business highlights coming through.

Speaker 2

Hi. Good evening, everyone, and thanks for coming again. I'll do what I usually do and just take you through segment wise, wholesale, and SME, and then take a small break while Rahul would then step in and give you some brief on the business momentum, after which go through retail, which would be followed by Arvind's views on the business again. So on the wholesale portfolio, the wholesale portfolio is now reasonably large at around 5.8 lakh crores. It's been growing well.

It continues to grow well in pretty much the same way as we've been reporting over the last two or three quarters. Most of the growth coming from well rated public sector and private sector enterprises. Everything is pretty much steady state, so there's not too much news to give you in that sense. The cross incremental portfolio I don't know if I need to explain our HDB ratings again, but I think if you go back to the previous calls, we have the one to 10 HDB rating. It's a model that we keep sharpening and has served us very well for twenty five years.

One is the lowest risk, 10 is the worst risk. 4.37 was the cross incremental in our portfolio during the quarter, which corresponds well into the double a, triple a category. Around 68% of the portfolio is rated HDB five and above, which measures into a double a again. This is just for external reference. It's not that we benchmark it that way.

So we have around 67% of the externally rated portfolio. Actually, no, I should say that again. 67% is externally rated at double a and above. And since I'm using the word above, maybe I'll just let you know that it's a fifty fifty between triple a and double a by and large. The average rating of the portfolio itself remained very steady, and it's been that way for the last few quarters at around 4.4.

70 the high 70 percentages, I would say, is where the externally rated book. So at this point of time, it's 79, but it's usually in the high seventies. Of the externally rated book is either triple a or double a rated. 90 plus percent is a and above. Moving into what we usually mention on the unsecured book.

The unsecured book always has a better rating than the average portfolio because we do take great caution in what is done in the unsecured space. The weighted average of the unsecured portfolio today is an HDB 3.4 as opposed to the average of 4.4 and thereby the secured booking of 4.57. That's how the average gets determined. So things are pretty much as they were going well. We are confident, and it seems in order.

I think Srini commented on the NPA numbers and the pro form a NPA levels. Within the wholesale book, there is really not much distance between the actual and the pro form a and b s because the book itself is quite steady and stable. Just take a minute to move into the SME book and let you know what is taking place there. So over the last two, three quarters, given the the injections of various benefits that have come in from the Reserve Bank and from the side of the government, the CLGS, so the various measures for agriculture and various other methods, We once again had a fairly good, ability to manage. As we had mentioned earlier, cash flows into customer accounts, which we monitor very closely, had slipped in the month of April and May.

From June onwards, quite happy to report that there has been a strong bounce back, and I'll come back to this in a minute. I'll just give you a better flavor of that there, but I'll leave this there for the moment. The 30 plus since the month of September, which is when you can actually measure it, has again shown an improving trend month on month. And I could tell you that the FITL in the SME book is a 0.74 or 0.75 percentage range, which effectively shows the inherent strength of this book. We would, over the last few quarters, have you not done a lot of analysis and tried to explain to you why we think it is strong, but I would think that this is one of the actually manifested demonstrations of the strength of that book.

That's not more than this much required to be put into FITL. We also have been doing stress tests on this book as we mentioned to you some time ago. And, initially, in the early days, of course, we were very conservative about it, and we reported that nine percent could end up being under stress. We revised that last quarter, if you remember, and it came down. It was much better than we had imagined, so it had come down to around three.

There is again a small positive movement and today around 2.3 odd percent is where we consider there may be vulnerability, which we watch rather closely. The utilization of facilities in the SME book has been steady over this entire period at around low 70%. The the number itself doesn't matter. It's the fact that it is steady that we look at because this is based on working capital limit. It is based on availability of drawing power, etcetera, etcetera.

So that once again puts things in a good light, and it carries on the same base. I'm not dwelling too much about it. It's pretty steady state. Industry classification and diversification, once again, very granular. Nobody except agriculture, which is, once again, as I mentioned, is directed lending.

So you have to have a particular percentage in it, crosses 5%. All other industries in the set and e book are below a 5% level. And I think if you go to industry number six or seven, it starts moving down to three and then to two and much lower than that. So there's a tremendous granularity in that. The delinquency trend quarter on quarter has also showed an improvement across all buckets.

So be it the seven plus, the 15 plus, thirty, sixty, whatever, there is an improvement across all buckets in the, so there has been good, recovery seen even in those, areas. Coming to the few points then that we usually mention, which are some of our own individual metrics, our self funding ratio. Once again, I must caveat, as I always do, This is not security. This is the bank's internal measure of the customer's wealth and liquidity in the SME space. As we had mentioned to you in the early days of the pandemic, we were concerned and we were watching whether this would stay to maybe to our surprise.

We're not surprised anymore about it because we've now determined the reasons as well, but the self funding actually grew from that point in time. I think the customers ended up with larger savings and larger balances in the bank than previously there. So that's that remains in the seventies now for a considerable period of time. I mean, seven between 70 to 80%. The collateral coverage, again, rather steady, currently around 85%, and it's usually been in the 85 to 90% kind of range.

