On the interest income breakdown - other interest is high at around INR 206 crores, versus around INR 100 crores in last few quarters. What is the breakdown of this other interest income?
Nitesh Ranjan said the bank would come back with the exact breakdown but it includes income from PSL deposits and RIDF. Ramasubramanian clarified RIDF investments produce interest recovered shown as other income. Asheesh Pandey added RIDF is INR 198 crores. On NII, two rate cuts notwithstanding, MCLR book is around 38% with the rest EBLR repo-linked; good growth in RAM sector and corporate worked on, plus INR 24,000-26,000 crores of sanctions pending disbursement help carry interest income over 90 days.
What would be your SMA2 below INR 5 crores?
Asheesh said roughly INR 24,000 crores to INR 25,000 crores because interest application gets recovered next morning. Avinash committed to provide the exact number separately as the bank only discloses SMA2 above INR 5 crores in presentation.
Deposit growth is just 0.95% this quarter, only 3.88% for nine months, and 2.19% over the last seven quarters. With CD ratio at 83.89% and CRR at 16.49%, how do you match deposit with credit growth?
Raising deposits is not an issue; bank knows where money is and where to deploy. INR 40,000 crores bulk deposit shed reduced LCR requirement; INR 15,000 crores treasury book contracted and shifted; domestic CD ratio is below 81. First time bank CASA increased by 140 basis points (~INR 9,000 crore CASA increase); plus retail term deposit ~15,000-16,000 crore increase. Refinance and MSME refinance (~INR 5,000 crores) used. Ecosystem banking structure created. All ratios within board-approved range.
Net profit went up substantially while operating profit went up only INR 100-120 crore - mainly because standard asset provision came down to INR 176 crore vs INR 882 crore in last quarter. Going forward, will provisioning remain less and profits keep rising?
Four-five ratios determine credit cost: SMA, loan book quality, PCR, GNPA and NNPA. These give good inference on future provision. On OP, what we are seeing now is part of 90-day spread - sanctioning takes 20-25 days plus disbursement another 10-15 days. Interest income emerges over 90 days. We have shielded OP and made it better even in falling rate scenario. Expect better performance in coming quarters.
FY '25 total recovery was upwards of INR 15,000 crores; FY '26 so far INR 9,200 crores. Outlook for FY '26 and FY '27 on this number? Is decline of 10-20% every year fair to assume going forward?
Portfolio is different now; slippages coming down. Done INR 9,200 crores so far; some recoveries expected last quarter will be realised; not giving specific guidance but expect more or less same average as last 3 quarters. On recovery as a whole - three baselines: regular recovery, bigger via NCLT, smaller via Lok Adalat or SARFAESI. Regular better than expected; bigger ones still pending. Bigger resolutions expected in last 15 days last quarter did not materialise but will materialise in this quarter; do not include in forecast.
On OPEX - last 2 years OPEX growth has been low. For next 2 financial years, what kind of OPEX growth do we expect? Should it be in tandem with loan growth?
Taken few steps - Project Muskaan for efficiency, plus initiatives on ATMs and equipment. Cost of people and physical infrastructure increases with GDP growth but identifying parameters where we can have control. Digital push and digital infrastructure platform - once put to 60-70% capacity will see good cost cutting along with risk mitigation. Plan to open 75 branches this year and 200 more going forward - that adds cost, but want to bring under control.
Based on draft ECL norms, what would be the run-rate impact on credit cost if ECL were implemented as in the draft form?
Asheesh said the total ECL requirement after netting current provisions is hardly in the INR 4200-4300 crore range. Avinash added that on a run-rate basis credit cost has been varying between 20-40 bps; they have made certain recommendations on draft and will discuss once final guideline comes, but are not expecting much change versus current credit cost. Asheesh emphasised SMA2 is only INR 4,285 crores entire book, 95% of corporate book is BBB and above, early warning signals strengthened so transition is not much.
