ICICI Bank - Earnings Call - Q3 20/21
January 30, 2021
Transcript
Operator (participant)
And now I have the conference. Sandeep Bakhshi, Managing Director and CEO of ICICI Bank. Thank you, and over to you, sir.
Sandeep Bakhshi (Managing Director and CEO)
Good evening to all of you, and welcome to the ICICI Bank Earnings Call to discuss the results for Q3 of financial year 2021. Joining us today on this call are Vishakha, Anup, Sandeep Batra, Rakesh, and Anindya. Thank you all for joining us today. We hope that you are safe and in good health. India is embarked on what we hope would be the last stage of its fight against the COVID-19 pandemic with the launch of the nationwide vaccination drive. We would like to extend our gratitude to the relentless efforts of the medical and research fraternity, healthcare staff, and all the essential service providers who have helped to put up a strong fight against COVID-19. I would also like to take a moment here to thank our employees for their service to customers in these challenging times.
The Bank's Economic Research Group's proprietary Ultra Frequency Index, which comprises several high-frequency indicators, rose to 106.3 for the week ending January 17th. The index has remained above 100 for the last four weeks, indicating that economic activity has crossed pre-COVID levels. Several high-frequency indicators such as rural unemployment rates, rail freight revenues, power consumption, E-Way Bill generation, and electronic toll collections were above the pre-COVID levels consistently in the last four weeks. The month of December registered the highest-ever monthly collections of GST, primarily on the back of festive season sales and rising collections on imports. The record agricultural output across Kharif and Rabi seasons last year, steady rise in Rabi crop sowing in the current season, and increase in tractor sales point towards a strong rural economy. There has also been an uptick in property registrations in December compared to September.
These trends are also reflected in the business and results of ICICI Bank as we continue to steadily grow our business within our well-defined framework. Number one, growth in the core operating profit in a risk-calibrated manner through the focused pursuit of target market segments. The core operating profit increased by 14.8% year-on-year to INR 80.54 billion in Q3 of 2021. The profit after tax increased by 19.2% to INR 49.40 billion in Q3 of 2021 from INR 41.46 billion in Q3 last year. Number two, further enhancing our strong deposit franchise. Deposit growth continued to be strong with 22.1% year-on-year growth in total deposits at December 31, 2020. During the quarter, average current account deposits increased by 26.5% year-on-year, and average savings account deposits by 15.9% year-on-year. The liquidity coverage ratio for the quarter was 146%, reflecting significant surplus liquidity.
Our cost of deposits continues to be among the lowest in the system. Our 360-degree customer coverage, digital platforms, and efforts towards process decongestion have played an important role in the growth of our deposit franchise. Number three, growing our loan portfolio in a granular manner with a focus on risk and reward. The continued pickup in economic activity and tailwinds from the festive season, combined with the bank's digital initiatives and extensive franchise, reflected in an increase in disbursements across retail products during this quarter. Mortgage disbursements increased further in this quarter over the previous quarter, driven by our efforts to offer a convenient and frictionless experience to customers by digitizing the entire underwriting process with instant loan approvals. Disbursements of auto loans have continued to increase from the September level and have crossed pre-COVID levels in December.
Till January 27, 2021, we have disbursed about INR 120 billion under the ECLGS 1.0 scheme, and about INR 6 billion has been disbursed under the ECLGS 2.0 scheme. The overall retail portfolio grew by 15.4% year-on-year and 6.8% sequentially. The growth of the performing domestic corporate portfolio was 9.6% year-on-year and 8.5% sequentially. Overall, the domestic loan portfolio grew by 13.3% year-on-year and 7.5% sequentially. The overseas branches portfolio, and within that, the non-India linked corporate portfolio declined both year-on-year and sequentially in line with the approach which we have. Fourth, leveraging digital across our business. We have continued to reimagine existing digital journeys in order to decongest service delivery and enhance the customer experience. The ICICI Stack helps us to curate and offer hyper-personalized solutions to our customers, suiting their life stage and business needs.
During this quarter, we expanded our state-of-the-art mobile banking app, iMobile, to iMobile Pay, which offers payment and banking services to customers of any bank. iMobile Pay can be used for making payments using UPI. It also offers instant banking services such as opening savings accounts, investments, loans, and credit cards. We have seen about 500,000 activations of iMobile Pay from non-ICICI Bank customers since it was launched just two months ago. We offered bespoke digital solutions for corporate and institutional customers, which enable us to tap into their ecosystem. The steady increase in adoption of these solutions and fund flows through our digital financial supply chain and trade platforms have contributed to the growth of our deposit franchise.
We have launched an online platform called Infinite India, offering not only banking solutions but also other value-added services for foreign companies looking to establish or expand business in the country. Number five, protecting the balance sheet from potential risks. The indicators around economic activities have been positive, and this reflects in the trends of our portfolio. The trends in collections and overdue across loan portfolios continue to improve during the third quarter of the current fiscal year. Rakesh will expand on this later. Loans amounting to INR 82.80 billion at December 31, 2020, compared to INR 14.0 billion at September 30, 2020, were not classified as non-performing, pursuant to the Supreme Court Interim Order.
The total funded balance outstanding to all borrowers under resolution as per RBI's framework, not included in these pro forma NPA numbers, is INR 25.46 billion or about 0.4% of the total loan portfolio at December 31, 2020. These are in line with or better than our expectations of NPA additions and loans under resolution. During Q3 of 2021, the bank made contingency provision amounting to INR 30.12 billion for borrower accounts not classified as non-performing, pursuant to the Supreme Court's interim order, and utilized INR 18.00 billion of COVID-19-related provisions made in earlier periods. Accordingly, the bank held aggregate COVID-19-related provisions of INR 99.84 billion at December 31, 2020, compared to INR 87.72 billion at September 30, 2020. This includes contingency provision of pro forma NPAs amounting to INR 35.09 billion at December 31, 2020, compared to INR 4.97 billion at September 30, 2020.
On a performing basis, the provision coverage ratio continued to be robust at 77.6% as of December 31, 2020. As mentioned in our previous earnings call, our aim is to be proactive in provisioning with the objective of ensuring that the balance sheet is robust at all times. We will extend our provisioning policies on NPAs during this quarter. Our contingency provisions on performing and non-performing loans during the quarter also take into account the revised policy. The provisions during the quarter were higher by about INR 21 billion due to this more conservative approach. To summarize the quality, the provision coverage ratio on a performing basis is robust, less than 90-day overdue above the normal pre-COVID level, substantially lower at end December compared to end September.
We are confident that the COVID-19 provisions we hold as of end December will completely cushion the balance sheet from potential credit losses which may arise due to the pandemic. As we have stated earlier, we expect credit costs to normalize in fiscal 2022 based on our current expectations of economic activity and portfolio trends. Sorry. Number six, maintaining a strong capital base. The capital position of the bank continued to be strong with a CET1 ratio of 16.79%, including the profits for nine months of the current fiscal year. This strong capital position does not. Of the bank's investments in listed subsidiaries of about INR 764 billion. Looking ahead, we see optimism in the economy supported by the indicators of resumption of economic activity and continued growth in digitization.
