HDFC Bank Ltd (HDB) 2014 Q4 法說會逐字稿

Good evening. Thank you for standing by and welcome to the HDFC Bank's Q4 FY2014 results conference call presented by Mr. Paresh Sukthankar, Deputy Managing Director of the Bank. At this time, all participants are in listen-only mode. There will be presentation followed by question-and-answer session. (Operator Instructions) I would like to hand the conference over to Mr. Paresh Sukthankar now. Over to you, sir.

Thanks. Hi, everyone. I've got Sashi Jagdishan and Bhavin Lakhpatwala also with me. I'll try and take just a few minutes on some of the key highlights. You have probably all seen the numbers, but nonetheless, let me walk you through some financial parameters both for the full-year results and the quarter and we'll jump into the questions.

Couple of numbers for the year as a whole. The total income for the year was up 17%, it's at now INR49,055 crores. Net interest income for the year was up about 16.9%. The cost-to-income ratio on a full-year basis was at 45.6%, which is down from 49.6% in March 2013. The profit before tax at INR12,772 crores was an increase of 31%. The effective tax rate was higher, that's probably what you have seen through each of the quarters this year. But on a full-year basis, the effective tax rate for the year ended March 2014 was 33.6% as against 31% for the previous year. And net profit growth for the full year was 26% to INR8,478 crores. Consolidated net profit was INR8,743 crores, which is up 27.3% over last year.

Moving on to the quarter, which is I guess what we are focusing on right now. Total income for the quarter was INR12,790 crores. That was up 14.9% over the corresponding quarter ended March 2013. Net interest income tends to be the larger part of our net revenues, accounts for about 71% of net revenues and NII was up 15.3% to INR4,952 crores. This was on the back of continued balance sheet growth and a net interest margin for the quarter of 4.4%. Other income, which is the non-funds revenue, formed the balance 28.8% of net revenues and other income growth was 11%, grew from INR1,803 crores to about INR2,001 crores. Operating expense growth for the corresponding quarter of the previous year was 1.2%.

Cost-to-income ratio for the quarter, 45.7% as against 51.4% for the corresponding quarter of the previous year. Total provisions, INR286 crores as against INR300 crores. Profit before tax at INR3,493 crores, an increase of 31.2% over profit before tax for the corresponding quarter of last year. Again for this quarter also, the effective tax rate was 33.4%, not very different from the 33.6% that we have seen as the effective tax rate for the full year. However, the corresponding effective tax rate for the corresponding quarter of last year was only 29% and therefore, the income tax is up 51% year-on-year. And the net profit growth was 23.1% where the net profit for the quarter was INR2,326.5 crores.

Very quickly on a couple of balance sheet numbers. The total balance sheet grew by 22.8%, we are now at INR491,600 crores as the balance sheet. Loans and advances grew by 26.4% and touched INR303,000 crores, deposit growth was 24% touching INR367,000 crores, and the CASA ratio as at March 31 was 44.8%. We have spoken about the fact that in the December quarter we had this one-off FCNR flow which had come in. This was against the window that RBI had provided to swap into rupees at a concessional rate. If you adjust for that flow of FCNR deposits of about INR3.4 billion and a couple of billion of lending in the overseas branches linked to that, the core loan growth would be about 21.8% and deposit growth of just under 17%.

So again, if you contrast both the total loan growth or the core loan growth and the total and core deposit growth, we have clearly outpaced the system which has grown at about 14%, 14.5% on both loans and deposits. As far as the branch network is concerned, we closed the year at 3,403 branches. These 3,400 branches are across 2,171 towns and cities, of which about 55% of the branches are in semi-urban and rural areas. In this quarter, we added about 67 branches. Finally, on the asset quality front, gross NPAs are at 0.98%, net NPAs at 0.3%. The gross NPAs as of March of last year were at 0.97% so it's sort of flat to this year in terms of even the -- by virtually the [decimal].

In the December quarter we were at 1.03 so there has been a marginal few basis points improvement on a sequential basis. Total restructured loans were at 0.2%. In absolute terms if you look at the NPLs again, we ended the year with gross NPAs of INR2,989 crores as against INR2,335 crores as of March of last year and marginally lower than the INR3,018 crores as of December of 2013. On capital adequacy, the cap ad at the end the year was 16.1%, of which the Tier one capital adequacy was at 11.8%. I'll stop here and let's open the call for questions.