The other good thing which I alluded to right in the beginning, which I could report to you now, is since the month of June, we have seen a very steady flow of receipts into our accounts, and this is something we monitor very closely. It's not just steady, it is actually growing. And at this point in time, I think I would be able to say that it's around 14 to 15% higher than the levels of the inflows in February. Thus, this, once again, I think reflects the health of the portfolio and the superior customer selection that the group has had. The ability of these customers to bounce back in terms of business receipts to pre COVID levels and actually cross that shows that the book is in reasonably good price.

That,

Speaker 1

of course,

Speaker 2

is all that we do internally, so we decided to do something a little more outward looking. And we decided to plot the receipts in our customer accounts and the collections vis a vis the GST collections of the government. And the block shows two almost parallel lines. So once again, this shows that the flow of funds into our accounts is mirroring the recovery in the economy as well, which seems into a good perspective for us. From the risk perspective, all I can say to conclude is we have our behavioral score.

Just like we have the HDB ratings in the wholesale, we have behavioral scores which focus a lot on customer behavior beyond just the balance sheet and the metrics. These are also gravitating once again back into the pre COVID days. So all in all, comforting from our perspective. Just thought, Rahul, why don't you just speak a bit on the business side? Sure.

Hi. Good evening. With commencement of the vaccination drive today, it finally feels that we are on the road to normalization. We'll run India on that. Wholesale banking remains on very strong footing and had a satisfactory performance.

Corporate banking and business banking continue to track continue to track better than originally anticipated before COVID. This was a quarter that not only saw strong quarter on quarter and year on year pickup, but also on extremely strong growth in averages in both customer assets and CASA in the range of 30% to 35%. As per CSO data, advanced estimates indicate mild positive growth in second half of current fiscal, continued improvement across high frequency indicators bodes very well for sustained recovery. Data points for December improved and continued to show a positive year on year growth trend even as the impact of festival related holidays normalized. Manufacturing PMI, as Shing just mentioned, recorded expansion for fifth consecutive month remaining, you know, at a very high level of 56.4.

In December, GST collections record high 11.6% growth year on year in December. EV sales for December were up 15.9% Y o Y. Power demand increased 5% Y o Y in December. Rail freight grew eight and a half percent

Speaker 1

in

Speaker 2

December. Weekly registrations for passenger vehicles remained robust, growing at a double digit rate even in December and so on. However, as a very large transaction bank, we look at our collections and the collections of large corporates that pass through our cash management system. The quarter three collections was higher 11% year on year, which is how strong it was. This is in a sharp contrast to first half of the year when the collections were down 16.3%.

For the month of December only, as people continue to debate, what happened post the festival season, collections this year were higher plus 20% year on year. Normalization was also reflected in, for example, in our wholesale SME book, wherein the twelve month period, OD utilization moved to positive terrain over a year ago level. The bank added new to bank customers in excess of 2,000 in the quarter, which was 30% higher than prior year, December. It was a quarter of highest ever disbursements that we have done. In light of this, here is our performance very briefly on business volumes.

On customer assets, advances and investments put together, Corporate Banking and Mid Market Group saw a mid single digit quarter on quarter growth. The year on year growth for Corporate Banking remained at a healthy approximately 40%. Business Banking saw a high single digit percentage quarter on quarter growth in its asset book and a high teens percentage year on year growth. We continue to receive responsible share of customer CASA across all our customer segments. Our growth is a result of our adherence to our institutionalized sales process, philosophy of service to customers and going deep into the Suru geography.

We are not in a race to be number one nor widen our lead. The market is large for all participants to grow. What aided growth very importantly was government's efforts towards macro stabilization amongst a slew of measures, just to name two, the 20% ECLGS scheme, its various modifications, one point zero followed by two point zero, and changes in line with ground realities, are all affected by the government has helped stabilize the MSME segment, provider of jobs in the country. Liquidity flow through the measures of government and RBI supported the parabanking and banking sectors tremendously. As we look to next fiscal, it will be out of place to remain optimistic.

For, after a long time, we have, the position where you can look a little bit longer, you know, other than just a quarter or two quarters ahead. The first half will possibly continue to be aided by government directed spends and CapEx in public sector activity, while I believe the odds have considerably improved for private sector participation and CapEx formation from the second half of the year. Always one wonders that while growth in NIM performance has given a strong earnings momentum in the Wholesale Bank, has it led to deterioration in book? Given the quality of the book, as you may describe, there is no unusual bad debt formation or restructuring to make a commentary on. Thank you.

Speaker 1

Give me on details, please. Sure.

Speaker 2

So, moving into the details, I think last time I had spoken to everyone about the demand resolution and created that metric for ourselves. So I've mentioned we were at a 95% level at that point in time. Just to reconfirm or in case there's new participants on the call. What we mean by demand resolution is what is demanded during the month and collected during the month. So it was at around 95.

We had predicted it would move to around 97 by December, and that has actually happened. Just to compare it with pre COVID levels, this would be levels a little over ninety eight percent, so we are very close to it. And we would be getting that. There has been a month on month improvement in all these months and in this as well as several other metrics. So we do intend to get there shortly.