On loan growth - you talked about mix changes within Corporate and lower-yielding loan book getting transferred. Is the mix change broadly over? Can you sustain 4% or higher Q-o-Q loan growth? How soon can you reach industry level loan growth on Y-o-Y basis?
Around INR 30,000 crores in Corporate has been churned. Something more will happen this quarter, but growth this last quarter will be better than this one - currently INR 24,000-26,000 crores Corporate sanctioned and pending disbursement plus pipeline in various stages. They expect better than this growth in coming quarter and aspire to industry level growth.
Was there any provision carved out for gratuity, leave encashment under the new labor code? At least the gratuity part was mandatory - have we provided, and if so, can you quantify?
On welfare benefits, what's in banking industry bipartite is much better, so out of question. On leave encashment, gratuity etc, impact more on younger-age banks (5-year to 1-year shift); Union Bank is 107 years old. As per calculation maximum in range of INR 10 crores to INR 15 crores, not much. Gratuity is already being done.
On the trade release measure - RBI gave dispensation for moratorium for exporters during the quarter. Can you quantify the request in INR crores for the bank?
Till date sanctioned around 78 proposals of about INR 500 crores; within which 61 proposals of INR 216.64 crores already disbursed. Bank has met with various clients in last three months, understood requirements as conduit for the economy; few more proposals are in pipeline.
Can you give some color on technology upgradation and IT budget? Where are we placed - is there any major ease of doing business or major initiative on the technology front?
Under Project Muskaan, around 300 odd processes identified for simplification. Capital budget for technology this year is around INR 1,600 crores, higher than previous year. Phase-II of Resilient Center of Excellence being implemented; Cybersecurity Center of Excellence nearing closure. Bank has DC, DR plus near DC and near DR. Digital banking platform has four-side active-active architecture. Almost 80% of liabilities relationships and accounts get opened digitally. Setting up a digital business vertical with three approaches: do-it-yourself, assist channel via call center, and digital approach at branch level.
In terms of provisions - going forward to meet ECL provision, do you expect we will increase standard asset provision or it will remain at lower end? And on PSLC - H1 FY26 had no PSLC income but INR 100 crores has come in this quarter. Can we go back to FY25 levels?
Total slippage for December quarter is around INR 1,800 crore with recovery and upgradation to similar extent; PCR at 95%; no corporate slippage. Going forward provision requirement should be lower. On ECL - bank is well placed; 5-year dispensation given but bank may not avail; bank has adequate profit to take care of ECL provision in first year itself. On PSLC - first half H1 had no opportunity to sell; in Q3 sold small amount, booked INR 108 crores profit. Last year was INR 950 crores profit in H1. Working hard, will try to sell more PSLC in next quarter.
On investments book - sold around INR 10,000 crores mutual funds and some SLR securities, yet income on investments interest income earned line up only 4%. What is happening here? And is treasury gain mainly because of mutual fund sale income?
Normal treasury operations. NSDL decrease last quarter was around 500 crores, in same range. Banking job is to lend first on quality assets. Given yields on SLR/non-SLR versus retail, MSME, corporate - lending is much better option. That is why treasury contracted by INR 15,000 crores and shifted to better yielding/quality assets. Treasury gain of INR 580 crores not solely mutual funds - includes foreign exchange income, HTM sale, sometimes arbitrage swaps. Q3 of '24 grew substantially above that number.
On the recovery path - recoveries from written-off accounts compared to run rate of past 5-6 quarters have come down, as has overall recovery. Where should we see it settling over next 3-4 quarters?
Earlier portfolio is different; new slippages are very less. Last quarter recovered around INR 3,000 crores or INR 2,800 crores; maximum recovery in single account only INR 130 crores. Concentrating on mid- and small accounts. Going forward expect some recoveries this quarter. Three channels: NCLT, OTS party-by-party, smaller via Lok Adalat or SARFAESI/property sale. We were expecting 3-4 accounts close to materialise last quarter; may see in this quarter.
