Outlook on treasury for the year and digital spend amount - what is the likely spend on digital?
Treasury depends upon the market forces. As you see June quarter it was very good and September quarter there is reduction in trading income, Rs. 290 crores reduction in income in this quarter. Based upon market news I expect that in coming quarter treasury is going to support us a lot. (Mukul Dandige adds: even though trading profit has come down, coupon income has gone up in treasury. We are into different revenue streams like depot transaction where we are getting good income, and also IPO - in a recently concluded IPO where a leading company had gone to market we were able to get 50% amount as a premium on our total investment. SDL also has seen an uptick, we are getting good coupon in SDL bonds. Treasury is doing its bit, market driven but agile and looking for any opportunity.)
Aviation account - can you give some development? Anything happening on the large account where we had extra collateral security with Bank of Baroda? Any progress in last quarter or any recovery?
As of now there is not much development but we have published two e-auctions and further we are going for another e-auctions for this account. This time we have reached out to many investors or property builders also, so we expect by December end there would be some e-auctions results in our favour and accordingly this may be resolved. (On size) This asset is around Rs. 1600 crores, this asset is around 1965 so after reduction in the third e-auction it may come around Rs. 1650 crore. When we publish the e-auction we expect this time this may be taken over and we will get a substantial recovery out of this.
Congratulations on the stable result and your appointment. The bank has been very stable on CASA. You highlighted in your vision that you would like to increase your RAM and agriculture. With RAM, what kind of new initiatives can we see over the next six months to a year which would strengthen the bank's position? We are a pioneer in terms of size where co-lending is concerned with brilliant quarter-on-quarter performance.
In Agriculture and MSME, these two are going to be our major focus area. Here there are going to be two approaches. One approach is the mass where we are going to support through technology - straight through processes journey capturing MSME advances and in next six months to one year we are going to finance value chain financing in agriculture, more focused in dairy side and other areas. We are going to play important role in cold chain financing - we are spread across the country where the warehouse part and cold chain part is also very important area where lot of investments are coming. There are activity-based clusters where whole ecosystem for improvement of agriculture and MSME is going on, and lot of government initiatives are also there. We will strengthen our branches in those clusters with manpower, technology and other support. In MSME, both ULI and other digital journeys are available - MSME digital loan, BGST etc. Cluster examples: Surat textile, Rajkot machinery, near Lucknow also lot of clusters. In those clusters we will strengthen branches, map them with the cluster activities, support with best products at competitive rates. These are going to be our strategy in next six months to one year.
With your rich experience across Union Bank, PNB and the EDs from large banks - how would you visualize your RAM vs corporate advances mix over a two year outlook? Currently we are at 71.5% RAM and 28.5% corporate.
RAM has its own advantage and taking exposure in corporate side also has its own advantage. We have given as an organization that 65:35 is an ideal ratio. We are going to aspire to maintain this ratio in coming years also, because in RAM sector this bank has got very good skill set traditionally. MSME growth rate and agriculture growth rate are very good - that is the strength of this organization, we will build upon it. In corporate side, due to obvious reason, this bank was for last five years under PCA but now capital also supports us and we are going to build. Our earlier predecessor has taken initiatives like building cadre of credit officers - we are continuing that. This year also we are going to build minimum 1000 credit officers. FOREX side, credit side skill sets we are going to nurture and prepare them. So 65:35 would be guiding for us and that is a good combination for maintaining balance between Corporate and RAM.
Looking at new RBI initiatives - acquisition finance, share advances, capital market exposure, new IPO financing. You have a strong CASA franchise, reasonable retail led by housing and auto loans. With RAM focused at 65:35 and acquisition of Future Generali as large shareholder, do you see margins where we are today and Cost-to-Income improving over the next 12 months?
Very right. If there is improvement income of Rs. 50 crores in a quarter it adds to the reduction of 1% in Cost-to-Income. If six month time we are able to generate Rs. 300 crores then actually six-point reduction in Cost-to-Income we can envisage. The kind of initiatives we are planning and which I have shared - bancassurance is also new, asset assurance side every quarter good number of disbursements are happening. Even through persuasion even our own assets are insured - untapped area for income. Several emerging sides like revisiting processes, more use of digital tools and more cost curtailment measures. Collectively if it works that cannot be a major challenge. By March I can assure you this would be in the range of 54% to 55% which it used to be. With very conservative approach I am telling you.
What is your estimate that G-SEC 10 year would trade between January and March at what rate? 6.20% to 6.25% because there is a likelihood of a repo cut again coming?