We believe our extensive franchise, high-quality digital solutions, our approach of 360-degree customer centricity, our prudent risk management practices, and our strong capital ratios put us in a good position. Opportunities that will arise in the near and medium term. We will continue to focus on delivering consistent and predictable returns to our shareholders. With these opening remarks, I will now hand the call over to Rakesh. Thank you, Sandeep. I'll talk about the balance sheet growth, credit quality, E&L details, capital adequacy, portfolio trends, and performance of the subsidiaries. Starting with the balance sheet growth, the overall loan portfolio grew by 10% year-on-year at December 31st. The domestic loan portfolio grew by 13.3% year-on-year and 7.5% sequentially at December 31st. The retail portfolio grew by 15.4% year-on-year and 6.8% sequentially.
Within the retail portfolio, the mortgage loan portfolio grew by 15% year-on-year, business banking by 39.4%, rural lending by 24.6%, medical and equipment loans by 8.1%, and auto loan portfolio by 6.9%. Growth in the personal loan and credit card portfolio was 9.1%. This portfolio was INR 636.56 billion or 9.1% of the overall loan book at December 31st. The disbursements in the retail portfolio have increased substantially in Q3 compared to Q2. Sandeep has already talked about the trends in the mortgages and auto loans portfolios. While the disbursements in the commercial vehicle and personal loan portfolios have increased in Q3 compared to Q2, they continue to remain below pre-COVID levels. Credit card spends have reached pre-COVID levels in December, led by increased spends in categories such as health and wellness, electronics, and e-commerce. These trends resulted in healthy sequential growth across portfolios.
The SME business comprising borrowers with a turnover of less than INR 2.5 billion grew by 24.6% year-on-year to INR 270.93 billion at December 31st. The growth of the performing domestic corporate portfolio was 9.6% year-on-year and 8.5% sequentially, driven by disbursements to higher-rated corporates to meet their working capital and capital expenditure requirements. While various sectors and corporate clients contributed to this growth, some focus segments were highly rated PSUs and large established corporate groups. The overseas loan portfolio declined by 25.7% year-on-year in U.S. dollar terms at December 31st. The overseas loan portfolio is now 6.2% of the overall loan book at December 31st. We had mentioned in our previous quarter earnings call that we would be progressively exiting our non-India linked exposure in a planned manner. The non-India linked corporate portfolio reduced by 48% year-on-year and 14% sequentially at December 31st.
Coming to the funding side, we continue to focus on daily average CASA balances and retail term deposits. Average savings account deposits increased by 15.9% year-on-year and average current account deposits increased by 6.5% year-on-year during the quarter. Total term deposits grew by 26.1% year-on-year to INR 4.8 trillion at December 31st. Coming to credit quality, loans aggregating INR 82.80 billion compared to INR 14.1 billion at September 30th were not classified as non-performing at December 31st, pursuant to the Supreme Court's interim order. Of the INR 82.8 billion at December 31st, INR 75.2 billion was from the retail portfolio and INR 7.59 billion was from the corporate and SME portfolio. The reported gross NPA additions during the quarter were INR 4.71 billion. Recoveries and upgrades, excluding write-offs, were INR 17.76 billion in the current quarter.
There were recoveries and upgrades of INR 9.33 billion from the retail portfolio and INR 8.43 billion from the corporate and SME portfolio. The gross NPAs written off during the quarter were INR 27.36 billion. The gross NPAs sold during the quarter were INR 0.88 billion. The net non-performing assets were INR 48.61 billion at December 31st compared to INR 71.88 billion at September 30th. The gross NPA ratio was 4.38%, and the net NPA ratio was 0.63% at December 31st, 2020. The gross NPA ratio on a pro forma basis was 5.42% at December 31st compared to 5.36% at September 30th. The pro forma net NPA ratio was 1.26% at December 31st compared to 1.12% at September 30th.
We had mentioned in our previous quarter's earnings call that the corporate loans under resolution via the framework announced by RBI in August would be less than 1% of the total loan portfolio of the bank. Excluding pro forma NPAs, the total fund base outstanding to all borrowers under resolution is about INR 25.46 billion or about 0.4% of the total loan portfolio at December 31st. Of the above fund base outstanding, INR 8.37 billion was from the retail loan portfolio. The bank holds provisions of INR 3.85 billion for these borrowers, which is higher than the requirement as per RBI guidelines. Going forward, the asset classification of corporate and SME borrowers under resolution would depend on the timing of implementation of resolution schemes and payment performance in the interim. As you're aware, there is time till June 30th for the resolution to be implemented.
Resolution has also been invoked for Pro Forma NPA loans, which have crossed 90 days at December 31st, amounting to INR 8.88 billion. Compared to the normal pre-COVID trends, the percentage of the retail EMI products and credit card portfolio, which was overdue for less than 90 days, was about 1.5% higher at December 31st compared to about 4% higher at September 30th. The percentage of the performing rural portfolio, which was overdue at December 31st, was about 1.5% higher than the normal pre-COVID trend compared to about 1% higher at September 30th. The percentage of the SME and business banking portfolio overdue for less than 90 days was similar to the pre-COVID levels at September end and remained so at December end also.
In the domestic and overseas corporate portfolio, less than 2% of the portfolio was overdue for less than 90 days at December 31st compared to less than 3% at September 30th. Coming to the P&L, net interest income increased by 16% year-on-year to INR 99.12 billion. Interest on income tax refund was INR 1.96 billion this quarter compared to INR 0.26 billion in the previous quarter and INR 0.16 billion in Q3 of last year. We have reversed the interest accrued on pro forma NPAs, and the same is reflected in the net interest income for the current and previous quarter. The net interest margin was at 3.67% in Q3 compared to 3.57% in Q2 and 3.77% in Q3 of last year.
The impact of interest on income tax refund and interest collection from NPAs was about 11 basis points this quarter compared to about 3 basis points in Q2 and about 10 basis points in Q3 of last year. The domestic NIM was at 3.78% this quarter compared to 3.72% in Q2 and 4.04% in Q3 last year. International margins were at 0.34%. The cost of deposits was 3.97% in Q3 compared to 4.22% in Q2. Non-interest income, excluding treasury income, declined by 3% year-on-year to INR 39.21 billion in Q3. Fee income was INR 36.01 billion in Q3 compared to a decline of 30.8% year-on-year in Q1 and 9.7% year-on-year in Q2. Fee income grew by 0.1% year-on-year in Q3. The sequential growth in fee income was 14.7%, reflecting the continued normalization in customer spending and borrowing activity.
Dividend income from subsidiaries was INR 3.56 billion in Q3 of 2021 compared to INR 3.67 billion in Q3 last year. The bank's operating expenses increased by 3.7% year-on-year in Q3. The operating expenses increased by 12.6% sequentially. Expenses increased marginally by 0.4% year-on-year. The bank had 92,103 employees at December 31st. We increased during Q4. Non-employee expenses increased by 5.5% year-on-year in Q3 due to increase in retail business-related costs and technology-related expenses, partly offset by decrease in advertisement and sales promotion expenses. We would expect business-related expenses to increase in future quarters as business volumes increase. Levels. We continue to make investments in technology and to grow our franchise. As a result of the above, the core operating profit increased by 6% year-on-year to INR 80.54 billion in Q3. The core operating profit grew by 15.9% during the nine months ended.