Last quarter you indicated prudent provisioning towards ECL which made Standard Asset Provisioning higher. This quarter, doesn't seem to be any provisioning towards ECL. And on fraud cases, was it 100% provided earlier with nothing provided this quarter for fraud reported in this quarter?
Yes, last analyst call we mentioned taking additional Standard Asset Provisioning to reduce the buffer required to meet ECL provisions. Did this in Q1 and Q2. Given low slippages this quarter and PCR of 95%, did not feel need to make any Standard Asset Provisioning this quarter. That explains why no big Standard Asset Provisioning in current quarter.
Do you expect NIMs in FY '27 to improve, stay stable, or moderate? What will influence this? And what kind of revenue mix are you expecting from Retail, MSME and Agri book?
Amresh: NIMs will further improve - deposit cost will be repriced in this quarter or next financial year; MCLR-related books only 32%, balance external rate linked; deposit side reprices after maturity. So definitely NIM going to improve. Asheesh: we would like to defend 2.76% but hope for better; depends on CASA, retail term deposit mix, average advances during quarter. Ramasubramanian: Retail 22% YoY, MSME 20%, Agri picked up last quarter; will maintain 68-42 or 60-40 ratio between RAM and corporate. Amresh on Corporate: pipeline, sanctions in hand; no challenge growing corporate book.
What is your NIM guidance for FY '26? And how much of the deposits are yet to reprice in terms of Retail term deposits and certificate of deposits in Q4?
We communicated last quarter that we would like to defend NIM and we did better. We would like to defend 2.76% but hope for better; in shuffling the book some opportunity exists. On deposits maturing in this quarter - in the range of 1 plus around 50 lakhs under different rates, including bulk and retail. Composition managed so as not to impact LCR. On high cost we are very keen - not quoting higher rates to financial institutions since runoff factor is 100%. Created ecosystem banking - very senior GM with around 1600 people across India; initial result CASA improved 140 bps.
What is the size of the gold loan book in both Retail and Agri? And incrementally, what LTV are you doing these loans at in Agri as well?
Total gold loan portfolio around INR 84,000 crores; flat for past 2 quarters then this quarter increased around INR 2,200 crores. Slowdown was deliberate to strengthen systemic procedure done in October/November; now poised forward. 9-month yield around 8.85%-9%. Agri is about INR 48,000 crores. LTV is 75% in non-Agri and 85% in Agri.
On credit cost - used to be around 65-75 bps average run-rate, now down to 10 bps. Is this because of slippages, write-backs or one-offs? And what would be your steady-state credit cost going forward sustainably?
95% corporate book is BBB and above, mostly A and above. SMA in absolute terms is lowest. Slippage ratio within control - credit book strengthened plus better collection efficiency via software/apps/feet-on-street. Restructured book - 50% already realised as NPA, so taken care. Do not foresee much variation unless heavier situation like COVID. Avinash: 9-month credit cost about 26 bps - we would like to try and achieve that going forward, including ECL coming in; hopefully around that.
On LDR - benefited from CRR cuts, LDR shot up by about 4.5% sequentially. What kind of LDR levels are we looking for? Capital comfortable at 14-15%.
Two types - domestic and global consolidated. Domestic is below 81. 80-81 is good comfortable range. Global LDR is 80-83 range including Gift City. Do not foresee any issue; will not go beyond certain limit, maybe 0.5%-0.75% here and there.
What is our excess standard asset provision that we hold? And on project finance provisioning rules - how do you see that impacting provisions? Are you seeing incremental private CAPEX picking up?
Avinash: not fair to look at it as excess standard asset provision - we are bridging gap between ECL and current provisioning level. We are comfortable on excess held; will look at it once RBI releases final ECL guidelines. Ramasubramanian: not much project finance provision this quarter; some recent project finance provisions made per norms but not significant. Asheesh: for existing portfolio no additional impact - either COD achieved or extended. Only new cases with COD extension will have incremental impact, not very significant.