(Operator Instructions) Nikhil Rungta, Standard Chartered.

This is Mahrukh. Just had a couple of questions. Firstly in terms of the CV loan growth, do you see it reviving now in the next year or when do you think the growth is going to bottom out? And in terms of the corporate loans you've done during the quarter, what would be the duration of these loans, are they really short term? So, that's my first question.

I didn't hear the first part of your first question. You said that when does growth bottom out, your voice sort of didn't come.

Yes. When will the CV growth will bottom out so when will we see a revival in the CV growth numbers?

Okay. So clearly, the loan growth out there is linked to what's happening in the underlying industry and therefore obviously as truck sales pick up, obviously CV loan growth will also start picking up. Anecdotally or otherwise, one tends to hear that the worst in that industry sort of tends to if not be behind, at least seems to have been reached and things have stabilized. And if there is some pick up in manufacturing and if some of these mines which are being restored and all of those developments start kicking in, then you should see some pick up in underlying demand for CVs and therefore some rub off of that on commercial vehicle loan growth.

As far as our year-on-year numbers for commercial vehicle loans, as you might have seen, there's been a degrowth of about 10.5% between March 2013 and 2014. We do expect that from this base there should be some growth in the loan book, but how much is really dependent on what happens to the underlying sales. On the wholesale book, the duration is pretty short because most of the incremental loan growth on the wholesale side has been working capital and medium-term loans so the duration of it is three months, six months, certainly less than a year.

Okay. And the other question I really had is a lot of emerging banks are focusing on investment banking fees, which is basically your structuring and other fees from both loan and bond syndication. Obviously, most of these fees are generated from mid-sized corporates and it looks like a very lucrative business for them. So why is it that HDFC Bank is not into that business? Is it because you don't have a corporate focus or you view that portion as risky?

We would like to believe that we have a pretty strong corporate focus and in fact, a lot of the core corporate or wholesale businesses, whether it's corporates or it's emerging corporates in business banking, I think we've grown rather well. We are also in the debt capital markets and loan syndication businesses. However, where these fees are really rich are probably for structures and customers where our understanding or our appetite for some of that credit may be a little lower. So, it's not that we don't want to tap into some of these opportunities or that we don't do that. However, we are somewhat more selective I guess with respect to the customer segments that we sort of want to be associated with on this.

I mean I don't want to sort of be running down what may be a successful business for a lot of banks, but some of this tends to be in the zone of corporates who need some structuring of loans, which ultimately involve taking risks, which the Bank may not have completely an appetite for or some trade-off between what are the interest rates that are charged on the loans and the fees that are earned. Both of these are certainly not areas that we are particularly focused on. So, the bottom line is that we do have expertise in terms of those product lines, those verticals. We will offer these for certain customer segments, but there may be other segments which we may not want to or be able to tap into.

Thanks a lot.

Suruchi Jain, Morningstar.

My first question is about the rural branches. Can you explain to us your strategy there as well as how their profitability is different like how long does it take for the branches to reach say breakeven versus a metropolitan branch?

Our strategy is that we see this opportunity to expand our presence in the semi-urban and rural markets, including a lot of unbanked locations which we believe do offer adequate business potential for us to grow as long as we manage the cost of those branches. So, a lot of these branches especially when we get into deeper rural or unbanked areas are extremely small branches, could have sometimes just two or three staff members and they tend to work on a hub and spoke basis with other rural branches and semi-urban branches so that we can provide the complete product range that we have and leverage technology whether it's in terms of scanning documents or other means of providing or sort of centralizing or regionalizing certain activities while providing the customer the full range of products. From a breakeven point of view, there's not much of a difference between these and some of our semi-urban or even urban branches because while the revenue potential is lower, so are the costs. And it still takes in most locations between two-and-a-half and three years for these branches to breakeven. There may be a few that it takes a little longer than that, but for most part the three year sort of a benchmark tends to work.

Okay. And my second question is about operating expenses, I understand they've come in a lot lower. Is this mainly because of your branches in unbanked areas and if so, how sustainable is this?