The treasury income was INR 7.66 billion this quarter compared to INR 5.42 billion in Q2. The treasury income this quarter includes INR 3.29 billion from the sale of 2.2% stake in ICICI Securities compared to INR 3.05 billion in Q2. These stake sales were undertaken to meet the minimum public shareholding requirement by March 2021 as required by applicable regulation. During Q3, the bank made contingency provision amounting to INR 12 billion for pro forma NPAs. We utilized INR 18 billion of COVID-related provisions made in the earlier periods. Accordingly, the bank held aggregate COVID-19-related provision of INR 99.84 billion at December 31st compared to INR 87.72 billion at September 30th. This includes contingency provision for pro forma NPAs amounting to INR 35.09 billion at December 31st compared to INR 4.97 billion on a pro forma basis.
The provision coverage ratio continued to be robust at 77.6% at December 31st. At December 31st, the total outstanding COVID-19-related provisions, provisions for non-fund-based outstanding to NPAs, general provisions on standard assets, and other standard asset provisions totaled INR 164.01 billion or 2.3% of loans. This includes contingency provisions of INR 35.09 billion on pro forma NPAs that I talked about earlier. As Sandeep mentioned, we are confident that these provisions will completely cushion the balance sheet from the potential credit losses which may arise. Profit before tax increased by 11.2% to INR 60.78 billion in Q3 compared to INR 54.65 billion. The tax expense was INR 11.38 billion this quarter compared to INR 13.19 billion in the corresponding quarter last year.
Tax expense declined due to lower effective tax rate in Q3, mainly because of higher gains from sale of stakes in subsidiaries in fiscal 2021, which are subject to lower tax. After-tax grew by 19.2% to INR 49.40 billion in Q3 this year compared to INR 41.46 billion in Q3. The consolidated profit after-tax was INR 54.98 billion this quarter compared to INR 48.82 billion in Q2 and INR 46.7 billion this year. The consolidated ROE was 14.6% this quarter. The CET1 ratio, including profits for nine months of 2021, was 16.79% at December 31st compared to 16.54% at September 30th. Including profits for nine months, the Tier 1 ratio was 18.12%, and the total capital adequacy was 19.51% at December 31st. Coming to some details on the portfolio, we have focused on growing our loan portfolio in a granular manner with a focus on risk and reward.
Our retail portfolio is built based on proprietary data and analytics in addition to bureau checks and well-priced in relation to the risk. Our strong deposit franchise enables us to offer competitive pricing to the selected customer segments. We have given further information on our portfolio in slides 31 to 34 of our presentation. The loans and non-fund-based outstanding to corporate and SME borrowers rated BB and below, excluding pro forma NPAs, was INR 180.61 billion at December 31st compared to INR 161.67 billion at September 30th, details of which are given on slide 35 of the presentation. Other than four accounts, two in construction sector and one each in the telecom and power sector, the maximum single borrower outstanding in the BB and below portfolio was about INR 6 billion at December 31st.
On slide 36 of the presentation, we have provided the movement in our BB and below portfolio during Q3. The rating downgrades from investment-grade categories were INR 22.39 billion. Ratings were largely from the construction sector. There was a net decrease in outstanding of INR 1.45 billion. There was a reduction of INR 1.5 billion due to increasing the pro forma NPAs and devolvement of INR 0.77 billion of non-fund-based outstanding to NPAs, and there were upgrades of INR 0.27 billion NPA to below investment-grade categories. Except one lease rental discounting account, all corporate and SME borrowers under resolution as per RBI's framework were rated below investment-grade at December 31st. The builder portfolio, including construction finance, lease rental discounting, term loans, and working capital loans, was INR 225.57 billion at December 31st, which is 3.2% of our total loan portfolio.
As mentioned in our earlier calls, our portfolio is granular generally, with the larger exposures being to well-established builders. About 13% of our builder portfolio at December 31st was either rated BB and below internally or was classified as non-performing. The total outstanding to NBFCs and HFCs was INR 576.29 billion at December 31st compared to INR 507 billion at September 30th. The total outstanding loans to NBFCs and HFCs were about 6% of our advances at December 31st. The details are given on slide 38 of the investor presentation. Our exposure is largely to well-rated entities with PSUs, long-vintage entities owned by banks, and well-established corporate groups. The sequential increase in the outstanding to NBFC and HFCs during the quarter reflects this. The proportion of the NBFC and HFC portfolio internally rated BB and below is about 1%.
Coming to our overseas portfolio, excluding exposures to financial institutions and retail lending against deposits, the total corporate fund and non-fund outstanding of overseas branches, net of cash or bank or insurance-backed lending, was INR 5.2 billion at December 31st to $5.47 billion at September 30th and $8.62 billion at December 31st last year. 69% of the outstanding at December 31st was to Indian corporates and their subsidiaries and joint ventures. 16% of the outstanding was to non-India companies with Indian or India-linked operations and activities. The portfolio in this segment is well-rated, and the Indian operations of these companies are target customers for the bank's deposit and transaction banking franchise, and we will continue to pursue risk-calibrated opportunities in this segment. 6% of the outstanding was to companies owned by NRIs or PIOs.
9% of the outstanding was to other non-India companies, which is less than 1% of the total portfolio of the bank. Coming to subsidiaries, the details of the financial performance of subsidiaries is covered in slides 43, 44, and 63-68 in this presentation. Just briefly, value of new business of ICICI Life was INR 10.3 billion in nine months. The new business margin increased from 21.7% in fiscal 2020 to 26% in this nine months. Business margin was 25.7% this quarter. The protection-based annualized premium equivalent was INR 7.03 billion and accounted for 17.8% of the total annual equivalent in nine months. The new business premium was INR 78.99 billion in this nine months. The gross direct premium income of ICICI General increased by 9.2% year-on-year to INR 40.34 billion in Q3 this year compared to INR 36.93 billion in Q3 last year.
The combined ratio improved to 97.9% in Q3 compared to 98.7% in Q3 of 2020. The profit after-tax grew by 6.6% year-on-year to INR 3.14 billion this quarter from INR 2.94 billion in Q3 last year. The profit after-tax of ICICI AMC was INR 3.58 billion in the current quarter compared to INR 3.05 billion in Q3 last year. The profit after-tax of ICICI Securities on a consolidated basis was INR 2.67 billion in the current quarter compared to INR 1.37 billion in Q3 of last year. ICICI Bank Canada had a profit after-tax of CAD 5.1 million in the current quarter, which was at a similar level compared to Q2 and compared to CAD 22.1 million in Q3 of last year. The profit after-tax was higher in Q3 of last year recovery from India-linked impaired corporate loans during that period.
The loan book of ICICI Bank Canada at December 31st declined by 7.5% year-on-year and 3.7% sequentially. ICICI Bank UK had a profit after-tax of $2.2 million this quarter compared to $8 million in Q3 of last year and $4.9 million in Q2 of 2021. The loan book of ICICI Bank UK at December 31st declined by 28.9% year-on-year and 11.6% sequentially. ICICI Home Finance had a profit after-tax of INR 0.03 billion in the current quarter, which was at a similar level compared to Q3 of last year. With this, we conclude our opening remarks, and we will now be happy to take your questions.