Looking at the the check bound streams, these have also been improving month on month since September when we actually started measuring it again. There was no point during the monitoring. And those are also moving and once again gravitating very close to the pre COVID levels all over again. Of course, we vary product by product, but on an average across the bank, that is how it is going. And let's not use that word average likely.

This is happening across products. So it's it's it's in every product, and that's how the average is effectively being built. If we move into the collection resolution, by which we mean the resolution of the cases that have actually bounced, this also is improving month on month and therefore is very encouraging trend. And in fact, the bounce resolution has actually gone better than the pre COVID numbers in the recent months. If we look at the higher buckets, the resolution is not over and above the pre COVID months like the bounce resolution is, but once again getting there in a sense.

So all in all, the collection situation is improving as we move along, and we hope it stays that way, of course, and not much else to report in that particular direction. Agriculture has been a sector that has performed relatively well during this entire pandemic. It's holding up well. There are, in fact, a few signs we have observed recently that might lead us to say that things are getting better than the historical levels. But at this moment of time, we'd like to continue doing some more research on those and wouldn't want to put them on the table.

So let's just continue to say that things are holding up well in the Agri front. Recoveries also, which means recoveries on return of cases, doing rather well since the last few months, and we are now around the fifteen percent over the pre COVID levels when it comes to the month on month recovery as well. So all in all, I would think reasonably good situation on the collection and recovery front for all of us. To just take a minute on one or two other things that have been little peculiar to the quarter. One is the restructured assets.

So I had mentioned in the last call, if you recall, that the restructuring, while it had gone live, was a little damp and not very enthusiastic in terms of its response. But I'd also mentioned that it was very early days and something could emerge going forward, that turned out to be true. Two things happened. One is perhaps customers themselves said that they should, apply while the opportunity was there. But I think what helped it beyond that was the, regulatory environment changed in which it was permitted to do the restructuring on a mere request rather than to insist on a lot of documentation and justification for the same.

So what we did was we tried to approach customers dynamically because we did see this as an issue and we did want to be human about it. And whoever did apply and was basically eligible on absolutely basic rounds was offered the restructuring and therefore the restructuring numbers did go up towards the end of the quarter. A lot of this restructuring, therefore, just to want to draw one distinction for the benefit of everyone, The restructuring that has been done is largely based on customer request because we did want to take a human approach to this. The it is not reflective of the bank's view on what could happen to that particular asset or the portfolio. The pro form a NPA that Srini referred to and also gave the numbers for earlier on is what the bank's view is on what would happen in terms of any asset turning nonperforming.

So I just thought I'll draw that distinction between how we handle the restructuring and the pro form a. There are two different things.

Speaker 1

And the restructuring is 0.5% of total. Yes, Jay mentioned that. Mentioned that.

Speaker 2

You had mentioned that. Also a small update on asset sales. We are we have always, in the bank, been looking at, and we're also required to do it regularly, but we do it anyway. We periodically examine the entire portfolio of bad assets, and we decide whether it is worth disposing some assets or retaining them for recovery. Whether we write off or not, of course, as you all know, we do not stop recovery efforts.

So we do examine whether a sale could provide us a better return than our own recovery efforts in various assets as well as pools of assets. And whenever we do see that opportunity, we do sell the assets. Historically, as you would know, in the Indian context, the market has actually really been strong for wholesale stressed assets, and there hasn't been much of a market for retail stressed assets. As you know, our wholesale stressed assets have not really been, fortunately, very large. And for that reason, there hasn't been that much of a sale.

But in the recent quarters, there has been a growing interest from various participants for retail assets as well. And hence, taking advantage of that, we have examined the portfolio. And since we did receive offers, which we thought were commercially in our interest and viable, we have sold some assets in the retail space as well. All I would say is, of course, the entire financial impact of such assets would have been taken in the current quarter as well to the extent it had not been taken in previous quarters. But there would be no further impact in the future going on over there.

When we move into Arjun, of course, we'll get into the business aspect of it. But from the risk dimensions of the product growth, I would just be able to say that we are now pretty much approaching pre COVID levels in terms of the business momentum. And in several products like the auto and two wheeler space, we are actually ahead of those levels. Personal loans are more or less on an even keel with those times. And it is a few products like business loans, etcetera, where things are not yet completely up to scratch.

That is for two reasons. One is, of course, the market in this area might not be that conducive. And, of course, we would also be cautious in certain segments where we wanted to exercise that level of caution. But of course, Arvind will speak more on the business momentum as things progress. I think that's pretty much it from my side except for let me just tell you a little bit.

I think com comparing industry delinquency at this point of time is not going to be very meaningful because of the supreme court judgment. We, of course, are trying to work out and communicate our own pro form a delinquencies, but there is no consistent methodology for that. It's probably not good to compare that. But what I could give a small flavor on is the future portfolio because the assets that we are putting on in the current environment, if we just take one metric, and this is again for the external, world to give a reference. It is not the metric that we use internally.

