First on liabilities, specific on the current account. We have seen a decent acceleration even on average basis. So what's driving that and how do you think about its sustainability? On borrowings, we have seen the borrowings going up in the last two quarters, and it's now back to 15% of IBL. Second is on cost of deposits. This quarter the improvement in cost of deposit was a bit slower than some of the other peers. Assuming no further rate actions, when do you think our TD re-pricing gets over and how much more juice is left on cost of TD side? Third is opex - on the staff expenses again, should we assume that what we saw in this quarter is the new base? And the last question is on asset quality. The standard loans provision were negative in this quarter, what's driving that?
On current accounts, I think it's a combination of a few things. One, we are continuing to see deepening of our existing customer-base relationships driven by the tech stack and the technology investment that we have done on corporate banking side. We continue to have much more deeper engagement with clients on their operating flows through some of the Neo based investments. We are also working to deepen and granularize the current franchise through our retail current account initiatives. On staff cost, the absolute number is down. And directionally, things would not have changed even if we had not taken the reversals into account. Siddhi, the employee super app, Adi the app that we use for addressing customer questions and queries at the branches. These are very powerful tools to improve employee productivity. We will continue to work to sustain the wage productivity numbers that we have been able to achieve in this quarter. On cost of funds, we do not give out the proportionality of the book to be re-priced, but the shorter-term book has entirely been re-priced as we stand. But please appreciate that non-retail term deposit rates in quarter 4 have started to inch up. And consequently, the re-pricing benefit on deposits to the fullest extent of the lag book may not come through if the rate environment remains competitive through quarter 4. On the standard assets provision, the negative is driven by the fact that there were sectors that we had marked as stress previously where given the stabilization of the overall loan book, we do not see a stress. It is actually inconsequential in the context of our results. It is about INR128 crores.
First question is basically on any kind of inorganic opportunity that you see out there, especially something which can give a sort of lasting push to your NIM, ROA, PSL compliance. Would you need additional capital if this kind of an opportunity were to arise or is the current capital position adequate? The second question is on how do you think about LDR? Is that becoming more important than really looking at LDR or is the regulator looking at both? Also, how much would be the agri slippages this quarter?
On the inorganic opportunity, we continue to be looking at what opportunities are available in the market. But given the size of possible opportunities, if you take the universe of opportunities available, I don't think there is anything of the size which meets some of the criteria that you mentioned, which will require us to raise capital for that kind of opportunity. So, to answer your question, I don't think there will be any capital requirement given the set that is available in that kind of an area. On LDR, over the last six quarters or so, this is seventh, we have been between about 90% to 93% LDR. And we have been able to navigate this environment in terms of doing the right balance between growth and keeping the LDR in that range. Our general sense right now is that as a metric, the metric served its purpose. Right now, possibly the focus on the metric is a bit different than what it was a year back. But we continue to remain focused on keeping it in that range. On agri slippages: Consistently, we've responded to that by saying we don't break up the retail slippages across product categories. So, that's a number we won't put out, please.
Just firstly, corporate growth, if you could give some more flavor coming from volume or value? Secondly, on credit cards, the decline Q-o-Q, is it simply an end of period thing? Or should we read more into it and be concerned? And thirdly, on prioritizing NII over NIM. My question is, why only in FY'26? Why not in FY'27 and FY'28?
On corporate growth, we're being very selective about the growth. It's being largely powered by the strong client engagement, materially faster turnaround times compared to how the market is operating, clearly focused on our filters on both FTP and RAROC. In terms of sectors, it's primarily led by power, corporate real estate, diversified conglomerates. But we're not stopping at just asset growth on the corporate. Our idea is to embed the Bank in each corporate to be able to improve our transactional flows. We're not chasing the growth here, we're being selective about it. On the card side, it's a phenomenon that we've seen across the sector, post the festive demand rundown, the spend year-on-year came down. Last year, festive season was in October, November. This year, the festive season actually along with GST cuts came in September, and that's why you see the quarter-on-quarter difference. Our percentage share of revolve continues to be the same. There's no change that we are seeing over there. From our perspective, our ENR share, our spend share continues to be stable for last six quarters. On optimizing NII on a go forward basis: Our comment for FY'26 was driven by the fact that we make these decisions on a plan cycle basis. So we are due for our plan cycle for FY'27. Once we've made the decision, we'd be happy to communicate. We will review it as part of our plan cycle and the outcomes, we'd be happy to communicate it at a due point in time.
First is with things settling down on unsecured and retail, on credit cost, we did see some gap versus peers getting created on the credit cost side. So most large peers were operating close to 50 or under, and now things seem to be settling on the unsecured side. So if you can offer some direction, do you expect to bridge the gap you've had in the last couple of years, given that technical slippages also should not be an issue next year?