Operator (participant)
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone.
If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mahrukh Adajania from Elara Capital.
Hi, congratulations. My first question is, could you give the breakdown of pro forma slippages?
Sandeep Bakhshi (Managing Director and CEO)
So, Mahrukh, we talked about the fact that the actual slippage was INR 4.71 billion, and the pro forma as of December 31st was INR 82.8 billion, which was an increase of INR 68 billion compared to September position. So the INR 68 billion and 4.7, about INR 72-73 billion is the increase that we have seen during the quarter. A large part of this has been from the retail portfolio.
Okay, but would there be any breakdown on how much is from unsecured, how much is from secured, any such breakdown?
So, Mahrukh, normally on the retail side, we give the aggregate additions and deletions on the portfolio. To give a sense, I think we have seen across portfolios the slippages. If you're comparing it to an earlier period, of course, it is higher across products. I think during this quarter, we have seen that the entire portfolio has got tested for payment because it has come out of moratorium. So the increase that we have seen on the NPA or the pro forma NPA is largely in line with what we were expecting across portfolios or slightly better in some of the portfolios. So that is the color that we can give on this. Going forward, we would expect to see somewhat lower additions.
I'm taking pro forma as the comparison number. The moratorium period has gone over, and the full impact has been seen in the December quarter.
Okay. So going forward, you said some bit as in on the INR 67 billion. Shouldn't it be substantial?
So, Mahrukh, we don't want to really comment on how that number will pan out, but it should be lower than where we are in the December quarter in terms of additions. I think that's the reason we gave also a color on the portfolio, which is the overdue portfolio. We had talked about that in September also. So we have seen there the trends have improved. On the retail, now we are about 1.5% higher than the pre-COVID normal trend compared to 4% that was the case in September. So overall, the overdue portfolio also has come down. So yes, we should see improvement going forward.
How substantial it is, we will have to see how it plays out. There are a lot of moving parts there. But again, to reiterate what we said, Mahrukh, I think we have taken provisions upfront in March and June quarter. We have utilized some of that provision this quarter of about INR 18 billion. We have tightened some of our provisioning policies to take more provision on NPAs. So overall, we are quite comfortable with the trends that we are seeing on the portfolio. And especially, the one variable which was there in October was around the restructuring or the resolution pipeline which could be there. As you see, that number is pretty much very similar to actually the pipeline we had in October, and we have not seen much of an increase there.
So these are the trends which give us some comfort that going forward, the numbers should decline. But again, the numbers will be higher than trend for March quarter. That will be the case because the overdues are currently higher than the normal pre-COVID level.
Got it. And whatever is downgraded in BB, does that overlap with the restructuring book?
So there will be an overlap there. So if you look at the closing book, Mahrukh, the INR 180 billion of BB and below, that includes all the corporate and SME restructuring. Other than one account, which I mentioned, it's not a large account. It's an LRD account, so it continues to be investment-grade. But the INR 180 billion includes all the corporate and SME restructured pipeline.
The downgrades that we saw of INR 22 billion during the quarter would also have come largely from the restructuring proposals that we have received and we have invoked. There would be a couple of other smaller-sized accounts also which have got downgraded. That's why that number is INR 22 billion during the quarter.
Got it. But most of the restructuring is corporate only?
So of the total, about INR 25 billion, as we said, so this INR 25 billion is the set of accounts which are not overdue for more than 90 days at December 31st because those which are overdue, we are usually accounting in the pro forma, so we don't want to double count there. The INR 25 billion which are less than 90 days overdue, INR eight billion is retail, and about INR 17 billion fund-based is corporate.
Got it.
And just one last question on the provisioning policy. What policy has changed?
So what we have looked at is that we have made our provision policy for some of the NPAs as more conservative. So essentially, increasing the provisioning on the early buckets and also preponing a bit when we reach the 100% provision level. And that's the reason you would see that on the pro forma NPAs for the quarter of INR 80 billion. We are already at INR 35 billion of provision between the INR 5 billion we did in this quarter. So we are pretty much at 40% in the first quarter itself. So we have kind of increased the early bucket provisioning for the NPAs. And this is not a one-time change in policy. This is something that we will continue with in future.
Oh, so now the first bucket will be around 40%, is it? Or this is just because of the mix?
Mahrukh, that varies across portfolios. It will definitely be different for, say, a mortgage or a car loan or an unsecured retail or corporate. I was saying that because this quarter will have an impact on the stock. The entire book impact will be there in this quarter as well. So we have increased the provision that we take in the early buckets on.
Okay. Thanks a lot.
Operator (participant)
Thank you. Finished from the line of Jai Mundhra from B&K Securities. Please go ahead.
Jai Mundhra (Research Analyst)
Yeah, hi, sir. Thanks for the opportunity and thanks for the detailed disclosure. Sir, if I were to look at this pro forma GNPA number of 8,200 crores, this is just the net number, right? I mean, the gross minus gross.
So the slippages for the quarter, it should be, I mean, INR 8,200 crores plus INR 1,800 crores of recovery plus INR 2,700 crores of write-off. Is that the right way to look at it? I mean, only the gross slippages perspective.
No, no, no, no, no, no. That's not right. So we have the table that we have on slide 26, if you have it in front of you. We have given the movement in NPA based on the reported NPA as per the current guidelines of RBI, and not classifying accounts which are more than 90 days overdue. So the total gross addition is INR 4.71 billion. Correct. And that is a gross addition. That has nothing to do with recoveries and write-offs.
So in addition to that INR 4.71 billion, we also had INR 82.80 billion of loans which were overdue for more than 90 days at December 31st, and we could not classify them as NPA because of the Supreme Court ruling. That INR 82.80 billion number, the corresponding number in September was INR 14 billion. So there was a INR 68 billion increase in the 90-day overdue which we were not able to classify during the quarter. So the 68 plus the 4.7, that INR 72-73 billion would be a reflection of the gross addition that you are looking at. And then you would have had the recoveries of 17.76 and write-offs and all of that. So that is how one has to look at it. And this INR 82.80 billion, again, just to clarify, this is loans which are at a borrower level outstanding for more than 90 days.
So if a borrower has two or three accounts, even if one account is more than 90 days, all the accounts are categorized as pro forma NPA in this number.
Right. Great. Right. So understood, sir. So actually, this is, I mean, Q2, INR 404 billion plus, let us say, INR 62 billion minus recovery that comes to INR 431 billion. So I think that is clear that way.
Sandeep Bakhshi (Managing Director and CEO)
Yeah, yeah, yeah.
Jai Mundhra (Research Analyst)
Second question is, Sir, on BB and below book, now we have been carrying this book for so many quarters, and I think even in the last six months, this has further credit tested. And probably only a small portion have asked for restructuring. So how should one look at the riskiness going forward, or would it be too early to sort of comment here?
Sandeep Bakhshi (Managing Director and CEO)
I think, like we have said earlier, it is below investment grade for us.
