HDFC BANK (HDB) Q4 2020 Earnings Call Transcript

Transcript

Speaker 0

Ladies and gentlemen, evening, and welcome to the HDFC Bank Q4 FY 'twenty Earnings Conference Call on the Financial Results presented by Mr. Srinivasan Vedhanathan, Chief Financial Officer Mr. Shashi Jagdishan, group head and mister Jimmy Tata, chief risk officer. As a reminder, all participant lines will be in a listen only mode, and there will be an opportunity for you to ask questions after a brief commentary by the management. Should you need assistance during the conference call, please signal operator by pressing star and 0 on your touch tone phone.

Please note that this conference is being recorded. I now hand the conference over to mister Srinivasan Vedanathan. Thank you, and over to you, sir.

Speaker 1

Oh, okay. Thank you, Aman. Appreciate the participants calling in today. Particularly, I think it's been delayed ten, twenty minutes as the traffic has been high, I think, and the telecom coming in. But we we'll get started anyway because there are more more than a few 100 waiting to join in, but we'll go.

First first, some background, right, for thirty seconds, particularly for some of you who may be outside the country and the COVID situation here. Right? Economic activity started slowing down in March and came to a grinding halt with Pan India lockdown starting March 22. Banking is an essential service and has been exempted from the lockdown to facilitate customer requirements to the extent possible in the physical space as well as for online transactions. The lockdown was originally supposed to be for twenty one days until April 15, but it has now been extended to May 3.

Right? Now a few words about our employees and health workers. As a first order of business, let's the health service staff in the society needs to be thanked and who give us confidence to keep us working. Right? Let's place on record our sincere appreciation to thousands of employees across the bank.

The teams play the teams balance very well their personal health and safety and bank's duty. All of them worked diligently and tirelessly through the past month, leveraging the robust processes, keeping up with the top class coordination and communication to make the results published under these circumstances. Majority of our employees, other than some personnel required to be at the branch, have been working from home. This has established new paradigm in customer management, products and processes, operations, technology, risk management, and controls. This also entailed defending off cybersecurity threats by implementing several solutions like two factor authentication, strengthened antivirus feature in the devices at home, prevention of any download on the local devices, etcetera.

Employee health and safety was accorded top priority with appropriate sanitizers and masks. All operational bank locations were disinfected and fumigated periodically. COVID nineteen medical helpline has been established for employees. Further medical further, medical webinar, newsletters, and videos have been published to support employees during this period. Now on customer engagement.

By and large, our branch our branches remain open for customers, though for limited activities. 95% of the branches are operational. Approximately 13,000 ATMs across the countries are operational, an average uptime of 93%. In addition, we have deployed mobile ATMs across five cities to facilitate customer transactions and remain a preferred bank with top of the mind awareness. What could be done online using Internet phone, we have encouraged the customers to do so.

Stay home, stay safe applies to banking as much as to any other day to day activities. Anywhere working model and its final contours were drawn up and communicated to the teams. The construct included collaboration and coming together of all stakeholders to enable various applications and tools to all resource to all resources managing customers, outbound sales team, and other key roles so as to facilitate them to work from home or anywhere and still engage with our customers. Capability development for our team members was a priority by administering elearning modules created for various roles and making narratives for key products and processes available through various medium and also webcast of live sessions by trainers and experts. Product proposition priority and narratives for staff aimed at forging customer conversations were rolled out.

Every narrative started with inquiring about customer safety and offering to help with digital solutions aimed at taking care of banking needs and financial needs. Boss majority of virtual relationship management resources were enabled to work from home by making changes to their existing dialers, which act as a bridge to connect customers and RMs. Narratives for the agents were also pushed to their phones. Enhancements were done in IVR, SMS, WhatsApp, banking facilities to to facilitate certain transactions of the customers. Equipped with the right and appropriate tools, the team members working from home and from branches started to reach out to customers, and we have been making 200,000 customer engagements on a daily basis.

We have rolled out Insta account opening self-service journeys, wherein our customers can open their accounts in a matter of few minutes and get to use the same through net and mobile banking, use cardless cash withdrawals, transfer and receive funds, make online bill payments, and etcetera. On the wholesale front, we are 100% work from home with full technology enablement to handle internal processes and client management. Given our processes, including credit approval process, which are largely digital, we are now attuned to handling transactions and approvals digitally with adequate indemnities and checks in place. We are able to maintain turnaround times on items of on items like new disposals and rollovers, including managing clients' quarter end needs on transaction banking. In business banking, each RM has had his or her client base called his or her client base.

More than more than 35,000 customers have been called and feedback taken from clients on general well-being, impact and severity on their business because of COVID nineteen, including discussion on any additional requirements of the customer. RMs jointly with credit team are doing review of customers for better customer servicing and tracking. They are also regularly communicating and using digital route to collate information from customer for preparing CAMs, credit appraisal memos, or call memos. RMs are taking refresher digital training, which are being organized by our HR team for further upskilling. In summary, client engagement is stronger, productivity is up, stress levels are down, and work life balance has improved.

A few sentences on society and community. We have contributed rupees 70 crore towards prime minister's care fund to support the government in its fight against COVID nineteen pandemic. Additionally, we are supporting various states in their requirements for medical supplies and other support. We are also partnering with not for profit organizations to raise funds to feed migrants, elderly, daily wage earners most affected by the lockdown. We continued our focus on corporate social responsibility and spent 2% of our average profit after tax for the past three years.

This is this is in line with our policy to support the much needed sections of the society. Now let's get on to balance sheet strength, where we are positioned now. Few comments to provide backdrop on the strength of the franchise. We are positioned to gain strong market share. Liquidity is consistently strong as reflected in our LCR ratio at approximately 132% in the quarter.

In the recent couple of quarters, on an average, we have demonstrated incremental credit to deposit ratio of 75 78%. The focus on deposits and bringing in new customer relationships have taken strong roots in franchise building. Capital adequacy ratio is at 18.5%. We have 7.4 percentage points more capital than the regulatory minimum of 11.08%. Our CET1 at 16.4% is 8.9 percentage points more than the regulatory minimum of 7.58%.

We have sufficient provision in the form of floating and contingent provisions totaling to rupees 4,447 crore built over a period of time, which helps in derisking the balance sheet. We have also taken several steps to further tighten the credit. As a consequence of which, we have seen increased rejects. Current book has a stable NPA ratio and loss ratio. The provision carry coverage has been further augmented to make the balance sheet even more resilient for any shocks.

Provision coverage ratio, including all categories of reserves, stand at 142%. The net interest margin has been in a stable range historically over the past ten years between 4.14.5% and currently stands at 4.3%. Now we will get to the results highlights for the quarter and also for the year ended 03/31/2020. As a result some some background here too. As a result of lockdown and consequent slowdown in economic activities and our strict adherence to social distancing, there has been an impact starting in the later March in terms of loan origination, distribution of third party products, payment products, activities, inability to deploy collection efforts to the optimum level, and so on.