So I think on the expense side, we've certainly been very consciously controlling the OpEx line and the benefits that we are trying to derive from an operating leverage perspective or the lower cost again really can be divided into two sets of factors. One is the fact that the incremental branches that we are adding to the extent that they are smaller and the costs involved there are slightly lower, clearly the incremental expenditure for some of those branches is lesser than for branches that we were adding a few years back. More importantly, the branches that we had added a few years back with the passage of time as they tend to reach that roughly three-year benchmark and have broken even, the drag of older branches keeps coming off partly offset by, of course, the new branches that we continue to add. But there is an operating leverage in as much as a lot of the costs are in and as we better utilize the distribution network, the revenues will grow without so much of an increase in incremental operating expenses.

This is something which is continuing and we'll hopefully continue to benefit from the cycle of older investments paying off while we continue to add some newer investments. The second set of factors is to do with pure and simple controlling and cutting or holding expenses, which is working on the back burner expenses, which are in respect of projects or nice to do, nice to have expenses; but which in an environment where given the macro, the revenue growth or the business growth is somewhat muted, clearly there is a conscious attempt to focus on improved productivity, cutting costs, and so on. And which is why you'll find that on an year-on-year basis even in this quarter, the operating expenses are up by less than 2%. So some of that is somewhat tactical and short term and as there is greater normalization or a pick up in the topline growth, some of those expenses could grow again. But in the meantime, there is clearly a conscious holding back or tightening of the belt to ensure that costs remain in check.

Okay, great. That answers my question. Thank you.

Amit Premchandani, UTI Mutual Fund.

Just a question on the Tier 1. If I am getting it correctly, the Tier 1 has moved from 11.1% to 11.8%.

I'm sorry to interrupt you, but can you start. In fact, most of the questions when they start off, the first few words we don't get to hear and then it picks up. So this is to the operator, can you just ensure that is there something at your end because I start hearing the question only in the second sentence almost so just figure that. And if you don't mind, please repeat the question.

The Tier 1, if I'm getting it correctly, has moved from 11.1% to 11.8% YoY. Is there anything to do with fresh Tier 1 being issued, [non-Tier 1] and if not then, is it some relief from Basel III guidelines that you're getting?

No, the increase in Tier 1 is primarily on account of the profits for the year, which you're not allowed to take through the year; but at the end of the year, the full-year profits. The payout ratio has remained more or less the same, which is between 22% and 23%. So it's a question of whatever our retained earnings are, apart from that, there may have seen some issuance of capital on account of earlier ESOPs, which might have been exercised, but that would be not very large. So, the main addition to Tier 1 would have been on account of the profits. There hasn't been any release of capital because of Basel III. It's just that the growth in risk assets has been slightly lower and the growth in take roughly 2% ROE for the year and the fact that our retention rates have been about 22%, 23%; there's been reasonable amount of generation of capital.

With 26% loan growth and almost 20%, 24% asset growth; what would be the RWA growth for the year because --?

I'll just give you the risk asset growth. But remember some portion of the loan growth this year, which is why I mentioned about the total and the core loan growth. See, the part of the loan growth which was again in our overseas branches and linked to the FCNR window is cash collateralized so that has effectively a zero risk weight. But in terms of the overall risk weighted assets, that growth --.

So the growth, you cannot tell if it's Basel II or Basel III.

Okay. But like-for-like, the total risk weighted assets as of March were INR345,000 crores, this is under Basel III; and the risk weighted assets as of March 2013 was at INR306,000 crores roughly, of course that was under Basel II. So, there's been roughly a 13% increase in risk weighted assets.

With this kind of ROEs, 20%, 24% ROE in that range, can we expect that -- and with the growth rate 20%, 22%, that it will be a self funding kind of capital and you may not require any capital for growth in the near term?

Well, I guess it's a function of what is the rate at which we grow over an extended period of time and the composition of that growth. So clearly, if the economy is growing at 4.5% and the system is growing at 14% and we grow on a core basis somewhere in the high teens or low 20s, then the risk weighted assets growth is muted and therefore that is one factor. Do we believe that the economy in this financial year grows a little faster, therefore the rate of growth picks up is one element. Secondly, within that, it's a question of what is the pace at which different components of our loan book grow so how much is wholesale versus retail. Within retail, which products and within wholesale, what ratings of our customers and so on because all of this obviously impacts the growth in risk weighted assets.

And of course, this is the capital required for supporting growth and depending on the composition. The other element of capital will be driven by the regulatory requirements in terms of under Basel III, what is the increased requirements in the roadmap between now and 2018 between the core capital requirements, the CCB, potentially the domestic [SIFI] requirements and so on. So whether we are self-funded or not or at what rate will we consume capital or whether the threshold requirements themselves will change, all of this I guess are the factors that could be in play.