So by definition, this is relatively higher risk, and ideally, we would want it to be zero. But in banking business, that can never be zero. So I think the level at which it is right now, it's not a number that we over worry about. If you look at the INR 180 billion, out of that, anyways, INR 44 billion is non-fund outstanding to NPAs. So it's not really BB and below. It's non-fund outstanding to NPAs on which we already hold provisions. We hold about INR 14 billion of provision. We disclose that on a quarter-on-quarter basis. So if you remove that, the rest of it is INR 135 billion. A lot of it is granular. INR 40 billion is individual size, less than INR 1 billion. So it is a part of the overall portfolio that you will always have some amount of BB and below.
And the reason we call out the larger exposure, so we have four accounts which are larger than INR 6 billion within this BB and below, out of which one is an account in construction sector which has sought restructuring. So that has got included this quarter in the BB and below. There is one non-fund-based outstanding for a construction company which is already classified as NPA. And then there is one each in telecom and power where we have been getting the payments. The telecom one is non-fund. The power one is where we have been getting payments. Some delays are there, but it's a large promoter there as well. So overall, of course, it's a risky book, so I don't want to say we are comfortable, but that is the color of the book which we can give. Short and just last clarification.
So I think you had clarified, but just to double-check, this INR 1,700 crore restructuring request which has come from BB and below book, they are sitting at both points, right? So if one were to add restructuring plus BB and below, so INR 1,700 crore of restructuring is actually part of BB and below. So if you look at the position at December 31st, you are right that INR 180 billion already includes the corporate restructuring request that has come, other than one account which is a lease rental discounting account which is still investment grade. So that is the position at December 31st. The downgrades that we have seen during the quarter of INR 22 billion, that would include a few cases which were investment grade and would have sought restructuring. But at the end of December 31st, the BB and below includes all the restructuring, barring one case.
Jai Mundhra (Research Analyst)
Thank you, sir, and all the best.
Sandeep Bakhshi (Managing Director and CEO)
Thank you.
Operator (participant)
Thank you. Before we take the next question, we'd like to request participants that in order that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we request you to rejoin the queue. We take the next question from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead.
Nitin Aggarwal (Banking Analyst)
Yeah, hi. Thanks for the opportunity. My question is again on the BB and below book. Now, we have not seen as much of slippages or restructuring requests as to how much one can really expect this book to throw up because despite all the focus this book remains, it's still around, say, 18,000 or closer. It has been pretty sticky and increasing very marginally.
So are we being too conservative here in terms of our classification? Because our peers have actually reported a decline in the absolute size of the book.
Sandeep Bakhshi (Managing Director and CEO)
I think we believe a pretty standard process which our risk team runs for the rating of the portfolio. Of course, the risk team is completely independent of business. The business team may have a different view on some of these accounts. But it's a very consistent process. So I don't think we have become overly conservative on these ratings. I think I gave you an example of the larger accounts. There are some challenges or the other in each of these accounts. And it's a regular review that we do. So even as we are on December 31st now, there would have been some accounts which would have got upgraded during this period, maybe downgraded.
So it is a continuous process which is there. And at the end, there'll be a certain amount of book which will be there in the BB and Below bucket. I think largely it is not lumpy other than the accounts. So it is not something which we overly worry about.
Nitin Aggarwal (Banking Analyst)
Okay. And two clarifications. One is on the margin. We have reported a 10 basis point sequential improvement, but both our domestic and overseas margins have expanded by 6 and 8 basis points. So what am I missing here? What is driving this net 10 basis point improvement? And secondly, our tax rate for the year so far is around 19%. It's moving between 18% and 19% every quarter. So where do we expect this for the year end for FY22?
Sandeep Bakhshi (Managing Director and CEO)
So on the tax ratio this year, as I said, I think we have got the benefit of the lower tax which is applicable on the capital gains. And we had a good amount of gain in the nine-month period, especially in Q1 from the sale of shares in the subsidiaries. So the tax rate this year and the tax, as you know, what we provide every quarter is based on the nine-month period is based on the full-year estimated tax rate. So the tax rate for this nine-month period is what you can extrapolate as our estimate for the tax rate for the full year. Going forward next year, I think we will be at marginal tax rate which is there. We get some amount of benefit, maybe 1%-1.5%, which will come because of dividend income and all of that.
So that's how the tax rate will go up next year. Exactly very difficult to say because it will still be a function of the composition of the income which is there. On the net interest margin, we don't do this domestic overseas and try to tally that. As you would appreciate, we have lending from domestic into overseas also. So it will not always net off. The domestic and overseas margins here are the gross ones for domestic book and overseas book. When we report at the bank level, if there are some lending from domestic to overseas, that would get netted off. So that's why a few basis point up and down will always be there. The domestic and overseas is on the gross book which is there. So there's the inter-branch elimination that will happen. That's the only reason.
Nitin Aggarwal (Banking Analyst)
Okay. Oh, for sure. Thank you so much.
I wish you all the best.
Sandeep Bakhshi (Managing Director and CEO)
Thank you.
Operator (participant)
Thank you. The next question is from the line of Parmeshwaran S from Jefferies. Please go ahead.
Hi, Rakesh. This is Prakhar, and congratulations to all of you for being able to manage in such tough times. Just a couple of things on the retail side, Rakesh. You did indicate the split of slippages across retail and corporate on a pro forma basis. Just to get a hunch, would it be fair to assess, like your peer group, in this quarter, unsecured slippages would have been elevated much more? So peers have seen something like 4%-5% of the unsecured book slip into NPA fully normalized. So would it be fair to assume that the numbers would be somewhere in that handle or probably even lower because you've been fairly conservative on the lending side?
Sandeep Bakhshi (Managing Director and CEO)
So, sir, I actually talked in response to an earlier query in terms of how things are. I think we have seen slippages across portfolio. For example, on the secured side also, we have seen slippages to be there. For example, on mortgages, there the installment amounts are large. So at times, customers are not able to make those payments. I think what will we have to just see over the next few months how it kind of eventually plays out. But we have seen it's not that unsecured is a very disproportionate contribution to the gross NPA addition. We have seen on the secured side also. And again, like I said, Prakhar, when we had done our analysis, we were assuming that on the secured side also, we would see slippages. For example, in card loans, the proportion of salaried customers are generally lower.
So you will have something in there. Mortgages, I said, the EMI levels are higher, so people take some more time to kind of become current as well, so it is spread across portfolio, but across all portfolios, it is in line with our expectation and in some of the portfolios, rural, business banking, SME, corporate, it is better than what we would have estimated. Sure, and so just a corrected question on this one, so now that the portfolio has broadly behaved well and within your expectations, it's great to see that last quarter you didn't make any provisions. From now on, you are being able to you have the comfort to start digging in.
So would it be fair to also assume that from a strategy perspective, you don't need to really make any material changes in terms of new client acquisitions and the give, etc., on the retail loan? Would that be a fair assessment? Yeah. I think the fact that the growth that you're seeing across portfolios on the retail side, business banking, SME, corporate, that reflects the comfort and the confidence that we have in terms of the framework that we have for underwriting. So there we are pretty comfortable. Of course, we have tightened some of the parameters based on the current environment. The entire focus is to ensure that we get a set of customers who we are comfortable with in terms of return of capital. And that's the philosophy across all portfolios.