But if we look at the bureau scores of the new acquisitions across all products, we are considerably higher than the average of the rest of the industry. So if you take one of the most significant unsecured products, around 52 of our portfolio is above what is generally considered a very high cutoff score in the bureaus compared to a 35 for the rest of the market. If you take one of the largest secured products, those two numbers are a 42% for us and a 33 for the rest of the market with the same high bureau triggers that we are talking about. And if you look at products considered a little more risky in the current environment like commercial vehicles, this actually becomes a 2x factor. It's it's actually double the injection into our portfolio as compared to the rest of the market with these high score customers.

Not the way we would want to actually describe this, but probably from an external reference perspective, the best flavor that I could give at this point in time. So that's a little bit on the new acquisition and the quality of the portfolio because you should know that what is being onboarded at this point of time is of the usual, if I may use the term, HDFC bank quality. And I'll hand over to Arvin now so he can take it away. Thanks, Jimmy. Okay.

The retail assets umbrella of all 11 businesses, whether it's secured, it's unsecured, the retail working capital, the microfinance. I think in the last quarter, when I covered the July to September, I mentioned that we have grown by the double digit sequential growth. This quarter, October to December as well, we are mirroring a similar sequential double digit growth on the dispersals. So we have surpassed a, we surpassed the pre COVID run rate this quarter, which you heard Jimmy just sharing with you guys on the retail assets as a whole. Another point to note is that on a December to December, if I compare '20 nineteen Decembers, we're running a double digit growth on the incremental business for that month as well on the overall retail assets business.

We are observing bullish growth rates in the retail working capital, home loans, auto loans, loans against property businesses, our secured arms as well as unsecured piece of the retail assets franchise. Let me also give you some ground level feel on what's happening quickly, a quick snapshot. I think the retail working capital, we've seen a massive robust growth on a year on year basis. The SME side of the business has been ably assisted with our distribution trend, the bumper crop, a good agri uptake. The government credit line guarantee scheme added substantial value.

We're also noticing a tier two, tier three cities' robust growth in the last quarter. The home loan business has also raised a substantial growth as the market continues to be dominated, I think, more by end users in our observation. The stand duty relaxation in certain states has given it a boost. Of course, the interest rates also have fueled, this growth, for the quarter, and we're expecting this, kind of growth over the next quarter as well. The Gold Road franchise, as you guys have seen, are experiencing an unprecedented high year on year growth rates.

And looking at that opportunity, we are also sizing up our physical distribution accordingly with the liability branches to grow this in the coming financial year and the quarter that we've entered. In the auto loan business, we've already started inching on the growth part. This December versus last December, we're a growth part, And we are hoping to strengthen this and consolidate this further this quarter itself. I don't know if I can tell, I think we should see a much higher growth rate in that. On the unsecured piece, we've noticed, like you heard Jimmy talking about showing some confidence on the book.

So I'll probably give you a quick sense there that we've increased our sourcing from the internal customers of the bank, one. Second, there's also an increase in the government segment contribution by almost a double digit. And another important aspect there on the unsecured loans is if the sourcing is tilting towards a slightly higher market share in the highest income segment. So that kind of echoes with what you heard Jimmy talk about, the quality of the portfolio, the confidence that probably he shared with that. In our microfinance business, I had mentioned that we have we have deliberately taken a more cautious and valid path.

However, I think our collection is in place. In Jan itself, we should resume the normal run rate for this business as well, and we are optimistic from here on. Last quarter, had also mentioned about the digital endeavor both in four wheeler and two wheeler loan site. We've had already a representation with the regulators for the same. We believe that the bank's retail asset franchise is on a solid foundation, and we see robust growth indicators on the ground, for most of the businesses, almost all of them.

And we like to consolidate with both physical and digital, keeping a three year vision in mind. So I think that's a quick sense on the optimism that I shared with you, and I continue with that optimism from here on to this year as well. Thank you.

Speaker 1

Thank you. Thank you, Ahmed. With that, may I

Speaker 3

request Sansar to open up

Speaker 1

the line for questions, please?

Speaker 0

Sure, sir. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may please press star then one on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star then 2.

Participants are requested to use handsets while asking a question. Anyone who wishes to ask questions, please press star then 1. The first question is from the line of Maruka Dajanya from Alara. Please go ahead.

Speaker 3

Yeah. Hi. Congratulations. My first question is on slippages. So you indicated slippages of around 51,000,000,000 for the quarter.

It is very similar to the previous quarter even after four months of aging of moratorium loans. So could we is it fair to assume now that slippages have peaked? Because even with so much aging, so much slippages are not really higher than what we saw in the previous quarter.

Speaker 1

So, Marik, the way to think about the figures is that this is this is a pro form a slippage, which is, you know, that there is a standstill as of August as of August 31. Even in last quarter, so that we we did tell you that this is a pro form a, including acceleration. Right? So that last quarter, we did do that. And in this quarter also, we have done a pro form a through an analytical approach.

You know, I I well, I I'm not going to venture into doing the forecast of where we will end. We believe we are fairly reasonable in making these kind of approaches to get to the pro form a in terms of slippage.