Adarsh, we could not hear you properly but before the line got disconnected, I think you asked about M&A and then you had a question on slippages. I don't know what M&A you're referring to. We don't comment on any M&A and we are not in any position to discuss any M&A at this point in time. People are quoting sources. Good luck to them. On your question on credit cost. As you're aware, we don't guide on credit cost, but I'll reiterate. Retail asset quality stabilization is what we called out last year Q4 for cards, Q2 this year for PL. The numbers are visible on slide 44/45 for you to see. The stabilization is playing through. Early vintage delinquency of the new underwritten book continues to behave well. That's where we will stop at commenting on credit cost performance, but that should give you a fair idea of stabilization actually playing through our numbers.
Can I please start with the 3.8 NIM guidance? Thank you for reiterating that. The question would be, is that something you're fairly confident about or would you like to caveat that target with any kind of market dynamics that need to play out for you to achieve that target? Also on NIMs, you've seen 27% year-on-year corporate loan growth, 6% retail loan growth. How should we think about this impacting your NIMs on mix effects? And finally, Amitabh, at Davos, you said it will take 18 to 24 months to return to deposit growth momentum. Could you please elaborate on that?
3.8%, we remain confident of, it is rate cycle agnostic, which is why we say it's a through cycle NIM guidance. We are not walking away from that even today, despite the 125 basis points rate cut that we've seen. We remain confident that we will get to the 3.8% over the duration of our book. To the second part of your question on portfolio mix, we had clearly called out at the start of Q1 that for the current fiscal, we would look to optimize net interest income because that flows through PAT and has a positive impact on ROE. We do believe that we will rebalance our book to what we have previously indicated. We think an optimal book balance in the current plan horizon would be 58 to 60 retail, 23 to 25 wholesale and the balance being SME. On Davos: I responded that first the credit and the deposit growth have to converge as it converged earlier. So credit growth cannot get ahead of deposit growth on a sustained basis. And I'm hoping that in the next 15 months to 18 months, the deposit growth will stabilize at similar levels as credit growth because there is no option. The reason I said that is because given what is happening on a geopolitical basis, it's very difficult to say that things can stabilize that quickly.
Firstly, on LCR. Your LCR has dropped. If you could explain the movement for the average LCR, and if you could give the average LCR outflow. My second question is really on deposit growth. We've beaten the sector over the last two quarters. Will we be able to continue at the same pace? And on opex, if at all there is a reversal on employee expenses, because the number looks too low or should this be the new base?
On LCR, we have been broadly in 115% to 120% range for the last several quarters. We continue to operate in that range. Quarter-on-quarter, there is some variability because given the large balance sheet, there are changes to inflows and outflows that do happen and consolidations of liabilities and assets do change. But the broad idea is to stay within that 115% to 120% range that we have operated in for almost 8 to 10 quarters now. On deposits: We've been telling you that NTB growth has been encouraging for us. We've been premiumizing our new acquisition. We're also seeing momentum in our NRI book. We've also seen our ETB book starting to deepen quite heavily this year. Last year, we added about 500 branches. This year also we will add about 400 branches. We've added 134 branches this quarter. Net-net, I think we are confident that our retail deposit momentum, we've seen some good work, but we realize that we have a lot of work to do still. On staff cost: The reduction in staff cost has two variables. Absolute reduction in headcount quarter-on-quarter, which is permanent in nature and there is a one-time reversal of staff expenses that are no longer required to be paid. However, please note that the staff expenses no longer required to be paid would not have changed the direction of the staff cost improvement on a sequential quarter basis.
One is on PSL. The PSL compliance, how are you placed? The RIDF outstanding has been coming down, now down to 100 billion. Does this suggest that we are moving towards self-sufficiency in PSL or the shortfall is being made good by PSLC certificate? Number two is deposit and LCR put together. Now, for LCR from April, the new guidelines comes in and the runoff rates on the wholesale and NBFC should ideally come down. Do you sense that you can still continue this strategy?
On the PSLC strategy, we have not got any RIDF allocation over the last four years, largely because of how we manage the PSL book in terms of organic growth. We did Bharat Banking in 2021 as a specific strategic agenda for the Bank. So, the RIDF numbers that you see are the old RIDF numbers which have been running off based on their tenure. Going forward, this is going to continue to be a challenge at a system level. We feel fairly confident given how we have focused on the Bharat Banking part of the business over the last four years that through a combination of organic book as well as wherever in order to bridge some of the gap, we might need to do PSLC purchase. On LCR, from 1st April, there are three things which are changing. First is that we are required to maintain an additional 2.5% runoff on retail and SBC deposits which have IB and MB enabled. There is an alignment of HQLA haircut. And thirdly, some OLE deposits will move from OLE category to non-financial corporate category which is a much lower runoff of 40%. So, there are pluses and minuses with this guideline and our current estimate is that this is what our composition of deposits is. We are broadly neutral in terms of these pluses and minuses effective 1st of April.