You are very well aware. CPI has come down to 1.54 even in October print also it will be even less than 1%. Only thing is core has increased a little bit but core is mainly contributed by the tremendous improvement in the prices of the precious metals. Excluding gold now it is 3.3 and with this now we think there is a benign environment now going by the indications given in the various features by governor. We expect at least one rate cut going forward and 10 year yield now it touched at 6.60%. It should trade around now we believe 6.30% to 6.40% range should be the ideal range.
Welcome and congratulations. Looking at this quarter's results, the operating profit has gone down tremendously - mainly because treasury income reduced from Rs. 664 crore to Rs. 186 crore. But ultimately it should reflect from core interest income, and for that you should have a strong corporate book. Corporate book in Central Bank has been going down substantially to almost 28%, 29%. How long can you rely on RAM? What are your plans to strengthen the corporate book given your experience? Margin squeeze - and you said over time you would try to make it 65:35 - what are your immediate plans?
Very pertinent question. I was going through earlier earnings call transcripts - it was a conscious call that corporate was not going to be the focus of this organization. Looking at the time which was there, that is why the income, the required income which should have come, has not added to the income stream of this quarter and last quarter also. Another important area - the repo linked base loan composition is not in favor of Central Bank of India, approximately 60% of our advances are linked to repo linked based loan. Due to those transmission, benefit has been passed on to the customer but deposit side it was not there due to contractual agreement, gets repriced with lag and that difference has hit us hard. But on our vision towards corporate credit - unless we play a big role in corporate credit side, certainly the income flow and all these things we cannot maintain. Through RAM, the repayment side will also be substantiated. We have to actually work sincerely, build capabilities, the core cadre is there, very good team we are having here, but we have to give confidence to the customer that yes timely decision would be there - we are also a player. Our capital adequacy ratio is 17 point plus, so we are in a position to play in this area significantly. Having experience of PNB where we were handling more than Rs. 11,30,000 crores - I can assure through your question to the market that we are going to play important role in this segment also.
You said we have a written-off book of about Rs. 35,000 crores. Have you got time to plan or revise the recovery calendar - how much from this written-off accounts comes straight to our bottom line? What ballpark figure do you expect year-on-year? 5%, 6%, 7%, 8% of total written-off book?
Rs. 35,000 crores is our total TWO book and I will give you the figures for the last four years. 2021-22 we were able to recover only Rs. 331.52 crores which increased to Rs. 1282.59 crores in next year that is 2022-23 it further went up to Rs. 1433.32 crores in 2023-24 and last year we could recover Rs. 1716.33 crores this half year itself we have been able to recover Rs. 893 crores. So our internal target is that we should cross the figure of Rs. 2000 crores as far as the recovery in TWO accounts is concerned during this financial year. This quarter also we could have seen further upside but one or two big accounts are in NCLT - if some case happens then it gets a little bit impacted but definitely we will be crossing Rs. 2000 crores for sure.
And will the recovery be less than the slippages?
Yes, 100%. Because that is guidance, minimum recovery will be double than slippages.
Can we talk about ECL? The norms are getting clearer. Have you started making some provision on SMA-1 and 2? What other kind of buffer do you have and what plans to take care of ECL provisioning when it becomes a norm?
RBI has released the initial draft on 16th January'23. Since then it was engaging our attention. We started making provision for stage 3 NP assets and our estimated debt at that point in time was around Rs. 6600 crores to Rs. 7000 crores of total provision required based on the ECL draft guidelines. Now we have totally provided for the stage 3 NP assets and have started providing for other assets - standard restructured accounts. Till September 2025 we have made a provision of Rs. 1150 crores. Our estimation based on the latest RBI guidelines is that somewhere around Rs. 3300 crores to Rs. 3500 crores total would be required additional provision, out of which this Rs. 1150 crores has already been made. It will be effective 1st April 2027 so June quarter it will take effect - going forward in the seven quarters we should end up doing the entire provision so that we can transit to the ECL on day one.
What is the SMA-0, 1 and 2 for the entire loan book? You have given the number for Rs. 5 crores and above.
SMA-0 total amount as on 30th of September is Rs. 2444 crores. SMA-1 is Rs. 1377 crores and SMA-2 is Rs. 2116 crores. So total - SMA-0 is only 0.83% of total advances, SMA-1 at 0.47% and SMA-2 at 0.72%.
Is the bank holding excess provisions outside of the standard asset provisions - any additional provision over what is required as per IRAC norms?
The standard restructured book wherever 5%, 10% or even 15% provision was required, that we are holding over and above this Rs. 1150 crores that we have provided for standard assets as per the ECL requirement. So in total around 0.94% of provision on standard assets we are holding.