And just one last question.
The credit card part, nice improvement and probably supported by the festive lending or usage. Would the level of revolvers, etc., come down in this period, or it's a different way because there is a lot of pay later stuff that is happening in the market? So would the proportion of revolvers be stable as it used to be, or would it have moved a little more than usual?
I don't think, Prakhar, in a period of three months, much changes. I think the growth that you see on the credit card book. Please look at it in the context that in the festive season in the December quarter, every year that growth is there. So it is not something which is indeed it has grown by 10% this quarter. It would have been similar last year, December over September also. So there is nothing different there.
Perfect. Perfect.
This is very useful, Rakesh. Thank you so much.
Thank you.
Thank you.
Operator (participant)
The next question is from the line of Amit Premchandani from UTI Mutual Fund. Please go ahead.
Amit Premchandani (Fund Manager)
Good evening. Thanks for the opportunity. In the restructuring number that you have given, is this all invoked restructuring or whatever you have actually accepted?
Sandeep Bakhshi (Managing Director and CEO)
The invoked and accepted will be the same, Amit. So it is, so these are loans which are invoked. So these will get restructured. These will get restructured.
Amit Premchandani (Fund Manager)
Are there any proposals still left?
Jai Mundhra (Research Analyst)
No. So December 31st was the last day for actually invoking. So on the retail and corporate piece anyway, there will not be any increase which will be there. I think on the MSME piece, there's time till March 31st. We have not seen much restructuring there. So it will not change materially from here for sure.
Amit Premchandani (Fund Manager)
And any DCCO extension for the real estate projects which are not part of this restructuring number that you have given?
Sandeep Bakhshi (Managing Director and CEO)
Because DCCO extensions have been normal and the two things have been post-COVID also. In fact, I must add that post-RERA, I think things have become just more organized. So two things have happened. One is it has become more organized. Certainly, it is moving towards stronger builders. And people certainly are more conscious about completion on time and things like that. But DCCO, not because of COVID. In fact, if at all, sales have only increased. You must be reading it everywhere. For DCCO, whatever was there, was there.
Amit Premchandani (Fund Manager)
But sir, still, if you can answer the question, INR 22,000 crore of builder portfolio, what was the DCCO last nine months?
Sandeep Bakhshi (Managing Director and CEO)
I don't have that number offhand.
What I can say is that it's not something which is abnormal or which will have in portfolio. I think we are comfortable with the portfolio. We talked about some of those details in terms of the granular nature of the portfolio. And wherever we have slightly larger exposure, those are two well-established builders. Overall, we are comfortable with that portfolio. Because of COVID, I don't think we have done any material DCCO extension because of COVID.
Amit Premchandani (Fund Manager)
Sure. Thank you, sir.
Operator (participant)
Thank you. The next question is from the line of Saurabh from JP Morgan. Please go ahead.
Sir, a question on the corporate and the SME growth. You have grown eight% quarter on quarter and 16% quarter on quarter in SME. Could you just comment on the quality of the book you are originating in the corporate book and how do you see the ROA profile of these loans?
So that's one. The second is essentially on the international book. Where do you think this net interest margins can go towards? Should we just assume it to be flattish at around these levels? Thank you.
Sandeep Bakhshi (Managing Director and CEO)
On the corporate portfolio, the growth that we have seen, I gave some color of that. This is largely the new business that we have done during the quarter, is predominantly A- and above internal rating clients. It is a mix of short-term, long-term lending that we have done during the quarter. About half of it would have been short-term in nature, meaning less than one-year maturity. Balance would have been longer-term loans. Of course, the longer-term loans are all floating-rate loans. On pricing, when the credit is good, pricing is always competitive. For us, the cost of deposits are also pretty low.
You have seen during the quarter also the cost of deposits have come down. So we look at this lending is not looked at as a standalone lending in almost all the cases. It is looked at from a client profitability point of view. So what we track for each of the clients is client-level return on equity. And that is something where we are happy with the numbers that we have. Of course, there's a lot more that we can do to improve that. We have seen good amounts of growth on the transaction banking side, FX. The current account growth that we have seen during the quarter YOY, a lot of that has come from the corporate clients. So on an overall basis, we are comfortable with the returns which are there. But yes, the markets are very competitive.
And so we get to look at all the deals virtually where we believe it would make sense for the bank from a return perspective, sometimes from a liquidity deployment perspective. We go ahead with those transactions. So that is how we have looked at it. On the SME business banking, I think if you look at the last couple of years, we have been going quite well. I think the moratorium tested the portfolio. The portfolio has come out pretty well. These are portfolios where our market shares are generally lower than what we have on an average on the portfolio. So there's a lot more that we can do. There is a lot of synergy outcome that we have seen as we do more and more of this business through our branches.
We have talked about during our Analyst Day about all the digital initiatives that we have taken. We have made the process, also the underwriting and all of that much more decongested. So I think all of that is what is flowing through this growth. And again, if you go back to last year, this was the growth trend which was there for these portfolios as well. Overseas margins are difficult to say. I think, yeah, you should just assume it is around the level where it is because we will not be doing corporate lending there really. So a lot of it is trade finance kind of business, loan against FD, or those kind of businesses where the margins will be lower. The capital deployed will be lower. Overall, anyway, the book has now come down to about 6-6.5% of total loans.
So it's difficult to give further guidance on the margin per se. That's not a specific focus area for us to be able to project that out.
Okay. Thank you, Rakesh. Thanks a lot.
Operator (participant)
Thank you. The next question is from the line of Manish Shukla from Citigroup. Please go ahead.
Manish Shukla (VP)
Yeah. Good evening and thank you for the opportunity. Of the ECLGS disbursement of about INR 120 billion, how much would have been under the SME segment and how much would be retail segment the way you reported for your loan book?
Sandeep Bakhshi (Managing Director and CEO)
So if you look at SME business banking, I think both put together would have been about maybe one-third of that. And the balance would have been across the rest of the retail portfolio.
Manish Shukla (VP)
Okay. The other question is that on the retail book for the last two quarters, you had fairly phenomenal growth, right?
Previous quarter was 6%. This quarter is almost 7% sequential growth. Just to understand what's driving this in your view and can this kind of pace of growth sustain because you are among the largest retail balance sheets in the country?
Sandeep Bakhshi (Managing Director and CEO)
So we are not very focused on a particular number of growth per se. I think the opportunity is there. We have seen at least in the last few months, the economy has been recovering. There has been demand. So if the demand sustains and from our point of view, the pricing is appropriate, the customer profitability is appropriate, we believe we are very well positioned to grow. So in terms of we have enabled, we have talked about all that we have done on the processes of underwriting, on the digital enablement, especially in the mortgages that we have done.
So from a growth point of view, we would be happy to grow as long as it meets our return criteria. On the risk part of it, we are very clear in terms of what we want to underwrite, what we don't want to underwrite. And as more and more we start, we have started looking at customers on a 360-degree basis. So as we drive some of this business through our ecosystems, like for example, we have seen a very good amount of growth coming in from the corporate ecosystem, the corporate salary accounts that we have. We have had a lot more focus on the liabilities. We also are doing a lot more on lending there currently. So all of this, we believe, are things that we can do without taking any undue risk or diluting our returns. Of course, in the near term, liquidity is surplus.