One more question. On the expansion in rural and semi-urban areas, if we look at the loan book, there has been a significant growth in Kisan Gold Card, which is clearly linked to the rural expansion. Is there any part of the loan book which should reflect your expansion in the rural and semi-urban areas other than this?

Well, this product stands out because it's obviously only linked to the rural piece. Some part of the retail business, including whether it is some part of auto or some part of even the LCV I mean at whatever it has grown or whatever loans have been rolled out, two wheelers, gold loans; a lot of these are actually coming from both semi-urban and rural markets. But obviously because it's a blend of existing and newer branches and the fact that the newer branches in terms of ticket sizes could well be smaller, it doesn't show up as much. But even tractor loans and so on, which is part of other, there has been growth in a lot of these products which are primarily focused on those markets or those regions. And on the other hand, some incremental origination of products which may not be as visible when you look at it on an overall basis.

Thank you. That's it from my side.

Manish Karwa, Deutsche Bank.

I just wanted to get some sense on the disbursements especially in retail loans, mainly in CV car loans because is it that the disbursements have really fallen very sharply over the last two quarters?

They haven't fallen in fact in the last two quarters, they've been sort of flattish. So, I guess depending on how the sort of run-offs and so on and in an odd product, you might have seen some marginal pick up as well, but that again tends to be sometimes the March effect and so on. But you haven't really seen a sharp decline on a sequential basis.

Okay. And have you sold anything in car loans?

Yes, we have sold including the smaller ones. Not legal amounts, but some small amounts.

Okay. And how much would you have bought in the home loan?

About [3,900] this quarter.

Okay. And one more data point. What is the floating provisions now on our books?

So floating provisions are exactly what they were at the beginning of the year. So through the year, we had made about INR30 crores and we also reduced INR30 crores. So essentially, the floating provisions remain unchanged on a year-on-year basis. What we started off with is what our closing balance is, which is about INR1,835 crores.

And the P&L provisioning in the fourth quarter is all for NPLs?

No, and there's also some general provisions.

How much would that be?

For standard assets, about [28]. So, small amounts.

Okay. And lastly on your non-retail loans which have grown very fast, I think the growth number is also high because in the fourth quarter last year you would have sold something and in this quarter, you wouldn't have sold something.

Yes, exactly. And we need to because we were more comfortable we were meeting the PSL requirements. As you know, we get some relief because of the growth in the FCNR book.

Okay. And if I were to just adjust, if you would, how much would you have sold in the fourth quarter last year just to get some sense of what would be like-to-like growth?

I think if you therefore remove the distortion which is there on the point of the base and so on for the last quarter and you look at really the last couple of quarters including the December quarter, right, where this previous year base correction does not need to be made; you figure that typically both retail and corporate or retail and wholesale growth was in the high teens. Now in this last quarter since we have continued to grow the wholesale book as normal without really holding back or cutting back, which is what we would have done in the previous year; on that significantly lower base, the growth rate in wholesale tends to sort of get highlighted in a very major way.

Then it will be fair to assume that a large part of the incremental growth that you would have done over the last two quarters will run off over the next two, three quarters?

If it wanted to, but a lot of this is not necessarily completely one-off. These are ongoing working capital requirements and medium-term loans which if we want to and if we sort of decide to, we can continue to grow. If we decide that we want a mix change or there are other parts of the business which are growing faster and which are more attractive to us, we could sweat this path and grow something else. But for us there is an adequate opportunity to grow both the wholesale and the retail book.

Okay. And that the change in tax rate is largely because of the increased surcharge that was put up or is there anything else?

No, nothing else.

That's right and because of the change in the surcharge, the stock of deferred tax asset needs to be revalued so the last quarter of last year had a writeback.

So I think, Manish, the best way to look at this on a full-year basis, the effective tax rate last year was 31% on a full-year basis. However in the last quarter of last year, the effective tax rate was 29%, right. This year on a full-year basis, the effective tax rate is 33.6%, which is not very different from what it is in the last quarter of this year, which is at 33.4% or 33.5%, whatever. So effectively what is happening is every single quarter this year you have seen that the effective tax rate has been somewhere in that 33.5% range, which has been about a couple of percent higher than what it has been for the previous year. But for this last quarter the difference is much more stark, it's almost 4.5% difference between 29% and 33.4%, and which is why the increase in tax for this quarter is almost 51%.