Speaker 3

You can could you share the number of NPLs as in what was upgraded and what was written off and recovered during the quarter?

Speaker 1

I believe we we got the the slippage is 1.86, which is, say, call it, 4,900 and change. That is the that is the slippage. And so but then the difference is between upgrades and recoveries and write offs.

Speaker 3

Okay. And my other question is that how much would you have disbursed under CLGS two? What would be your incremental disbursed under CLGS in the third quarter, And how much of it would be ECLGS two?

Speaker 2

Hi, Maru. Hi. There are two ECLGS as you know, and I'll just ask Rahul to give you the numbers if he has them. But you see, I guess, one, the bank was pretty much a dominant player and leader in this because it was general. It was across the board.

It was for all the MSMEs, and we actually had a very good output over that. The CLBS two, as you know, was for specific stress sectors and a few other such constraints without. Bank would usually, in its usual portfolio, they would not have got the same level of exposure fortunately into stock sectors. So we would not have had the same level of output. But for numbers, Rahul, you got any clue?

Or Yeah. So, Madhu, just to give you a sense, at this point of time, as of yesterday, under ECLGF one point o, we have disbursed 22,102.68 across one lakh 19,599, customers. In ECL GS, two point o, we have disbursed 579.16 crores across 58 customers. Thank you.

Speaker 3

Okay, sir. Thank you. That's very helpful. Just one last question on restructuring. Would there be any corporate restructuring under implementation which which is not included in this point file?

Speaker 2

No. I I don't there are a few corporate cases, but I would think they are included. I wouldn't check ask Incon to check that and get back to you, Maru. But there are a few corporate case. But I don't think there's anything more than what is being put out there.

Speaker 3

Okay. Sorry. Just one last question in terms of interest reverses on pro form a slippages. So would you have reversed interest also on these slippages? Or Yes.

Speaker 1

My work has been done.

Speaker 3

Okay. Thanks a lot.

Speaker 0

Thank you. The next question is from the line of Sudesh Ganpati from Macquarie. Please go ahead.

Speaker 2

Yeah. Hi. My question is just on the qualitative front. You know, on the technology side, I know the last time it happened was because of the power outage. But then confident you are that you can really handle higher and higher volume?

What are the qualitative changes that has been done? If you can just reflect upon that. And also, when do you think you're going to call RBI for a review and by when this could get resolved? And the second related question to this is that your inability to add credit card customers doesn't necessarily affect account openings. Has there been some kind of a reduction in account openings because of that?

And, sorry, finally, the last question is a clarification from Jimmy Chatter. So you are saying that 1.38% is a pro form a GNP and point 5% is research asset. Does this mean that this 1.38% pro form a NPA also includes part of this point 5%, which can potentially go back because this is a basically an analytical NPA number that you are giving. Yeah. Thank you.

Taking the last piece first, Suresh. Hi. Hi. You yes. There would be some of it included, but I did mention earlier, and I would take pains to point out that the restructuring has been done very genuinely based on customer requests and what they wanted and not on what the bank's view was in terms of the performance or ultimate slippage of the asset or not.

And therefore, the pro form a NPA is a separate methodology and calculation, and the restructuring was based on customer request. That said, would some of the customers who requested for restructuring be included in the pro form a NPA? Yes. I would think so. Okay.

That's clear. But but definitely not all. Definitely not all. Okay.

Speaker 1

Getting getting to the other two, the the first one in terms of the technology upgrades and technology process, what what we're trying to address. We we have several action plans from strengthening of the disaster recovery or the or the recovery point and recovery time and automating the orchestration tool to get on to the Doctor side or architectural efficiencies, cloud strategy, etcetera. There are several strategies that we have. Some are long term, like the cloud strategy. We should put that to the side because that goes on long term.

It could be twelve to eighteen months. Right? So leave that to the side because that's not an immediate thing. That's more of a longer term thing. But the rest of the things that we we have in the stage and the action plans we're working on, anywhere could take ten, twelve weeks from our side.

But then from then on, the further time frame is not something that we manage. We will leave it to the regulator to handle in front in form of further inspection as I mentioned in my initial remarks where they can inspect and institute the process, how they will inspect and look at the action plans and the progress around it. That's not something that we can manage or we can tell you. But, certainly, we'll keep you updated in the future as we go along and get to know more about that. In terms of the card accounts, yes, as I alluded to from a liability opening account opening relationship point of view, 2,000,000 accounts we opened in the quarter, it is not hindered.

Right? We have had the we have provided robustly on the liability relationship. And as you know, when we get the cards, more than two thirds of the accounts are coming from the liability base. And so from that sense, we haven't seen any kind of an impact on that sense on an immediate basis. But, you know, to the extent that these are all temporary, we we should get back.

And we know that the life cycle of a card, it could become little meaningful. It's actually a two year journey for a card to become meaningful in its life. Right? When a card is acquired, there's a thirty day, sixty day, ninety day kind of a time frame by then. There is a program for activation and engagement.