You can see in our balance sheet also, we are sitting with significant surplus liquidity. LCR is 140%-150%. So some of it on pricing and all will always be a tactical call also in the near term. But from a growth point of view, that is how we look at it. There is no specific number that we are chasing on retail or on corporate side. Also, I'll add, Rakesh, that our market shares, so we track market shares in each of our micro markets. So they are quite low. I mean, they are sub 5% actually in this business. So plus micro markets is there, plus we have worked a lot on process, plus because of ecosystem, 360-degree banking, there is a lot more color we have on underwriting. So with this actually, and plus we have enabled and empowered our branches quite a bit.
So net-net, I agree with Rakesh that there is a headroom for us to grow in these markets. In fact, across most products, we have headroom to grow because if you look at our market shares compared to the potential that we have, I must say that we are still, we have not done justice to the potential that we have. We should do more justice to the potential that is there in the market.
Manish Shukla (VP)
Sure. Just one clarification. When you say that FY22, you expect to be a normalized year on credit cost, do you think it will be closer to your medium-term target of provisions to PPOP, which you articulated in the past?
Sandeep Bakhshi (Managing Director and CEO)
Yeah. So about 25% of core operating profit is what we would be looking at as a number. And that would translate to, I guess, 1.2%-1.3% of average loans.
Manish Shukla (VP)
Perfect. That is clear.
Thank you, Rakesh. Thank you.
Operator (participant)
Thank you. The next question is from the line of Mahesh from Kotak Securities. Please go ahead.
M B Mahesh (ED)
Rakesh, just a quick clarification for the presentation. Slide 28, which you have drawn, what is available to you, which is outside the pro forma numbers, is 64.75 and 13.95. Is that correct?
Sandeep Bakhshi (Managing Director and CEO)
So the 35.09 is the provision that we hold against the pro forma NPA. That 82.80, Mahesh, that we talked about, against that we have taken 35.09. Is that. 64.75 is the balance COVID, which is against, I guess, the entire other portfolio. So during the quarter, the movement has been that we have taken INR 30 billion provision on the pro forma NPA. So INR 5 billion, 4.97 has become 35.09. And we utilized INR 18 billion from the COVID other provision. So 82.75 had come down by INR 18 billion. Is that clear, Mahesh?
M B Mahesh (ED)
Yeah. Yeah.
Sure. It's correct.
Sandeep Bakhshi (Managing Director and CEO)
And if I remember, last quarter, you had indicated that the ECLGS was at 160 billion. This quarter, you've kind of indicated 120. This is the disbursements which are there. So the sanction is still at 160 or?
Yeah. That is the actual disbursed amount. Okay. So the sanction still remains at 160 or has that gone up this quarter? I don't have the number right away, but it will be. I don't have the number right away, Mahesh. Okay. Sure. Sure. So just one clarification. On slide 60, is it fair to assume this kind of, this being a minute or exclusive question, in September, you have a gross retail NP of 92.63, and in December, it is 68.88. So the difference between the two essentially represents upgradation write-offs? Yeah. If I hold that condition. One only.
So rest of it will be the upgrades and the write-off.
Correct. Correct, Mahesh. Yeah. So now, if I move from 92.63 to 144.09, and I just do the back calculation again based on the initial numbers which I said, it shows that the retail book should have been about INR 75 billion, almost indicating that there was no slippages on the corporate side. I'm saying there will be a few aberrations to the numbers. Correct? But we have given you the movement, Mahesh. That will just tell you the numbers actually. So if you look at it, we have given the INR 4.71 billion breakup into retail and corporate. And we have also given the INR 82.80 billion rupee how much is corporate and then if you look at the INR 4.71 billion, INR 3.94 billion is retail. That INR 82.80 billion, INR 75 billion is retail.
So indeed, most of the slippage during the quarter, as expected, has come from the retail side.
M B Mahesh (ED)
You're right. Perfect. Perfect. Perfect. Yeah. That makes sense. And last question to Anup. On the housing portfolio specifically, this massive shift that you're seeing today, is it because of one refinancing which is happening? Is it new loans, balance transfer? If you could just kind of broadly comment on it, that would be it. And also, if the portfolio yield correction has completely taken place in your books. That's it. Thanks. First, let me take the portfolio yield correction. I think broadly, yield correction has happened because everybody has put out so much of ads that even if you were putting [shades and gears], you will see it. So I don't think there is anybody who has not seen that the rates have come down.
Sandeep Bakhshi (Managing Director and CEO)
So, number one, I think everybody has done. So that is number one. Number two, certainly there is some element of balance transfer because everybody is matching the rates. So if you are giving it to new, why will you not hold on to your portfolio by correcting it? So that is the second thing that by and large, people hold on to their portfolio. Certainly, there is a demand in the market, number one. Number two, we are also seeing a shift in shares because of our process and better distribution and better analytics of our own customers who have taken loan from others, etc. And plus, engagement levels are much, much better. So I would say that partly demand, little bit of balance transfer, certainly not a majority or anything like that. And I would say that large part also because of our distribution process.
I've seen that the gap is decreasing. Otherwise, it would have been a parallel stock with everybody else. but shares are increasing.
Thanks. Thanks.
Sure. Thanks.
Operator (participant)
Thank you. The next question is from the line of Adarsh Parasrampuria from CLSA. Please go ahead.
Yeah. Rakesh, question on margins. You said it's held up well and it has the NI reversal as well. so can you talk about outlook on margins given that you are indicating that the backbook repricing is almost through? Where are we in the cycle?
Sandeep Bakhshi (Managing Director and CEO)
So Adarsh, if you look at during the quarter, we have seen the yield on advances have indeed come down by about 44 basis points. It's there on slide 49. but the overall interest-earning assets have not come down as much because the yield on investments has not come down as much. Plus, the growth has happened on the advances.
The rest of the portfolio, as the liquidity is getting deployed, has not. So going forward, I think we should hopefully see improvement in margin. But again, there are so many there. One, of course, is the interest reversal itself. In March quarter, we will still see NPL additions to clearly be higher than any kind of a normal level. So there will be some amount of that which will be there. But I think more and more, the liquidity will also start declining for us. The LCR numbers that you see should come down in the March quarter. That should help the margin. I talked about on the lending side, the market is extremely competitive. So there, the pricing pressure is definitely there on the new loans that we are giving. So in short, Adarsh, we are not giving any guidance there.
But I think the objective is to improve our margin, and we hopefully should be able to do that. And Rakesh, did you quantify the interest reversal impact on NI? You have taken the NI line, right? So how much was that absolute number? We don't disclose that separately. That's there in every quarter. Whenever NP addition happens, that reversal is always there.
So Rakesh, just the only point I wanted to understand is this quarter would be a little different that some accounts are under moratoriums for six months, and then they have become NPA. So the reversal is the easier question to ask is, is the reversal impact it should have been materially higher than past quarters because reversal could be for eight months, nine months here?
Yeah. That is possible.