Sure. So now this 33.5% tax rate remains steady state assuming no change in the government taxation?

Yes, absolutely. We can hope of course that there is a reduction, but you're right, there's no further change. We have had a full year now so that is in that. The effective tax rate does not change again.

Okay. Thank you.

Parag Jariwala, Macquarie Securities.

No. My questions have been answered. Thank you.

Vivek Varma, CIMB.

This is Jatinder. Sir, just one question. If I look at your yield on average loans and which we obviously calculate on a period-end basis, start of the year to end of the year there seems to be a 40 basis points, 50 basis points decline, which is a bit contrary to what we have seen mostly in case of competition. If you could explain that specifically with respect to both the segments, the corporate and the retail?

See one, it may not be 50 basis points, but there is about 30 basis points reduction in yield at least if I look at the information for the full year. But between the fourth quarter of last year and the fourth quarter of this year, there is about a 30 basis points reduction. In fact on a full-year basis also, it is roughly a 30 basis points reduction and this is almost entirely driven by a change in loan mix. Two things. One, with that increase in the overseas loan book, right, we have gone from 4% to 8% of our total loan book on the back of the foreign currency loans, almost [INR2 billion], which were part of that FCNR initiative. That obviously when you're increasing, when you're looking at the normal rates, those obviously are significantly lower and the margins there are also lower which you're aware of.

The other is that if you look again within retail, while you've seen some healthy growth in cards and personal loans, you've also seen muted growth in say CV or auto, which were the other large slightly better yielding than those, and home loans have grown by almost 15%. So when you look at the overall weighted average yield on the retail loan book, it has also actually come off from what it would have been last year, again not because there's been a huge change in the -- in fact, there has been hardly any meaningful change on the interest rates, change in the mix. So, that's really where it is. Of course, the funding costs and so on have also come off and therefore the margins have been largely intact. I mean there have been some quarterly variations, but on a full-year basis, the margin might have been maybe 10 basis points lower or something like that. But on a full-year basis again, our NIM for the year is about 4.4% almost.

Okay. Some housekeeping data questions. Can we have the movement of NPLs, the employee base as of March?

So the employee base as of March is 68,165, which was pretty much flat from the previous quarter, right, and it's --.

Down by about 1,000 I guess.

Yes, that's right, lesser than the last year at 69,000. As far as the NPA movements are concerned, the opening balance of NPAs was INR2,334 crores, I'm ignoring the decimal points everywhere for you or INR2,335 crores to round off. The additions during the year are INR4,622 crores. Reductions during the year are INR3,967 crores; of which upgradations were about INR1,443 crores, recoveries were INR1,042 crores, and write-offs was INR1,482 crores. So, the closing balance is INR2,989 crores. I want to just take a minute since you're looking at the movement and when you compare it with last year, there is one slight difference which will result in a higher addition and a higher upgradation or recoveries because on the retail book till last year, we were looking at the NPAs at the beginning of the year and at the end of the year. And looking at the movements without double counting movements of customers who might have paid or might have become NPA and then been upgraded because they paid and again might have moved back in.

There was no double counting of things which happened within the year for the same customer, right. So, it was only a one-time movement depending on who sort of became an NPA or ultimately was an NPA at the end of the year or was an NPA but was fully recovered. Based on clarifications that were given to us from a regulatory perspective, we now count those on a customer basis on a higher frequency so it actually can sometimes double count, triple count and so obviously it makes no difference from the position point of view sort of as the same amounts to additions and recoveries and upgradations, sorry not recoveries. So, it doesn't make a difference to the recoveries or to the write-offs because that have been the same, but the movement gets sort of grossed up and a little bloated out.

It bloats up at these two lines.

Just one thing, this is useful. In the disclosures that have come on the website, the total disputed assets mentioned are INR359,829 crores and if I heard you right, you said earlier it is INR345,000 crores. Is that correct?

Those are consolidated.

That's consolidated, perfect.

The one on the website includes all the subsidiaries too.

Perfect, that is useful. Thanks a lot, sir. Thank you very much.

Prabhakar Agarwal, Edelweiss.

Nilesh here. Just wanted to kind of understand. See, there's been a disconnect between when we look at asset growth and the revenue growth. Now, revenue growth in fact is actually in the mid-teens specifically on the fees side. So just wanted to get your qualitative comments, how much of that would you attribute to regulatory and market?