Moratorium relief is available to customers according to RBA notification. Waiving of certain fees for customers have also been implemented in accordance with RBA mandate. We have seen inherently good customer demand across most of the product segments prior to the COVID nineteen issues and lockdown. This should revert to normalcy after a period of time, and we continue to be positioned to capture the demand through further streamlined processes, digitized offerings, stringent credit and controls, etcetera. COVID nineteen has had certain impact in the financials, which we will call out as we go along.

Let's start with net revenues. Net revenues grew by 18.2%, driven by an advances growth of 21.3%, deposits growth of 24.3%, and an other income growth of 23.8%. Net interest income for the quarter was rupees 15,204 crore, up 16.2% over previous year and grew 7.3% over previous quarter. Net interest margin remained the historical range. For the quarter, net interest margin was at 4.3%.

For context, prior quote prior year was at 4.4%, and prior quarter was at 4.2%. We continued with our strategy to build on deposits, thereby maintaining strong strong liquidity position. I I mentioned about the LCR, average LCR for the quarter at 132, which is 50 rupees 50,000 crore of surplus or approximately dollar 6 and a half billion. The excess liquidity position of the bank impacts current NIM by about 100 base by about 10 basis points. Again, as we have mentioned in the previous quarters, the drag was offset by some investment gains in the form of trading gains, which we will mention as we go along.

Now moving on to details of other income. Fees and commission income, which constitutes 70% of other income, grew by 14.6% over previous year to reach 4,201 crore. Of this, retail constitutes approximately 93%, and wholesale constitutes 7%. As I said earlier, the lockdown in March following the COVID nineteen outbreak has impacted the business across the bank, particularly in the in the later half on various things that affects the fees fees and commission by around 350 crore. In our card spends, we observed that March was lower than the average January and February by about 21%.

The March was particularly impacted as the card spends was lower by 35% compared to the average of January and February. FX and derivatives income, which that that line of income grew by 24% over the previous year to reach 501 crore. The growth was granular in nature, being primarily driven by retail customers who contributed around two thirds of the total. Trading income was 500 and rupees 565 crore for the quarter. Again, as I mentioned, this was the ALCO strategy of monetizing some portion of the gains from the excess liquidity investments.

Other miscellaneous income of rupees 766 crore includes recoveries and dividends from subsidiaries. The collectors the collections was impacted in the last month of the quarter, particularly in the later half of March. This had an impact of approximately 100 crore on the recoveries. Operating expenses for the quarter were at 8,278 crore, an increase of 16.3% core the previous year. Year on year, we added 313 banking outlets, 71 during the quarter, 1,412 ATMs, cash deposit, and withdrawal machines, and 5,379 business correspondence managed by common service centers.

The staff count increased by 2,990 during the quarter and about 19,000 in the last twelve months. In addition, approximately 250 branches are in various stages of readiness to open in a short time. If there were no disruption, it would have been opened in March. Going forward, we look for an opportune time to get these to be functional. Cost to income was at 39% that is and has remained stable in a stable range compared to the prior year and prior quarter after absorbing the investments in branches, people, and technology.

Moving on to PPOP. The pre provision operating profit grew by 19 and a half percent to 12,959 crore over the prior year. Adjusted for the COVID impact that I mentioned earlier, a few of those items, that that would have been at twenty two percent, but the reported number is 19. Coming to asset quality. In accordance with the RBA guidelines relating to COVID nineteen regulatory package dated March 27 and 04/17/2020, the bank would be granting a moratorium of three months on payment of all installments under interest as applicable, falling due between 03/01/2020 and 05/31/2020 to all eligible borrowers classified as standard even if overdue as on 02/29/2020.

For all such accounts where the moratorium is granted, the asset classification shall remain standstill during the moratorium period. That is, the number of days past due shall exclude the moratorium period for the purpose of asset classification under the IRAC norms. The bank holds provisions as on March 20 as on 03/31/2020 against the potential impact of COVID nineteen based based based on information available at this point in time and the same as in excess of RBA prescribed norms. As a result of the above circulars, GNPA, NNPA, and annualized core slippage ratio has been lower by 10 basis points, six basis points, and 40 basis points, respectively. GNPA ratio was at 1.26% of the gross advances as compared to 1.42 in the prior quarter and 1.36 prior year.

GNP ratio excluding NPAs in agricultural segment was at 1.1% as compared to 1.2% in the prior quarter and prior year. Net NPA ratio was at 0.36% of net advances as compared to 0.48 in the preceding quarter and 0.39% in the prior year. Annualized core core slippage ratio at 1.2% in the current quarter. Prior quarter was at 1.7, and prior year was at 1.4. Now on to the provisions.

Specific loan loss provisions were rupees 1,918 crore as against 2,884 crore during the prior quarter and rupees 1,430 crore for the prior year. Total provisions were rupees 3,800 and 3,784 as against rupees 3,044 crore during the prior quarter. Total provisions in the current quarter included contingent provisions of approximately rupees 1,550 crore primarily related to COVID nineteen. The coverage ratio was at 72 as against 67% in the prior quarter and 72% in the prior year, including contingent provisions. The coverage ratio was a is at 96%.

I want to remind that there are no technical write offs. Our head office and branch books are fully integrated. Beginning of the quarter, we had contingent provisions of rupees 1,457 crore. With a build of approximately thousand 550 crore, at the end of the current quarter, contingent provisions towards loans were at rupees 2,996 crore. The bank's floating provisions remained at 1,451 crore, and and general provisions were at rupees 4,438 crore.

As of March, total provisions comprising specific, floating, contingent, and general provisions 142% of the gross nonperforming loans. Now coming on to credit cost ratios. The core credit cost ratio, I e, the specific loan loss ratio was at 77 basis points of advances as against 92 basis points for the prior quarter and 69 basis points for the prior year. As you are aware, recoveries are recorded as miscellaneous income. Therefore, the core credit cost ratio net of recoveries was stable at 55 basis points as compared to 66 basis points in prior quarter and 48 basis points in prior year.

After factoring in COVID nineteen credit impact, as mentioned earlier, which is approximately 62 basis points, total credit cost for the current quarter was at 151 basis points as against 129 basis points in the prior quarter and 91 basis points in the prior year. The reported the reported profit before tax was at $19,174 crore. Adjusting for some of the COVID COVID related items that I including the contingent provisions that I referred to, the core profit before tax grew approximately 23%. Right? Net profit for the quarter grew by 17.7% to 6,928 crore.

Net profit for the year ended March 31 was rupees 26,257 crore, up 24.6% over prior year. Now on to some balance sheet items. The balance sheet size as of March was 15 lakh 30,511 crore, an increase of 23% over approximately 80,000 crores in the quarter and 2 lakhs 24,000 crores since prior year. As a result our folk as a result of our focus on granular deposits, CASA deposits grew by 23.9%, ending the quarter at rupees 4 lakhs 84,625 crore, with the savings account deposits at 3 lakhs $10,003.77 crore and current account deposits at 1 lakh 74,207 248 crore. Time deposits at 6 lakh $6,062,008 77 crore grew by 24.6% over prior year.