And then from then on, it takes another year and nine months for for the buildup to happen before it reaches the life cycle top. So there are several intervention programs that happen in between, and so there is enough room for having various intervention programs to accelerate. Right? It depends on what sort of a programs we implement at what time period so that we can crunch this buildup life cycle to a short end as we go along. But at this time, to to answer your question whether you have seen, now the 2,000,000 accounts liability relationship being opened is quite robust.

Last quarter was 1.8, quarter before 1.6, and the 2,000,000 all of last year, we are ending March 20. All of that year was 6 and a half million accounts liability relationship is what we opened. So we are on a good track from that sense to build start building. The initial relationship building approach is robustly growing. You, Srini.

Yeah. Thank you, Srini.

Speaker 0

Thank you. The next question is from the line of Kunal Shah from ICIC Securities. Please go ahead.

Speaker 2

Yeah. Congratulations to the entire team for a great set of numbers. Just wanted to get some sense in terms of the SMA pool, SMA one and two, which would be sitting out there currently, and if you can, if you can give it up for, some of the specific segments of our retail and also the SME one and two pool for HDB Financial. Hi, Hi, Kunal. Retail for SME one and two wouldn't be very applicable because you have the 5 crore cutoff for classification to start with.

That said, we don't put SMA numbers out in the public domain, but they have always been and remain well ahead of industry.

Speaker 1

The same for HDD too. It shouldn't be in a big deal there. And I I that's that's not something, Kunal, that that is a published number for for us to talk about.

Speaker 2

Well, last time we just highlighted that it's really in very narrow range of one to one and a half percent and not moving out there. So that's the reading from RBI's, ASR, okay, wherein it is actually moving up to almost 7.2. So how should we read it into, say, particularly for our bank as well, and how representative would that number be? We do not have a creep is all I can tell you. Okay.

Sure. And the second, in terms of this collection efficiency, the last time, also, we were highlighted that 95% was in September, and what I'll include to the 97 in October. And that continues to be 97 in December as well because last time we just broke it up between the more at and the non more at full as well. So currently, what number we are highlighting of 97 odd percent, this is again the, the combined number which is there because last time in the nonmorated, it was 99 and morated was 97 by October. So, two things that one.

Let's see. Our collection efficiency is an extremely broad umbrella terminology. So the ninety five and ninety seven that we are referring to is what we are calling demand resolution, which, as I said, was what is demanded during the month and what is collected during that same month out of that demand. We do so, yes, this was at 95 the last time we spoke, and we had thought we would be able to move it to 97, which as I mentioned earlier, is very close to the pre COVID numbers as well, and we have managed to do that. Yes.

Okay. Sure. We have managed to answer. Yeah. So, maybe last time, we highlighted October also 90¢.

So just trying to gauge in terms of October to December, was it flat or there was month on month improvement? Yeah. I I don't know. I don't recall exactly, but this has it has progressively moved from 95 to 97 by December. Okay.

Sure. And It's progressively moving up. Let me answer you. It it it it has been consistently improving. If that is the question you are asking, that's the answer.

Yeah. Okay. So nothing in terms of stabilizing from October to December. So that's

Speaker 0

We we

Speaker 2

are not. No. No. There is no plateau in this, if that's what your question is. Sure.

Sure. Yeah. Thanks. And lastly, we highlighted in terms of, sale of a retail business set. So how much was that full, overall full work?

And, how is it coming? So we said that maybe we are seeing a better, recovery than the internal, and that's the reason we are selling out. So at what, method would that portfolio be doing out here? If you can just highlight it, is it a significant one, or what is the content? The recovery that I mentioned and the sale are two completely different things.

I I I'm not including the recovery understanding what I was saying. The recovery is what we have recovered through our own efforts on return of assets. No. We have highlighted that whenever we see that of the sales proceeds are better than what we would have recovered internally, we are we generally approach it in that particular way, and we sold out some retail assets. So just wanted to get the sense in terms of what was the proportion that was sold out in this quarter and at the what maybe in terms of what will be the any any provisioning that would have been made of that sale as well.

Yeah.

Speaker 1

As it relates to the assets that we have sold, Kunal, any financial impact, real impact or the delinquency type of reporting impact, either in this quarter or in prior quarters, it has happened. Right? And, so there's nothing more on that from that sense. You you know, what what I mean is that, they are either declared NPA prior or or in this, this is part of the pro form a in this. So that's why I've told you 1.38, and it's gone out.

Right? So, there is nothing more on those, that point, if that's what you're asking.

Speaker 2

Okay. Okay. Okay. No worries. Yeah.

Thank

Speaker 1

you. And from a recovery point of view, for your information, I I alluded to the miscellaneous income carries any recovery, 24 basis points, on the total portfolio. That is the recovery in this quarter. Last year, I think it was 30 basis points or so. And last quarter, I think, was 21 basis points or so.

That's the kind of recovery range that we have recovered. Yeah.

Speaker 2

Okay. And nothing worth highlighting in terms of the quantum sold out, so not a significant one, I think. No. No. Okay.