I think one thing which is there, Adarsh, right now is that across all banks, right now, things are a bit difficult to compare because the pro forma basis which is happening and moratorium and all of that, so I think in terms of the interest treatment itself, during the period of moratorium, I think in some cases, you have excluded that as income. Some cases, you have put that as a deferred interest term loan itself, so the reversal, when it happens, happens only for a 90-day period, so I would say that it's not something which will result in a very sharp increase going forward. Of course, there will be a positive going forward because this quarter was slightly higher than normal.
Got it. Got it. And Rakesh, the last question from my side would be on how you all see the ECLGS portfolio, right?
It's INR 12,000 crore sanction and let's say INR 60-70 thousand crore of ECLGS book. This portfolio, I think it's fair to say that we don't really know the right debt servicing, what's happening there. So how do you look at the risk in this portfolio on the lending that we were having outstanding in February or March in FY22? This is a portfolio which could have its own stress next year, right, when all other portfolios normalize?
That is a possibility. I think we believe where we have extended credit under this scheme. It's not that these are bad kind of given this extended scheme. So it's not something that we are overly worried about, about this portfolio where we have lent. Will there be some challenges that could come up? Definitely, because these borrowers would have got impacted by COVID, generally speaking.
So I think in the outlook that we give, for example, for next year, say, credit costs getting normalized, this is factored in, and we don't believe it's going to really be any material impact for us going forward, which is getting postponed due to this. Also, actually, we have to see the disbursement to sanction ratio, and you will see that for stronger banks, the disbursement to sanction ratio is lower. So that is one marker. The second marker we always see is that in general, on the portfolio, how is the limit utilization? If economic activity has not picked up, but limit utilization is happening very fast, that's also not a very, very good sign. So these are the two big markers. So when you look at these two markers, it looks okay at this point of time for us.
I mean, there are no such red flags in that portfolio. So these are the two markers that we will have to see. Also, now we are seeing one by one, one by one, sectors are coming back. As Sandeep had said, that if you look at our ultra high frequency index, it is now above 100 for a few weeks now, which also means that if you are not there in those sectors which have not come up, the rest is all business as usual. It is also showing up in the fact that what is your 1 to 90 or 0 to 90 above your BAU, that has also declined sharply, which basically means that people are now getting cash flows and they are paying up. So all in all, I would say that things are okay.
Now, the other thing that one can always surmise is that how much of it is by way of refinancing, how much of it is by way of balance transfer, or how much of it is by way of interim demand. All those are very difficult to say. Of course, whenever interest rate suddenly falls, there is some activity on balance transfer and refinancing. That is for sure which happens. But interest rates from here on, we don't think it's going to fall that much so that balance transfer activity will come down. So shift of portfolio from one bank to the other will come down. And we don't think that it is that much of a pent-up demand for long because now it has been open for four, five months. Last quarter also, we had good disbursements and good book growth.
This quarter also, we had good disbursement, good book growth, and we look at it at a micro market level, yes, it is okay. I mean, we are still quite a bit of unsaturation is there for our customers and their needs. So that's what it is, and we have spoken to the ECLGS customers. We have called 100% of them, and we have spoken to them as well. They seem to be okay.
Perfect. Thanks. This was helpful. All the best.
Operator (participant)
Thank you. Before we take the next question, a reminder to participants to please limit your questions to. The next question is from Abhishek Murarka from IIFL Securities. Please go ahead.
Abhishek Murarka (Lead Analyst)
Hi, good evening, and thanks, everyone. Congratulations for a great performance this quarter. So most of my questions have actually been answered. Just sort of a small data point.
So this debit card trend that you show on slide 21, there's quite a bit of a drop in the number of cards in the last quarter. Is there anything particular in terms of trend that you see there or, I mean, anything to read into it? How do we understand this drop? Because it follows a number of quarters of increase.
Sandeep Bakhshi (Managing Director and CEO)
So it would be in the last quarter, we would have done some removal of the inactive cards would have happened. Nothing more to read there. But in general, Abhishek, just to give you some sense on the payment landscape that's happening, very, very clearly, UPI is coming up. Debit card over a period of time, it will first cannibalize debit card. A credit separate anymore because you get credit-free period. So credit card is a slightly different anymore. So that is coming up.
Credit card in its physical format replaced by card-not-present transaction. So e-com is going up. So payment system landscape is moving. And the good thing for us, banks like us, is that while everybody talks about other PSPs, well, the fact is that all those transactions also go through the bank at the back end. So if someone says that we have got 100 million transactions happening through us, we should also, by corollary, understand that 100 million is also going through the banks. So it is now up to us to input that data also in our underwriting and in profiling and making sure that we are able to utilize it better. I would also go on to the extent to say that many of them may not have fully utilized use cases. Banking system has use cases because you can lend to them.
You can cross-sell to them with that data. So I would say that the data quality and the throughput of the data is certainly helping in understanding the client in a much, much, much, much deeper way. That also certainly is one of the drivers of our higher disbursement. It also helps us in pre-underwriting cases, and that is increasing. And so net-net, with data analytics, it does have an impact on the way you underwrite and the speed by which you can underwrite and take through the transaction and reduce, in a way, cost of acquisition because you get data. So net-net, I think we are in a decent position and position well. It helps in liabilities. It helps in assets. It helps in cross-sell. So data, whoever utilizes, will have a better chance.
Abhishek Murarka (Lead Analyst)
Sure. And Anup, just a quick follow-up on the growth question.
I know you said that most of the pent-up demand is now already in. So how do we look at this 7% QOQ? I mean, what part of this would be a normalized kind of growth number?
Sandeep Bakhshi (Managing Director and CEO)
No, it's very, very difficult. Actually, this pent-up also, we don't know. Who knows when demand falls off? I will only say, Abhishek, that our market share is low, so we have headroom to grow. So I would fall back more on market share rather than demand coming up. Of course, if there's demand, it is easier to grow, as you know. So it is difficult to see what is pent-up because housing, for example, because of the stamp duty reduction, because of work from home. So there are other factors which are there, which is leading to demand of housing.
And if you look at the ticket sizes, we look at our ticket sizes. If you look at the ticket sizes which are moving, that is also increasing. We were looking at our own data on salaries. If you look at the number of people who are filing income taxes, and if you look at the gradation of that on the salaries, etc., very clearly, you can input the ticket sizes will move on housing, what kind of ticket sizes will move on auto. And then if you have good micro market data, which we have, then you can allocate your resources, attention, energy to that and get some share. So in general, that's the format that we are pursuing, and we have been reasonably successful so far. And I feel that if we continue, our market share again will happen. So that is how I will put it, Abhishek.
Abhishek Murarka (Lead Analyst)
Great. Thanks. Thanks so much, Anup, and all the best to the team for the future quarters. Thank you. Thanks, Abhishek.
Operator (participant)
Thank you very much. We'll take that as the last question. I would now like to hand the conference back to the management team for closing comments.
Sandeep Bakhshi (Managing Director and CEO)
And thank you, everyone, for joining today on a Saturday evening. Wish you all a healthy New Year ahead. Thanks. Thank you very much.
On behalf of ICICI Bank Limited, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.