Yes. It is on the fees, right, your entire question was on the fees. Again, I'm sorry I'm asking some of you to repeat because the voice tends to sort of fluctuate. So you're right, the fee growth has sort of been rather muted for both this quarter and the year. And if I was to look at the portion which has clearly in fact degrown, that's been the third-party commissions where the third-party products were roughly 14% of our fee growth last year.

Quarter. Year is 15%.

15% I'm sorry, 14% for the last quarter of last year, but 15% of our total fees last year were from sale of third-party products and that component has shrunk by 19%. So, it's actually lower by 19% from what it was last year and therefore now at the end of this year or for this year, it accounts for 11% of our fee incomes from what was 15% of fee incomes. If you look at the rest of the fees, they have grown by about 16% for the year or maybe for this last quarter of this year at about 17%. So effectively what you see as a blended growth rate, which I agree with you is about 10%, 11% whether you're looking at the quarter or the full year, really can be split into the portion which has been sort of growing at a healthy enough rate of mid-to-high teens and a portion which has shrunk at least last year by almost just under 20%.

Now, third-party products degrowing is partially driven by of course all the regulatory changes, which impacted commission rates whether it goes back a few years on the mutual fund side or on the insurance side even in the last couple of years. And of course, it's also driven by the fact that these products have seen lower volumes on the back of what has been the appetite of retail customers for these products. So, it's been a combination of lower rates and lower volumes. Having said that, even for the third-party product sales, there's been some pickup from if you compare the second half of the year vis-a-vis the first half; but as I said on a full-year basis, it's still lower than earlier.

So fair to assume that once the third-party normalizes, the fee income component would probably grow in the mid-teens, is that what we are probably looking at? I know we especially don't have a good guidance, but generally looking at -- because see the reading from RBI in terms of all these prepayment penalties moving out, I think the reading seems to be pretty clear, right, so there is some stress on the fee income lines. Difficult to quantify from outside, but I think directionally seems to suggest that there is some bit of pressure there. So, fair to assume that we should be in that range even when things start to pick on the economic side?

See, I think the only joker in the pack is what other changes come along the way, right. So while you're right that the third-party products as it gets built into the base and perhaps as the demand for some of these products picks up even at the lower rates since that is baked into the base, we could see some pickup. But if you look, there have been other businesses which have been impacted this year. For instance, the sale of gold coins has completely featured out, right, or gold bars which were sold through our branches, that is a business which has gone off. The debit card merchant acquiring commissions again came down sharply. So while there are some regulatory changes or market changes, which are more visible like the third-party piece as the mutual fund commissions or the insurance commissions or sales commissions were changed, there are other products or other businesses which also tend to be impacted by the changes in regulations or otherwise. So, difficult to try and anticipate or predict or build in what might change.

But what I can say is that the underlying businesses where there have not been changes in pricing driven by regulatory change, I mean there might have been some competitive pressures here and there, which is part of business as usual in many ways; then those fee lines or those businesses have tended to grow at the mid-teen levels in the last few quarters. So again you're right, we don't have a guidance to give, but I'm just trying to contrast the fact that there's an underlying business momentum, there are some pricing changes or margin changes on account of market related developments, and then there are some pricing or margin changes driven by sometimes regulatory changes, and all of these go into the melting pot and finally drive our fee growth. But the positive in our fees still remains the fact that a negligible amount or very small amounts of our fees are directly linked to our lending and a lot of it is transactional in nature, which therefore consumes very little or no capital.

The other question is actually on when we look at NIMs, right, so (inaudible) mentioned that NIMs navigate between 3.9% to 4.3%, 4.4%. So we are today at the upper end with a fair bit of 8% exposure to the foreign currency book, which is running at a lower margin. So, fair to assume that we are probably at the peak of this and considering that the asset growth has also been pretty high, the core growth at about 22%. So from the NII line item perspective, we would be somewhere tracking close to 18% to 20% kind of growth.