Okay. Yes. Thanks a lot and all the best. Yeah.

Speaker 1

Thank you. Thank you.

Speaker 0

Thank you. The next question is from the line of Jai Mundra from BNK Securities. Please go ahead.

Speaker 2

Yes. Hi, sir. Good evening. Sir, first question is on asset quality. Now the asset quality has turned out very well and probably in your earlier interactions also.

And probably also in case that some of that could be due to multiple dispensation given by RBI, maybe the 5PM, moratorium, etcetera. So do you suspect that as these dispensation gets unwinded, there could be some some, let us say, impact on the as we go into FY '22? Or do you

Speaker 1

think this should not be we should

Speaker 2

not have any meaningful impact? Yeah. That is the question number one, sir. So firstly, if you look at the series of of measures taken, it was it was frankly very well done by the government. The first thing was a moratorium.

What do you do when you have a hemorrhage? You tie a tonic and you stop the bleeding. So I think that was step one. Step two was you start injecting. That was your ECLGS.

You need a further injection to cure even further because some gangrene is spreading, you inject ECLGS too. And lastly and finally, if there is anything residual at all, you had your restructuring option, which was given to the customer and the entire power and all these measures, if you can see, was not left with the banks. It was put in the hands of the customer. He could ask for an ECIDS. He could ask for the restructuring, and it was done on his request.

So that answers part a of what he was saying. Part b of what he was saying is that there is no unwind here because the real measures see, what had to be unwound was unwound in August. You're seeing the impact of the moratorium then, and you've and now we don't need to talk about it anymore because it's more than six months old. The rest of it is frankly not being unwound. It's permanent.

The CLGS injections are there for the benefit of the customer for time to come. The restructuring is there to the benefit of the customer for time to come, so there is no unwind left. There may be time horizons within which you have to act on each of these measures. That's fine. But the impact of those measures is lasting.

So I don't see what you were perhaps alluding to as a fear that, you know, as these unwind, there will be stress pouring out from all corners. I don't see that. Sure, sir. That's helpful. And secondly, sir, on HDB Financial, so there is pro form a basis that G and P has moved from 5.2% to 5.9% odd.

Any, you know, any anything specific or any any product that you would like to highlight where you are seeing, relatively higher strength or any qualitative comment, within within the customer segment or within the product segment? Not really. As you know, HDB operates in a segment that is of a higher risk, customer segment than HDFC banks. That is always been the case. They also operate in a product range that is a little different from HDFC banks, so it's never fair to compare.

That said, there is nothing of any material note in terms of change between the quarters to report. No. So, sir, and the last question, sir, correct me if I'm wrong, but if I compare RBI data, that they gave on monthly basis, sorry, on the sectoral basis, it looks like that the retail growth is even lower than the RBI reported retail growth. So could you I mean, that has been there for the last two, three quarters. So could you provide some commentary around that?

Thank you.

Speaker 1

We need the growth in the bank. Industry is talking about we gave our numbers. Sorry. We talked about the growth that we have.

Speaker 2

I think we have always said and maybe from that respect, we we have our policies and product programs, and we grow as much as we can within those policies and programs. We aren't really guided by how competition is growing from time to time, and we take guidance from our own programs. So I don't have the numbers you are talking of with me, but if at some point of time, we grow slower than the market, at some point of time, we grow faster than the market. What I can tell you is we grow within our program, which we consider to be the safe limits for growth.

Speaker 1

Thank you. Sure. Thank you so much. All the best.

Speaker 0

The next question is from the line of Shagun Verma from Goldman Sachs.

Speaker 4

This is Rahul here. Actually, couple of questions. First one is on this restructuring. So can I just understand just trying to understand here, this 0.5% would largely be corporate? And would you be done with it?

Because I think there is an element of integrated agreement also, right, particularly for the

Speaker 0

larger cases, if at all we

Speaker 4

have got exposure there. So could there be some

Speaker 0

more loans that can show up

Speaker 4

in this number in the fourth quarter? That's question number one.

Speaker 1

Rahul, it is in this one, it is predominantly a lot of it is retail. That that's one thing. The second thing is that whether we're done with it, things in the pipeline where some documentation completion can happen subsequent to January January 1 can happen. Will that be a big number, material number? No.

It can be insignificant. We we don't foresee big numbers coming through that process. What's your second one? Second question?

Speaker 4

Yeah. I'll answer. Thank you so much, Shini, for that. Second one is actually on the on the on the retail growth. So quarter on quarter, the book has grown.

Definitely, these buses have grown much faster, Arvind was alluding to. Just trying to understand, is there any I mean, can you give us some flavor about the growth in number of customers versus the balances? Which way the volumes would have moved you know, in terms of number of customers? Because the NACI wide, the check bounce rate is still is fairly elevated. So are we definitely benefiting from the market share consolidation, which would reflect in value terms?

So just trying to get some more color on that without getting into the numbers.

Speaker 1

I I don't have a particular customer count, but it will be broad based in terms of growth rather than a concentrated growth.

Speaker 4

Okay. I mean, I will have to be fair. Okay. Just on data giving question, Ashini, can we get the write off number for this quarter?