Casa deposits comprised 42.2 of total deposits as of March. Credit deposit ratio was 87% for the current as of the current quarter against 89% in the same time last year. The advances were 9 lakhs 93,703 crore, an increase of 21.3% over prior year and 6.2% over prior quarter, which is an addition of 58,000 crore in the quarter and 1 lakh 74,000 crore since prior year. Retail advances on a Basel basis grew by 14.8 over prior year and 2.7% sequentially, and wholesale advances, again, Basel basis grew by 28.2% year on year and 9.7% sequentially. Moving on to CAPED.

With regard to capital adequacy, the total capital adequacy ratio as per Basel III guidelines stood at 18.5% as against a regulatory requirement of 11.08%. March 19 was at 17 March 2019 was at 17.1%. It was 18.5% in the prior quarter also. Tier one capital adequacy ratio was 17.2% in the current quarter as compared to 17.1 in the prior quarter and 15.8% in the prior year. CET1 capital stood at 16.4% currently compared to 14.9% in the previous year.

A few business update. During the year, I mentioned about the 313 banking outlets opened and five thousand five thousand four hundred and sixteen banking network, and 52% of our branches are in semi urban and rural. Including the banking correspondence, 5,379 all opened during the year. Right? The total banking outlets were 10,795.

As of this quarter end, we have signed up approximately 1.4 lakh common service centers, village level entrepreneurs, of which one lakh are onboarded as business facilitators. Of these, 42% are actively sourcing. In full year 1920, we acquired 6,300,000.0 new liability relationship, an increase of 44% over the previous year. This was driven through various strategies that we adopted, which we have articulated in the past. As of March, we have 14,500,000 credit card base and 1,800,000 merchants acceptance points.

In summary, we are proud of our staff who have passionately managed customer relationship in executing our strategy despite a difficult environment. This has resulted in deposit growth of 24, advances growth of 21%, card spending increased by 22%, retail loan disposals increased by 12%, operating profit growth of 20%, and profit after tax increase of 18%. With that, may I request the Sashi to give a few comments, please?

Speaker 2

Yeah. Thank you, Srini. Yes. This has been a very unprecedented period for all of us globally. We would like to sort of give our our prayers for the people who have been affected by COVID.

Srini has mentioned a lot about what all we have been doing in this during this lockdown period. I think the entire organization has been reasonably energized. The fact that we have a great distribution and the resilience in the balance sheet and the fact that we have derisked our balance sheet is pretty evident from the results that has just been announced. To add to that, I think some of you may have seen the press release by Standard and Poor last night, wherein they have reaffirmed the standalone credit profile rating, which is triple b plus. We are the only bank which is having a rating two notches above the sovereign rating.

The issuer rating is no S and P does not rate any bank above the sovereign rating of India. So the issuer rating for HDFC Bank continues to be triple b minus stable rating. So this sort of is a testimony of the fact that our the balance sheet is very strong. Our asset quality continues to be reasonably sound, and even after and probably as you would probably listen to some of my colleagues who are here in terms of the stresses that we have done in our portfolio to take into account any potential impact of a prolonged impact of COVID over a period of time. So this is a testimony which I wanted to share.

A lot of questions I'm sure you will be having as to where is the quality of growth coming from. Is it are we chasing growth? Absolutely not. I can assure you that we have a wonderful distribution platform across wholesale, corporate, SME, and retail businesses. And, you know, it's I don't want to sound pompous about it, but the fact is the fact is a lot of companies, a lot of customers who would like to participate in in in our growth.

So we will have more of more of it. I mean, as in the in the press release and in the financials that have that have been released, you would know that the large part of the growth has come in from the wholesale sector. Retail has been muted about 15% and which is something which is understandable. It will continue to be a bit tepid over the next couple of quarters, and we would see strong, reasonably healthy growth coming in from the assets that we have put in on the wholesale side now or in future. But to get to give you more color about what is that quality of growth, Are we sort of trying to distribute these for biscuits, or is it something that is what is the why our company is borrowing?

To give you more flavor about it, I'll just request my colleague, Rahul Shukla, to talk about it, and then I it'll we we we will add more color to the other parts of the growth.

Speaker 3

Thank you, Sashi. Good evening, everybody. Thank you for joining the call. Both our corporate banking and business banking business, business banking is our wholesale SME business, had a satisfactory performance during the quarter. In corporate banking, specifically, strong growth performance was also helped by corporate's desire to keep liquid cash post lockdown as implications of COVID nineteen became clearer.

So, obviously, there are few questions that will come up as a result of this. Question number one, where did the growth come from? Our corporate banking business benefited from strong client support. The bank disbursed to public sector corporations, to nodal agencies, private sector, and MNC corporates. The bank refocused more sharply in serving businesses that have strong liquidity access through public markets, debt or equity, or have ownership, you know, by the government or or access to liquidity because they are part of large business groups.

And to a second set of businesses, which I call epidemic resistant businesses. We saw broad based growth across sectors such as power and power infrastructure, agriculture and allied activities, including fertilizers, material, energy, discretionary consumer, etcetera. The bank also supported liquidity needs of the ecosystem, including banks and NBFCs by using RBI provided tools such as PSL on lending, priority sector on lending, securitization, direct assignment, and interbank participation certificates. The second question that one would think about is that what was the purpose for which corporates borrowed in this particular quarter? When we analyze top 20 disbursements by value during the quarter, that shows that 41.9% was towards working capital requirements, 23.6 was ultimately towards capital expenditure, 15 and a half percent was balance sheet borrowing for acquisition of assets, including in the NCLT process.

9.3% was towards on lending for PSL purposes. And the balance 9.7% comprised of other reasons, including availing existing lines for building liquidity buffer. The third question I would ask is, did the bank lower its risk criteria in gaining this growth? The answer to that is that the bank did not lower risk threshold at all. Almost all of the quarter on quarter accretion in the book came from top half of a 10 internal rating scale, which has served the bank well over the years.

In fact, over 92% of the book or the incremental book came from the top 30% of the rating scale. Nominal residual cases were to subsidiaries of large entities which have a lower stand alone rating, but may be backed by support from the parent or for disbursements for PSL assets. The bank continued to diversify its book and reduce concentration. Its NNN squared 100 programs contributed to approximately one third of the year on year asset book accretion. Over 80% of the q o q disbursements, including rollovers, were assets with less than one year tenure maturity.

The fourth question, what impact does it have in cross sell generation? The bank remains transaction bank of choice in the marketplace. It did over two fifty line items of fresh disbursements and rollovers in March alone in corporate banking in a smooth and error free fashion, including during the lockdown period. This was made possible by switching to digital completely for approvals and execution. Together with customer support and our digital cash management systems, we also saw end of period CASA in corporate banking double over a two year period in the corporate banking segment.