Again, I'm not going to be sort of drawn into talking about individual lines in terms of potential growth rates. But I think I'm entirely with you that the range of margin has for the last few years now been pretty much in that 3.9% to 4.3% or an odd quarter or an odd year, which has been higher than that. And yes, we did lose about 20 basis points of margin when the spurt happened on the foreign currency side, which is at margins which are probably closer to 0.5% so clearly, there is that change. And as I mentioned earlier, with some mix change even within retail and on the mortgage side and so on, there is some downward pressure on the margin which is accounted for there. On the flip side, in this quarter we had a slightly better CASA which gave back some NIM. And to the extent that we had seen a sharp increase in the fixed deposits in the last quarter, which was the FCNR swapped into rupees, there is clearly some better utilization of that money as the loan book has grown which has taken off some pressure.

Having said that, I think there is always a seasonal impact on the CASA not so much on the SA as much as in the CA. Clearly as you know for the first few quarters of this year, the current account growth has been muted. In fact, it was in sort of single-digits and low single-digit for some quarters. There will always be some transaction flows, I think it was also fortunate that in the last few days of this year were a long weekend and so on so there have been flows which accumulate. So, there will always be some seasonality to current account and CASA percentages in the last quarter of every year. But nonetheless even on an average basis, this quarter has been slightly better than the last couple of quarters. So let's see, we still believe that the NIM range will remain the same and therefore net interest income growth to a large extent will track what happens to loan growth and loan growth we believe again will track what happens to system loan growth, which is again in some ways linked to how the macro environment unfolds.

Thanks a lot, Paresh.

Anish, Barclays.

Congratulations, Paresh, on a good set of numbers. I had three questions. One, on the deposit side, I'm not sure I think you were addressing this as you spoke. But is the CA pick up a period-end pick up or is that a sustainable sort of through the quarter, the CA has been this strong because --?

No, it's certainly not been this strong. There is an element of sort of a pickup which happened little more towards the year-end. But I mean as I said, there was a little bit of pick up earlier, but clearly there is a very meaningful element which tends to pick up in the month of March.

Are we seeing any signs of a pickup in CA momentum, which if there's a cyclical recovery, you would probably expect that? Are there any signs of that happening?

No. I think it's still early on because to make this into a trend, I would want to see this for a few months, right, because you have whether you call it a seasonal or sort of a year-end trend, there always tends to be some variation out there. But to your point that do you see a recovery or should we expect some recovery if things pick up, well logically yes because there are some businesses which are linked to how the manufacturing sector, how the SME sector does in terms of what happens to their payments and therefore their flows that they have in their current accounts. There are some products which are linked to the capital markets and how they are doing in terms of settlement volumes.

Hopefully, if markets remain buoyant, there are other products which are linked to primary capital issuances in terms of being bankers to the issue or refunds and so on. So if you do get into a virtual cycle of the economy picking up, there being slightly more comfortable liquidity in the supply chain systems of corporates and mid-market and the capital markets pick up, there should be hopefully some recovery or bounce back on the current account side because we have seen this in the past when the economy was growing at maybe 7% or 8%. Right now, I don't think that's what we're really seeing. Right now is more the seasonality factor that we tend to see from time to time, but certainly typically in the month of March almost every year.

(technical difficulty) have been basically flat this quarter on a year-on-year basis of course. So if we were to look at the sort of underlying heads which you will disclose in the annual report I guess, which heads would have been seriously negative and which would still have been positive? And the second question was on the retail loan mix. There's also a slowdown in business banking this quarter, which I am a little surprised by given the expansion in semi-urban areas. So if you could talk about that and also gold loans if you don't mind.

Okay. And the first part when you started off, what was flat in the quarter? I missed again.

I'm saying if I look at OpEx, the non-employee OpEx is essentially flat year-on-year, right?

Right. There's been a couple of percent growth year-on-year on overall basis. So what is your question on the OpEx side?

I think in the annual report you do give a break up of these OpEx.

Okay. You want us to breakup some of these.

No, I don't want the breakup. But if I were to look at the heads, right, which one will we see the sharpest, I mean maybe a negative number and which ones are still growing?

Okay. So if I look at the lines there, you will see about 5% increase only in staff costs. Rents and taxes is up about 10% because again the branches which are expanded. But things like printing and stationery, advertising and publicity are both down 12%, 20%. There are other lines which are growing in the single digits like repairs and maintenance, postage and telegraph. So there are I guess multiple regular operating lines; there is depreciation which has grown about 3%. So I guess the major lines, which have not grown in a sense are things like advertising and publicity and printing and stationery. On the loan mix part, there has been some [IVPC] and sell off of some of the products, which are partly from some retail loans and partly from business banking/EDG. But there really hasn't been any particular slowdown in terms of our continuing to [put] new customers on the business banking side.