Speaker 1

As we go along, I'll try to get it. I I don't have

Speaker 4

it in front of me. Yes. Just a last question, Sriniv, so the Reserve Bank of India had put out this draft paper for the NBFC spot forward. Just wanted to understand your preliminary views, if at all, from the bank side, given the fact that we have got HDB financials, which could, you know, I mean, which could be affected by the new set of regulations. So any preliminary thoughts that you may have on these draft guidelines or draft paper rather?

Speaker 1

It's still in a working paper form with the with the views and suggestions and inputs to be given by January 15, which was yesterday. It still remains to be seen how this shapes up and evolves. We'll have to wait and see how how this evolves into a shape.

Speaker 0

Okay. Okay.

Speaker 4

Got it. Thank you so much, Sini. That was really helpful. Thank you,

Speaker 0

and good luck in the future.

Speaker 1

Yes. I appreciate, Rahul. Thank you.

Speaker 0

Thank you. The next question is from the line of Manishotzvan from Nirwala Bank Securities. Please go ahead.

Speaker 2

Yes, sir. Thank you for the opportunity. I have only one question. On our HDB Financial, we have a gross NPL of 5.9%. What is the total provisioning number?

Because the way you shared for the bank number, contingent provisioning for the pro form a gross NPL, what is the total provisioning we are doing today?

Speaker 1

In this quarter, I think the provisioning was about 800 crores. That's what readily I have.

Speaker 2

Balance sheet number, sir. Balance sheet number. I'm looking at it.

Speaker 1

No. I don't have it in front of me. I'd like to get back to you on the balance sheet.

Speaker 2

Okay. Thank you. You know that,

Speaker 1

sir, HDB Financial Services closes their books on Indian GAAP basis. We take and consolidate on an Indian GAAP basis. So, in in India and Indian GAAP, we close on India and we consolidate on IGAP. So two different basis we have and I don't have readily in front of me what that is.

Speaker 2

You, sir. Thank you.

Speaker 0

Thank you. The next question is from the line of Abhishek Modarka from IIFS. Congratulations

Speaker 2

for the quarter. So just a couple of questions. The first question is basically on net interest margin. And if I see in the last three or four months, that's how far back the last TV rate cuts or rate cuts were. So is there you know, a base forming in terms of cost of funds, whereas, you know, there is pressure on yields.

So do you think the NIMs are largely at the, you know, higher end of your your band? The second question would be on the unsecured growth. I know I think you've alluded to it, but I just wanted to know on a gross basis, how much credit card do you issue, let's say, on a monthly or a quarterly basis? Just a ballpark we'll do over there. Thanks.

These two these two number questions.

Speaker 1

Okay. First is relating to the net interest margin. Yeah. The the bank has operated on a net interest margin between four four point one on the low side, 4.4, 4.5 on the high side. If you look at it over a period of time, you that means if you look at it for the last three years, look at it don't look at quarter to quarter, but look at annually if you wish.

Look at three years, five years, or ten years for that matter. That's the kind of range the bank operates. So at 41402, you can call it at the towards the lower end, right, towards the to the left of the center. That is the kind of range at this 4.1, 4.2. From from where we are over a period of a longer cycle when you look at it.

Speaker 2

Yes, Shini. But the point is, I think this part of the cycle, let's say, in the medium term, not immediate, but we are growing faster on the corporate side and that is pressuring yield. Whereas on the cost of funds side, you would, you know, be close to a bottom in terms of the ability to cut rates further. So do you see the bank hugging, let's say, the lower end of the bank for a while? Or do you think you can grow retail fast enough incrementally and sort of get NIMs back up?

Speaker 1

There there is no one particular target that we shoot for, but the way we're managing the alco is assets are priced based on our cost of funds. We run alco once in two weeks, and we price the product according to what we can do and what we want. And the the the bank the whole we have managed is to operate it within this broadband of four four point one to four point four four point five. Within that band is what we started to manage. And once at the end of the day, the volumes come in, the demand comes in and checks out, that's where it comes from the so sometimes 10 basis points can go down, 10 basis points can go up.

But that checks out as a part of the process, but the way we follow is like this. We look at the process of price based on our cost of funds and according to the risk measurement that we have for different category and segment of customer.

Speaker 2

Sure. Thanks. That helps. And regarding the credit card?

Speaker 1

That's not something we have published, and so they don't want to put something new. That's not something unless there is there in the public forum, which is there. But, otherwise, we will not disclose that number. Yeah.

Speaker 2

Alright. Thank you.

Speaker 0

Thank you. And gentlemen, that was the last question. I now hand the conference over to mister Srinivasan Vedanathan for closing comments.

Speaker 1

Oh, okay. Thank you. Thank you very much, Stanford. Appreciate the the participants dialing in. And if you do have more questions, Corey, feel free to reach out to us in terms of time.

We shall be happy to engage with you on anything. Thank you. Appreciate it.

Speaker 0

Thank you very much, sir. Ladies and gentlemen, on behalf of HDFC Bank, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.