The bank also saw a strong traction in corporate salary initiative. With regard to our business banking or wholesale SME business, the bank continued to pursue business on the basis of granularity, geographical spread, sound credit profile, and risk mitigation through self funding, high collateral value, and strong documentation. The asset book moderated slightly on a q o q basis, as in, you know, fell slightly while growing on or about mid teens on a y o y basis. Business was impacted due to lockdown as new acquisitions could not be converted given the lack of ability to perfect documents. The bank was not prepared to dilute risk or housekeeping standards.

Regionally, we saw strength in the environment in Southern India, parts of Northern India, Punjab, Haryana, and UP, and in Central India. Activity levels remained modest in Western India. From mid March until mid April, the overall wholesale SME book has continued to be on a downward trend, which is credit positive from a client selection point of view. The Y o Y growth is evenly spread across geographies After over fifteen hundred new clients acquired in this quarter, slightly over 30% were from Suru locations, semi urban and rural locations. Bank's network remains its core strength in this business.

Granularity was maintained with approximately twothree of the disbursements under wholesale SME segment being for amounts less than INR 1 crore. Our focus on collateral cover remains intense, Approximately 85% of the cases in this quarter, which were disbursed, had a collateral cover in excess of 100%. About 60 to 65% of the book is classified for priority sector lending purposes. Given that approximately three fourths of transactions are done digitally, the bank continues to remain fully available for its wholesale SME segment customers through use of its digital platform. In conclusion, two more unanswered questions that are common to both the groups.

Number one, what is our outlook? The bank believes it will continue to benefit from flight to safety on liabilities and that the better borrowers will continue to associate with us, and more and more will, you know, come and be associated with us for stable funding supply. Therefore, the growth rate will remain higher than the market growth rate as in the past. The second question, what proportion of corporates do we expect to avail moratorium? While requests have started coming in and are being processed after checking eligibility and other criteria, it is difficult to set a trend this early.

Bank would expect several large corporates with access to public equity and debt markets to conserve cash given the uncertainty on when normalcy would be restored, actual requests received as of date in corporate banking segment remains low. On the other hand, smaller private players in wholesale SME segment without access to liquidity in public markets would look to reduce their operating and financing costs. As of now, a very small percentage of BBG customer base has indicated they will avail moratorium. However, given that they can make an application anytime within the time frame permitted by RBI, the current survey may not reflect the final trend. At this point, I hand over to my back to my colleagues.

Speaker 2

Thank you, Rahul. So just to you know, we've as of March 31, still about 75 to 80% of our book is to double a and above rated companies. We do have an internal rating and an equivalent of we have a mapping vis a vis the external rating, and this is how it is. Since the last three quarters, in fact, the rating the rating of all the assets of the disbursals that we have been put up has actually improved to even better even during this particular quarter. And this is quite evident from what Rahul had just mentioned, the kind of corporates that he has been patronizing.

Even from a sectoral exposure perspective, I think we have a fair amount of diversification of more than 150 plus sectors. Even the high risk sector that we are talking about in terms of during the COVID, what are the the impact that's gonna happen to the travel and all these other sector allied sectors is not is a very small, low single digit number. A lot of questions have been asked about the unsecured portfolio, the composition, you know, what is the risk profile of these customers, what is the granularity, what is the tail. I mean, a lot of us people by know you know, by now, all of you would know that we have a large salaried book. What is the quality of the salaried book?

What is the quality of the non salaried book, etcetera? So to give you more color in that, let me just hand this over to Jimmy Tata, our chief risk officer, to give you some color onto that.

Speaker 4

Thank you, Shashi. Good evening, everyone. I'll just look at the various aspects of the retail portfolio. I'll look at the various aspects of the retail portfolio and cover some of the parts relating to the unsecured in particular where there have been a lot of questions and also let you know how we have built this portfolio, where we stand entering the crisis, although it was an unknown unknown, and what we see happening through this crisis as well. So to start off with, to just give you a flavor, compared to the rest of the market, the condition in which we are entering these businesses is a delinquency level of between 40 to 60% of the rest of the market depending on which product we take to look at.

And to make a comment even on the tail end or what is considered the tail end of the portfolio, if you look at low SIBIL bands, we remain at a 30 to 50% below market delinquency even in low civil bands, I. E, some higher risk customers who you may find. It would be further interesting to note that the areas where we have an even better positioning vis a vis the market are actually in the self employed, which are considered the higher risk amongst the unsecured as well. How this has been achieved is primarily through our long standing and continually developed analytical assessment skills. The bureau scores, for instance, form a very small percentage of the HDFC bank analytical and underwriting process.

We look at multiple scorecards. We also look at multiple bureaus for that matter. Each of these scorecards, whether it is based on behavior, whether it is based on demographics, whether it is based on a financial parameter, or whether it is based on the actual intrinsic worth of a person, movement in accounts, everything else, to a discriminating power. This is an internal nomenclature that I'll probably use, may not have heard it before. We have a composite score coming out of this called the p 27.

I won't go into the details of how that got named, but it's relatively it belongs to some of the components that went in. But this has been proven to have two and a half to three times higher differentiation compared to any individually used scorecard. And this is one of the strengths that the bank possesses. It is proprietary, and it has been in use for well over a year now. We look at the we look at the performance of the portfolio in various ways now just to break it up in the unsecured.

So questions have been asked, and I'll just try to answer them as I recall them. So there were questions asked initially on the ten second loan portfolio that we have. Do we still offer it? Do we still give ten second loans even after this crisis has hit us? The short answer is yes.

But the base on which this product is offered has been paired considerably to bring the risk down to an extremely low level. The base has been paired to a level where the probability of default is rather small. Can't give the number right now, but it is rather small, and, therefore, would be considered rather safe. Another question that was asked because we have always put out, as you will rec if I can recap for a minute, we have always put out that 80% of our unsecured portfolio is to salaried individuals, and 20% is to the self employed. So let me take this separately.

We have also often stated that around two thirds of 67% of the salaried base is not merely salaried, but actually belongs to salaried employees of very, very well regarded entities. Talking about triple a and double a companies, government entities, multinational corporations, etcetera. This has led to a question which I would like to answer and address now as to what about the 33%. Is that a high risk or a vulnerable segment? The best way we can put this across to you is that if you look at the observed delinquency of the remaining segments, it is 0.09% or nine basis points away from the rest of the portfolio.

How is this achieved despite the employer category not being the same? There are various filters that are put in at the underwriting stage. We have higher requirements on the strictures for leverage. We have product caps. We have lower multipliers.

And, of course, we are choosy about the entity that goes in in any case and also as to the rank of the employee within the organization at that point in time. So all these additional filters into the product enter at those lower levels, and thereby, the observed delinquency is not very far away from the rest of the portfolio. I just thought I'll put this out there because, usually, we try to put things out in a manner that would be universally understandable. So it shouldn't mislead anybody that the rest of the portfolio, which does not belong to such highly rated entities, would be at risk. These are the precautions that are taken, and here is the observed delinquency on that as well.