Question was on recoveries. When we look at the run rate on the recovery side, it still seems to be almost similar on a quarter-on-quarter basis, somewhere around 2800-2900 range, and there were expectations in terms of better recoveries to flow through even from the technical slippages. Also, on the investment income side, there has been quite a bit of volatility in 2Q and 3Q. So, is it more to do with maybe some booking of the investments during a particular quarter?
If your question is related to technical slippages and recoveries thereof, we reiterate that pool will not result in an economic loss for us. We will be able to recover these loans because they have an adequate value of security cover. That's what we've consistently been saying. You've seen a decline in the net slippage number on a quarter-on-quarter basis. I think you're comparing quarter 3 to quarter 2. Please do adjust for seasonality, and if you adjust for seasonality, the trend lines that we've been calling out continue to hold. So, on technical slippages, we remain true to our comment that you should see recovery from that pool over a period of time, no economic loss on that pool. On investment income: treasury income is a function of the treasury's decision to monetize basis market scenarios. Ideally, you should look at trading profit on a full-year basis. So, if I request you to look at nine months trading profits, nine months trading profits for last year was INR1,885 crores, and nine months trading profit for the current year is INR1,978 crores. So, broadly flat to stable, INR100 crores gap. So, please don't either model or measure trading profits quarter to quarter. If you're looking at yields on investment income, there will be some volatility depending on the investment position we carry on our trading book. There will also be some volatility basis the interest rate view our treasury takes between long-duration securities versus short-duration securities. You're right in your observation that there is a marginal decline in yield on investments in the current quarter, that's driven by specific treasury strategies on elongating or shortening the duration of instruments we hold. Nothing to read into it as we stand today.
One is just wanted to understand about the growth in the retail asset book. What strategy are we adopting to improve the traction there? Number two, on the operating leverage side, how confident or what's your view about the direction of travel going forward in the next couple of years as the investment need might again arise if the retail asset growth picks up?
At a very broad level, there are two or three things that we used to look at the retail asset businesses. The first thing at a broad bank level, we have said that we will grow our asset book through cycles at about 300 basis points better than the industry. The second thing is that on the RAROC side, we are guided by RAROC operating principles. We are very clear that we will dial up or dial down depending on the returns that we expect to make in any business. The last few quarters we've seen, we took a hit in unsecured disbursal because there was about six to eight quarters back we went through a cycle there. We've seen those disbursals now come back. We have remodeled our acquisition engine, and we are seeing attraction in that business. We've also, in the mortgage business, we're seeing a lot of competition from PSU banks. We're also doubling down on a few lines within the retail mortgage business, which will give us higher RAROC. We are seeing higher disbursal growth quarter-on-quarter and Y-o-Y. We will maintain a growth which is better than the industry growth rate. We also mentioned that over a period of time, we'd like the ratio of retail, wholesale, and SME to be in a certain zone. Wholesale is way higher right now, but at some stage, that will come down. Retail will pick up because the disbursement numbers definitely reflect that over the next couple of quarters. On cost: Please think about cost to assets on a full year basis rather than quarter-by-quarter. When retail disbursements improve, we will see costs increase because there is a sourcing component, cost component to retail disbursements. But that does get compensated in part on the fee income line because we will realize some amount of processing fees to offset that cost. Keeping that aside for the moment, directionally, you should see cost to assets improve as we get efficiency into the business.
First question is on the NIM movement in the quarter. So you reported it's down nine basis point quarter-on-quarter. So if I look at your NII at 4% quarter on quarter, it's largely in line with your loan growth and your asset growth. So is it that, the growth that we saw in the last quarter was back-ended and so, the averages have grown? Just one last question. I didn't pick up your response to what is the impact of the new LCR calculation from FY'27 on your reported numbers.
I think a good way to anchor the response is to refer to slide 9 of our investor presentation. Effectively, we've explained the 9 basis points as 1 bps of extra interest reversal compared to the previous quarter due to seasonality of the quarter. 8 basis points is spread compression. Broadly, I would request you to think about the 8 basis points as a reasonable portion of the 8 basis points coming from mixed shift in the book. So what you've seen is wholesale proportionality move up compared to retail proportionality. Now that's playing through on full quarter basis as we move forward in time. So there's an advances mix impact on margins that plays through in the 8 basis points. And second, there is a liability mix impact that's playing through in margins, given that for the system and us, the incremental CASA ratio is not at the same levels as the book CASA ratio. On the mixed shift question: we are focusing on NII optimization through the year. So effectively, given what opportunities present themselves in the current quarter, we will take a considered decision on where we grow for in the current quarter. So if there's a further mixed shift, it will impact margins. The other impact on margins in Q4, as I had called out earlier, was the full pass-through of the 25 basis points repo rate cut offset by depository pricing in part. On LCR: I think we would be neutral on the change from where we stand today.