If we move on to the self employed segment, Over here, yes, one would have to admit that there would be a greater impact from the COVID phenomenon. There would be disruption in cash flows, and some people would find difficulty to make their payments. However, one has to say over here, once again, the entry point for HDFC Bank into this is a 90 plus of around point six six or so in this particular segment. The the level of delinquency in the if you wish to call them stressed or the high they're not yet stressed, but at least the high impact industries and segments that are thought to come out of this is pretty much in the same range, within single digit basis points of the same range once again. So here again, we have careful selection, monitoring, rationing of the facilities, etcetera, that look at this.

The high impact 90 plus, therefore, is very similar to the regular businesses and industries based on these filters that have been placed. That's what I would have to say on the unsecured portfolio. And I'll just move on, if I can have a minute, on a couple of the other segments. I'll very quickly go through corporate because I think Rahul has covered it in a very significant way. To put out again, this time, I think I would like to speak about our internal grading system rather than external ratings because once again, we rely on that far, far more than we do rely on external ratings.

So we have an internal rating system in HDFC Bank on a scale of one to ten, one being the safest and 10 being the riskiest. The mapping of these into the various external ratings to give you some flavor, and this here again would allow you a reflection on the tail of the portfolio to so to speak, and I will come to the part of the port the larger part of the portfolio, which is in the low ratings. But let's look at even the higher ratings, which, as I said, means a higher risk on our scale. The lowest rated or the worst rated, let us say, investment grade acceptable to onboard is HDB seven from our ratings of HDB one to 10. We would not onboard anyone who came in at a rating lower than this.

If you look at the probability of default and the observed default rate of HDB seven in HDFC Bank, it actually maps to a rating of a, which would be given by the best rating agencies in the country today. So our our investment grade, so to speak, if you could use that term, would be HDB seven, which would match to ONA. The rating agencies themselves have an investment grade, which is accepted up to a triple b minus, which would be a four notch difference beyond what is accepted by us. So this is the portfolio. This is how it has been built.

This 10 grade scale has served us well for twenty five years and has proved to be very reliable through industrial crises and all sorts of crises. And just to give you a flavor of how the highest risk onboarding maps onto the national scale. If I can take just one moment more to let you know of where the portfolio itself stands. Towards the middle of last year, one would say on this scale of one to 10, we had a weighted average rating of around 4.6. By December, this had improved to a 4.56, which is rather close, I would say.

And in March, this has improved further to a 4.43. Rahul mentioned for a moment the various categories of companies where we have seen good corporate growth, namely the very strategic and large central government PSUs, the flagships of India's best rated corporate entities, and, of course, some MNCs. The weighted average rating of these assets put on in the last part of the quarter is 3.5. So to give an indication of the safety behind the growth, that's what I could put on if I manage to explain about our rating grade. And while I'm on just a minute more on the SME segment, which obviously is in focus at this point of time, growth, of course, has been low and moderated as you would Rahul did also mention about the portfolio running off in recent times, which we, of course, take as a Proprietary behavioral score.

I would be quite happy, in fact, to report that the decrease in the high risk behavioral scores has been quite noticeable in recent months. This was the result of several initiatives taken during the whole of the last year. We made a considerable thrust on having churn of receivables through our own banking accounts so that we could monitor activities, this churn improved quite significantly and is obviously, as you would expect, a major consideration in the behavioral score. We also look at a concept called self funding. And what this means is liquid funds held by the borrowers, the borrower promoters, their families, their associates, their trusts in HDFC banks.

So what we are referring to here is liquid assets held by them in our bank itself. I don't mean to say that these are landmark or to be considered as security, but this is definitely an indication to us of the wealth and liquidity available to these promoter families and would definitely be a reflection of the selection quality of promoters for onboarding into our SME portfolio. At this moment in time, I would just say that there is in excess of 60% of the advances at a portfolio level that are held in these liquid funds. I repeat, they are not collateralized, but they are a fraction of the wealth and the liquidity available with the promoters whom we have chosen to put in the portfolio of SME. Further, I must mention, although this is only a second way out, and therefore, we pay less attention to it and far more attention to the cash flows, But the portfolio at an aggregate level is 77% collateralized by real estate property, which is either commercial or residential belonging to these same promoters.

So these are the relative strengths that we have entered the fray with. Now let me also comment on what would happen once we have entered. We stressed this portfolio in the early days and continue to do this exercise. We looked at three different scenarios of reasonable stress, strong stress, and extreme stress. The strong stress scenario led us to a conclusion that around 9% of the portfolio may find themselves vulnerable to impact, meaning they may find it difficult to honor obligations as they fall due.

But I would like to specify that this is without taking into account any advantages of the moratorium granted or the DPD freezing or any such other concession that has been officially given. So this was the stress level that was envisaged in the mid scenario. Naturally, we have been in touch with several of the customers. We have taken a voice of customer. Not many have actually told us that they would wish to apply for the moratorium.

I must once again say here that we should wait. They still have an opportunity to apply. They also have an opportunity to change their mind, although we have contacted a very large number of them. So this must be taken as a number at this point in time. Several of them have informed us that they would be wanting to arrange funds on their own for their rehabilitation because they are cost conscious, and they understand that the moratorium itself entails a cost.

So if they do have liquidity, they would wish to use their own liquidity at this point in time rather than avail of the moratorium. So this is the status where we stand on the SME piece as well from a risk perspective.

Speaker 2

Right. Thank you. Thank you, Jimmy. Probably, he can come come on after probably some of you, we open it up for questions. But before that, let me just conclude.

You know, we the the team actually set up to do a stress test on the entire portfolio, whether it's corporate, SME, or retail. So as Jimmy alluded to just now, we did sort of stress saying that assuming the sales are impacted by 40% in the near term and 20% later. Correct. And then he came out with a certain number without considering the impact of moratoriums or the leeway that has been given by the regulator, which is about 8% to 9% of the portfolio. Similar exercise was done on the corporate book as well, wherein the post distressing or the shocking of the portfolio, what was the implied DSCRs and the which which were the ones which are comfortable, which are the ones which are not comfortable, all that was assessed.

And for the retail portfolio, we shocked the flow rates. As you know, there is there are standard accounts, and there are things which move into overdue. And within the overdue, there are various stratification of the buckets which move into. So the movement, the forward flow to the bucket is a is a combination of the inherent nature of that particular customer plus the collection effort or efficiency as well. So we had a bit of a a shocking of that, assumed that we will have zero amount of efficiencies in the month of April, which is a fact, which probably could be a reality.

And we sort of took a certain amount of smaller efficiencies in the month of May and maybe to a near normal efficiencies in the month of June. So this is how we've gone about, and the the resultant is what we had we had a number called x. So we have then multiplied by an x times of that to to arrive at that 1,550 of contingent provisions. So, obviously, what it shows is that we have enough buffer of credit reserve to be able to withstand this kind of a shock that probably we are anticipating that things will start to normalize sometime around March and sorry, May and June. But in case it gets prolonged even beyond, whether it is unsecured, whether it's secure retail, whether it's SME, whether it's corporate, I think we have done enough amount of provisioning to take care of any any events that may happen in future.

So let me conclude, and let me stop here, and I'll have put the floor open for questions.

Speaker 0

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

Participants are requested to limit their questions after two for participants. If time permits, you may join the question queue for any follow-up. Ladies and gentlemen, we will wait for a moment while the question queue is The first question is from the line of Maruk Adajanya from Adana Capital. Please go ahead.

Speaker 5

Speaker 2

Marukh, are eligible. If someone comes in in April or in May, we are obligated to provide them that moratorium. As of now, it's only in single as Jimmy was mentioning, only low single digit customers have opted for moratorium. As he also gave a color to that, strangely, 95% of the customers are all non overdue customers. They have no overdues at all.

So survey he did a survey. I know a lot of other analysts have been doing a lot of surveys around, but the the the extent of survey here is much larger. And here, the survey, as he mentioned, is primarily the results are coming about that people want to be cautious. So that's the reason why they are so there is a bit of a fear psychosis. There is a bit of a fear.

They wanna be cautious. They wanna enjoy the benefits. If someone is giving that kind of a benefit, even though there's a cost to this particular moratorium, they are saying that it's better to take it. And mind you, even from the survey, even from their balances, even from the salary credits, it's very surprising because when you see the salary credits, when you see the balances in these customers who have taken moratorium, there are balances. The salary credits are coming in, but still they would like to avail of the moratorium.

Speaker 5

Got it. Thanks. And what are the what are the new credit tightening measures that you would have introduced in March or April, credit scoring measures rather in retail?

Speaker 4

Maruk, every single product and portfolio has been filtered further. I would like to preface that by saying for the twelve months prior, because of the stress in the economy itself, we were progressively filtering every single product, and that is why we have probably, fortunately, entered this crisis in much better shape than we would otherwise have. So it's been very fortunate for us. But the exact filters applied to each product, Maruky, will understand is a little proprietary to us, and we would not wish to disclose it on a call. But suffice it to say that the probability of default has been brought down in significant measure even beyond what it was after the crisis in response to the crisis.

Speaker 1

Part of the routine credit architecture to keep reviewing in terms of calibration.

Speaker 4

This is this is life in the bank. So observing, applying, remediating is is it's life in the bank. So this goes on all the time. And that is why we had twelve months prior to the crisis of doing it even before we walked into this.

Speaker 2

Let me add one more, you know, since a related question, probably a lot of people may be asking is that during this period, there'll be a lot of credit hungry customers who are less than thirty years who have an income level of 25,000 to 50,000 per month. And in times like this, this will be all vulnerable. You know, the the beauty as what's his name? Jimmy was mentioning, okay, we have credit hungry algorithms already in place for a long time now across all income bands, which identify such people upfront. So it's not something that we need to do a work now.

So wherein we know for certain, we we know which are the kind of customers where the leverage is low, where we the propensity to take more and more loans is much lower. These are the kind of guys, if at all they are in that particular band, we will be patronizing. Otherwise, no. So we do have algorithms which are which we call the credit hungry algorithms, which is there in place for a long time now. So it's not something that we need to invent or be worried about the fact that in this in this kind of times that there will be people who will be wanting to borrow more, and we will be having a lot of adverse selection.

Speaker 4

Correct. I had alluded to it a little earlier. The credit hungry concept has been part of our p 27 arrangement and scoring methodology for a very long time. We've been doing this for years.

Speaker 5

Got it. Thank you. Thanks a lot.

Speaker 7

Welcome. Thank

Speaker 0

you. The next question is from the line of Kunal Shah from Edelbite. Please go ahead.

Speaker 8

Yeah. Hi. This is Kunal Shah from ICSA Securities. So three sets of questions. Firstly, thanks for such a detailed description in terms of how you are managing it.

But just to again come up on this contingency provisioning of $15.50 odd crores, So you highlighted maybe in the worst case applying x times maybe for things get settled, say, in May and June. That's the provisioning buffer which we have already build up. So it means that based on the information avail available in the current situation, we are very adequately covered, and there will not be the requirement in q two. So it in in the next quarter. So should I assume that what came from RBI yesterday in terms of splitting or upfronting the provisioning over two quarters, can we comfortably say that we had done it in this quarter itself?

Speaker 2

As we had mentioned in the press release, basis of the information, I think we are extremely comfortable, but only time will tell what's gonna happen in the future. But notwithstanding this, I think if you really look at the stock of buffers of credit reserves that we have had we had, which Srini had mentioned, we have a thousand 500 crores of floating provisions. We have another how many 3,000 crores total of contingent provisions. You know, these are the times if at all, there is a need, these these are the times that we will use it because that's that's the nature of countercyclical provisions. So we have enough to take care of even if there is a truck which comes and rams into us.

But I think the way it's going and the way we have we have our architecture built, I don't think there would be a need to do that, but we are just keeping all these things in handy in case there is an need for that in the worst case, you know, the cabin pressure were to drop.

Speaker 8

Surely. And in terms of the subsegments, so the way we highlighted, like, 9% of the SME banking could be vulnerable in the worst case, and we had done this exercise across the wholesale as well as retail. So maybe the broader breakup of this $15.50 odd crores, the way it would be split between these three categories of wholesale retail, the way

Speaker 0

we we would have done.

Speaker 4

I don't even want work.

Speaker 2

No. No. No. No. See, the 9% is vulnerable.

We have

Speaker 1

as as you know, we have few times in the quarter, we have dropped the interest rates. All through the quarter, we kept dropping, testing various price points. That's part of a regular process in terms of how in the alco, we determine the strategy, both in terms of the rates that that is required and the communication that needs to go into the field to our arms and thereby to the customers. And then we test various price points where where

Speaker 8

okay.

Speaker 0

Hello?

Speaker 1

These price points. And and and all of those price points have been have been proved to be quite okay, quite good. The deposit growth in the quarter, I think I alluded to saying 80,000 crores of deposit growth in the quarter.

Speaker 8

Sure. Sure. Okay. Yeah. Thanks, all the best.

Speaker 0

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

Speaker 9

Yeah. Hi. Just two quick questions. One is, what is the board decided with respect to the candidates for the CEO? Has that been referred otherwise, it's going to be referred to the Reserve Bank of India?

Has it been decided? And the second question I have, you know Tashi, do you think there is really a moral hazard creeping in? Because when you are saying that 95 to 98% of the customers in the retail category are still availing just because, you know, they are worried about whatever could be the reason. We see has shown that whenever such moratorium has been given, eventually, people don't come back and pay the money. And this can really potentially harm the credit culture or behavior or something.

It just happened in the farm loans. So I'm just worried about that. What is your initial assessment?

Speaker 2

Okay. On the first question, I'll have Srini sort of respond if at all he has any information because I was not a part of the board meeting, number one. Number two is on whatever you've just mentioned. See, the thing is we are in a very uncertain or a very unusual kind of an environment. Will there be a stress for people?

Absolutely. In terms of some of them, even though I do say that we do have 80% of our unsecured book in salary segment and 80% of that in the AAA corporates and IT companies and government organizations, where the stability of the particular of their jobs will be much better than the normal jobs. But still, you know, it will take some time. Assuming this is prolonged, there will be a time when even these kind of people will be hit. I'm not saying no, but they will be resilient.

The reason why I'm saying it, they will be resilient in terms of by the time it comes and hits the levels of, you know, the mid mid and upper mid level executives and the salaries that we are talking about because we do. God has been kind. I think the kind of corporate we are the largest salary bank in the country today, and we are probably the salary bank to most of the double and above corporates in the country. So we have a bit of a kind of a far more optimism or cautious optimism in terms of the layoffs that will happen. Probably, some of the companies by June may decide to manage their costs, could have a bit of a wage cut, etcetera.

That is possible. But is it something that we have we are comfortable with that kind of scenario? Absolutely. But surely, Cassie and CADD companies, which is also where we have which is a very small element of number, you know, we have seen that, you know, there, it's just about, as Jimmy did mention, seven or nine basis points higher than the normal delinquencies. So even there, one would say that you have an exposure there.

But the point is that we have tried to pick and choose the ones which are more as as Jamie was mentioning, the algorithms which which ensure that they are not the they don't fall into the credit hungry algorithms, and that is how we have tried to do this. But, of course, there will be this model risk wherein you have to factor all these things, which is what we are saying. There will be a bit of an increase in NPLs. We have seen it in 2007 and 02/2008, wherein the range of gross NPL was between the range of 1.3, 1.4 to a 2.09 up to September 2009. Will this are we gonna be within that kind of reach?

My hunch tells me after doing all these stress tests that we it should be unless and until it goes beyond even our what we have estimated in our stress test. But as we speak, I don't think there is any any sort of you know, we don't have too much of a worry saying that this will you would we will have a worry. I'm not saying no. But we have provided enough to to be able to cushion all these kind of things that may happen, which is you are alluding to.

Speaker 0

Thanks. I have first question.

Speaker 1

Sure. Sure. So the first question, one is that, you know, I just want to mention that's a perimeter of the board. We have we have put out a press release today, but if you would be glad to see that

Speaker 0

Okay, sir. Can I request it to be processed for our audio speaker?

Speaker 1

Oh, sorry sorry, Suresh. My microphone was muted because she was talking then. Now one is I just want to mention that that was a predicative of the board, but nevertheless, think as a as a bank, we put out a notice in the stock exchange today. You you'll be glad to see that. All that it says is that there is a shortlist and will be submitted to RBI.

And then the details will be known and received after the RBI review and so on.

Speaker 8

Okay. Thank you.

Speaker 0

Thank you. The next question is from the line of Manish Karwa from Access Capital. Please go ahead.

Speaker 10

Yeah. Hi. Am am I audible?

Speaker 2

Loud and clear, Manish.

Speaker 10

Yeah. Yeah. So she's see, in this in the upcoming environment, wherein the growth environment is gonna be extremely slow, fee cost will fee fees will actually decline. I think one tool which probably every management has and probably every management is now working on is on cost front. Now we are actually coming up on the back of a very strong investment in branches, decent investments in people and technology.

How do you think the costs will behave from here on? And, you know, what sort of tools and cushions you have available on the cost ratios going ahead?

Speaker 2

You know, it's a very good question because we we are certainly very surprised by the way that we have adapted ourselves to this working from home concept. I did not think that a bank of our size could adapt to this kind of a a methodology or a mode so easily in the last three three weeks or four weeks that the lockdown has been. Right from the branch, the largest channel, the branch channel, apart from the people who need to go to the branches for operations, like the cash operations or the other teller operations, large the entire relationship management team, which is a personal bankers and the private bank and the the preferred bankers, h and r m, who handle about almost 4,000,000 customers as we speak, have started to work from home in a manner far more efficiently than what they were doing while they were in the branches. A, the logistics have sort of is not there. So the callings are much more much, much more than what they used to do when they were in branch, and they had to go on a call or a visit to meet a customer either at his residence or at the office.

So we believe that, you know, in going forward, we want to make this as a way of life, not just here, but also for our large part of our the wholesale relationship team, the SME relationship team, the virtual you what is what amazes amazes us is the virtual relationship team, the call centers. We didn't realize that there are technologies which they have sort of, you know, introduced in the last couple of weeks wherein sitting from home, you can go through the call center as if you're calling from the call center. So that's the technology that is there now, and that is what we have adapted. And I'm I'm sure with a bit of an experience on effective supervision, I think this will be the way of life going forward. What will that do?

We will probably be spending a lot more on cybersecurity and all the other related security investments that is required or the incremental end use point technology investment that is required for getting the higher amount of VPNs in so that people can access their data on a secure basis from home, but other and also heightened monitoring for such accesses. But what that will do is over a period of year or two, we will have to we there is there will be an opportunity to rationalize a, the infrastructure, b, and hence, the allied or related expenses on infrastructure. Two is even the people themselves. Because if you have someone who's doing about two to three calls a day, and now he can do about eight to 10 calls a day, effective calls, okay, that itself is a massive change. So you will have a bit of a better productivity and efficiency measure.

We have not sort of dimensioned this, but we have a a very serious project team at a very senior level handling this. Over a period of the next three to six months, I think we will have a kind of a vision and a plan in place, which will then be translated into a micro level execution plan.

Speaker 1

Significant productivity significant productivity improvements must come through this process, which is which is natural. And the second thing that this is also driving us is wherever the straight through process, we have some things which are real, real straight through, exactly, goes through straight. There are some straight through which has got some kind of a handoffs where things can fall. Those things are getting stitched together by our operations and technology team to ensure that we have real straight through, and it goes. Right?

So these these kind of other digitization type further on the scale, they're expected to get more benefits.

Speaker 10

And on numbers, all these things would mean that my cost ratios will continue to decline in the next one, two, three years?

Speaker 2

I would say yes. In the medium to long term, absolutely yes. Surely, as you would know that it probably in the if you're talking about in the next few quarters, we need to get back our business, you know, while wholesale is rocking at the moment. But I guess, you know, there is also a finite appetite for all that. Retail will take some time to build up its momentum.

So until then, you will have a bit of a tepid top line for a quarter or so before we can get back to normalcy. Yes. You will see the cost to earnings declining in the medium term as we had promised in the past when we had said that if it's about 38%, 39% over a three to five year period, we should target a three to 5% decline in cost to earnings.

Speaker 0

Right. 3%

Speaker 10

to 5%. Okay. Thanks. And just a question back on your asset quality. Now in this quarter, if you see, even if I adjust for the COVID related 10 basis point of improvement that may have come in because of the moratorium, Even adjusted for that, our NPLs or slippages seems to have declined decently compared to the last few quarters.

Speaker 2

Yeah. Thanks.

Speaker 1

Okay. Good. Good. Addition. Manish, you wanted the slip page.

That number is 3150.

Speaker 0

Yeah. Thanks. Thanks so much. Thank you. The next question is from the line of Ashish Gupta from Credit Suisse.

Please go ahead. Hi, Ashish. Good evening. Just one quick question. In case of HDB, as yet, what is the percentage of borrowers who have applied for moratorium?

Is it similar to the at the bank?

Speaker 2

Speaker 7

You mentioned that April 17 circular, which asked for, you know, status quo on the DPD.

Speaker 0

Speaker 1

you you are, I guess, you are to annualized rate. Right? Normally, we report Okay. Okay. Okay.

Okay. Annualized, that that will answer your question. Yeah.

Speaker 0

Okay. Yeah. Yeah. And just one

Speaker 7

clarification on numbers. If I look at your contingent provisioning, that number was roughly about 4,000 crores as of last financial year. You have provided another about 1,500 crores on the same. And despite that, you know, the contingent provisioning number in the press release is roughly about 3,000 close. So can you give the reconfiguration there?

Speaker 1

Doesn't it doesn't I don't know from where you are picking up, but if you show the 4,000, we should be able to explain. But that number that you're quoting is not what we

Speaker 4

had or we have. That

Speaker 7

number I took from your annual report for FY nineteen, where you will separately provide for.

Speaker 1

Sure. You can send it to us. We could reconcile for you, but that number is not right.

Speaker 0

Okay. Okay. Sure. Thank you. That's it from my side.

Nick, your line is unmuted for question. Please go ahead. Hi. Can you hear me? Yes.

Speaker 1

Please go ahead. Yes. Go ahead, please.

Speaker 6

Okay. Thank you. Thank you for all the color, and I appreciate the fact that Bank has done a lot of stress testing on the portfolio. And I know there's still a lot of unknowns with the virus, but could you give us some color for us to get a better sense of the provisioning that we might see if we get a more prolonged period of lockdown? I.

E, like, do you have a sense of how many months your clients have liquidity before they start having more significant issues?

Speaker 1

Okay. In terms of liquidity, right, I mean I mean, it is anybody's guess in terms of what could when currently, the scheduled lockdown lifting is May 3, but it is anybody's guess. We'd love to hear from you what your views are when the lockdown will be lifted. Right? That is that will be another view that we will have.

Right? We have as many people in the bank, that many views we have. Right? That's something to keep in mind. There's no crystal ball exactly that we can do look at that.

The second thing second question that you asked in terms of the liquidity, how long how much we could last with, We are one of the strongest liquidity that was part of the first balance sheet strength that I recapped at the beginning of the call is the strength of the liquidity that the bank runs runs in. 100 and 132 percent is our LCR ratio. And and in and in terms of that, it turns out to be about nexus of 50,000 crores. That's that's more than enough cushion, right, which is 100% norm, which, again, RBA has taken it down to 80%, but 100% norm. We want to run above 100, above 110.

And anything above that is what we try to measure to say 50,000 crores or roughly 6 and a half billion in dollar terms. That's the surplus liquidity. So we have enough room, and there are enough deposits growth that we are having, which are deposit growth are outpacing the advances growth.

Speaker 6

Actually, I meant more specifically for your clients. Like, I know it's an average, but, like, do you have a sense of how long of a downturn your clients have in liquidity to still be viable?

Speaker 4

Hi, Nick. This is Jimmy. I'll just attempt to answer your question. So I partially alluded to this when I was making the opening comments. What we would know is from what we can observe of customer balances with us and, of course, what we have learned from speaking to the customers themselves.

As I mentioned in the SME segment, we do seem to have a relatively good set of customers. They do seem to have wealth, and they do seem to have liquidity, a fair part of which is, even as we speak, parked in the bank in liquid assets, and this could be used by them as and when they need. They have, in their conversations with us, even told us that they would be looking at using this. In fact, even over and above taking moratoriums because of the cost attached to the SIM. So it's difficult to say how many months it would last because we don't have their entire expense budgets with us from the overall family perspective.

We do know what the cost of the enterprises are, but they would obviously have bigger cost than that. In the retail segment, similarly, we have, as we mentioned, a large number of internal customers. We have looked at those accounts. We have seen that balances are fairly stable. The large salary population that we have, we have seen and maybe this is important to know the way things have progressed at this point of time.

I think the ethos of the Indian entrepreneur is showing through. They are concerned for employees, and they do not like to starve employees of their compensation. There have been a few cases where salary payments were delayed. But when we have noticed the salary credits into the accounts at a corporate level, they are not coming down. So we are not seeing cuts nor are we at this point in time really seeing layoffs.

So there have been some delays, and payments of salary have been made in a few cases with some delay. But apart from that, one would expect the cash flow of that segment also pretty much to remain intact, and that would come every month, month on month. So I presume they would have it for quite a few months. Unless, of course, one has to say out of caution, things change for the worse even from where things are now. And at that point, it would be anybody's guess.

Speaker 6

Okay. And just on strategy, with the current situation, are you slowing down your expansion strategy into the rural and semi rural areas? And would this have an impact on growth?

Speaker 4

The expansion, depending on the product and the line of business, will have slowed down. As we have always said, we neither push nor slow down. We run with a strong marketing infrastructure and a very firm risk policy on all products. As you would understand at this point in time, the risk policy naturally has been tightened considerably, and therefore, business flows into some products will have slowed down. If they slow down, so be it.

HDFC Bank - Earnings Call - Q4 19/20

Transcript

Speaker 0

Speaker 1

Speaker 2

Speaker 3

Speaker 2

Speaker 4

Speaker 2

Speaker 0

Speaker 5

Speaker 4

Speaker 5

Speaker 6

Speaker 4

Speaker 5

Speaker 4

Speaker 2

Speaker 4

Speaker 5

Speaker 4

Speaker 1

Speaker 2

Speaker 5

Speaker 4

Speaker 1

Speaker 4

Speaker 2

Speaker 4

Speaker 5

Speaker 7

Speaker 0

Speaker 8

Speaker 2

Speaker 8

Speaker 0

Speaker 4

Speaker 2

Speaker 8

Speaker 1

Speaker 8

Speaker 1

Speaker 8

Speaker 0

Speaker 1

Speaker 0

Speaker 1

Speaker 8

Speaker 0

Speaker 1

Speaker 8

Speaker 0

Speaker 9

Speaker 2

Speaker 0

Speaker 1

Speaker 0

Speaker 1

Speaker 8

Speaker 0

Speaker 10

Speaker 2

Speaker 10

Speaker 2

Speaker 1

Speaker 10

Speaker 2

Speaker 0

Speaker 10

Speaker 2

Speaker 1

Speaker 0

Speaker 10

Speaker 2

Speaker 10

Speaker 2

Speaker 10

Speaker 2

Speaker 10

Speaker 2