(multiple speakers). So what also has happened is a larger chunk of business banking has shifted from the retail to the wholesale side of things. So when we break up the wholesale, you will find that the business banking piece there growing up a little bit.

See when you look at the Basel II definitions, there are multiple criteria wherein you need to look into whether to classify the same as retail or wholesale. One of them could be on the exposure, one of them could be on the orientation of the customer whether he has a INR50 crore turnover or whatever, et cetera. So even though some of the exposures may be less than INR5 crore, just because the turnover is higher, we will have to classify them as wholesale. So constantly over the last couple of quarters, we have been sort of transferring to the wholesale segment these customers where the orientation meets the definition of a wholesale customer. So that's one of the things that we are seeing also both between commercial vehicles, large transport operators, and business banking group that there is significant amounts getting transferred to wholesale.

So to answer your question, Anish, if you look at the total business of business banking, total (inaudible), which is partly in the retail piece and partly in the wholesale piece, that business has continued to grow at a decent rate probably in the mid-to-high teens.

Paresh, may I squeeze in one housekeeping question. Are you paying any premium rates on any savings deposits for which are bulk or government savings or any of that?

No, none absolutely.

Everybody is at 4% flat.

Yes.

Okay. So no account that's classified as a savings account has anything more than 4%?

That's right.

Okay. Thanks a lot.

[Swapna], Bajaj Finance.

Thank you. My question has been answered.

Saikiran Pulavarthi, Espirito Santo.

Just quickly as a follow-up on the earlier question on business banking. Will you be in a position to quantify what amount would have got reclassified during this year from retail to wholesale?

I don't have the figure right now with me, but we can give it you on an offline basis. I don't have it with me right now.

Okay. And just as a follow-up question on the costs as well, I guess you have discussed in detail about the cost growth why it is lower. Just wondering like is there any further leeway for you going into the next year to maintain similar lower growth rates on the costs?

I think there will be some pick up in the operating expense line from where it has been in the last few quarters because when you're doing a 1%, 2% year-on-year cost growth or even a total staffing at flat or maybe marginally lower and adding a few hundred branches, clearly we are running an extremely tight shop. Can we continue this for some more time? The answer is yes, maybe for some time. But clearly our own sort of anticipation is that if the macro is a little more conducive to slightly higher growth, then we would be in a position to clawback a little in terms of the expense growth. Having said that, from where we used to be at 48%, 49% cost-to-income ratio, we have come now closer to 46% or 45.7% for instance in the March quarter. So, the benefits of branches breaking even and newer branch drag being lower than what it used to be with slightly larger branches, that benefit will probably continue to accrue. But the tactical cutting back on regular operating expenses, I think we are already running a reasonably tight shop so there may not be too much more room to cut expenses there.

Okay. And last question from my side again on the commercial vehicle side. You mentioned that most of the pain is over, but just looking back, your own vintages last cycle versus this cycle, how these were?

One of course, I have not said that most of the pain is over. All I have said is that the incremental formation of NPLs has certainly dropped off at least in this quarter and want to watch it for a few more months if not a couple of quarters to see whether this is a trend. One can relate it to the fact that if there is a slight recovery in some parts of manufacturing relative to where it was or some of the specific regional mining or other factors, which might have started to normalize to at least some extent, then there is a reason why the pain could be lesser. But also in the last quarter to the extent that there may have been some payments which were released and so on, maybe some of these transporters and others who were facing liquidity issues because of delayed payments, that might have cause some relief which has eased some amount of the asset quality strain.

But I think if this continues in terms of a mode of recovery, then we would probably see that the major pain is behind us. Relative to the past, I mean from our point of view while we saw a sharp increase in the last year-and-a-half, it was still a good profitable business and to the extent that a fair portion of the CV portfolio also classified as PSL obviously at the lower end of the spectrum in terms of the transport operator and so on. For us, it's a business that while we remained cautious about, we still remained in a mode where we would be comfortable growing on those terms. I mean obviously if the total sales are coming off, then that will reflect in our portfolio. But on the whole, I think the portfolio even in terms of where we peaked in terms of NPLs remain profitable.

But has it reached earlier peaks, if you can comment on that?

See, we unfortunately haven't really had an earlier peak and our CV portfolio is about five, six years old and this is the first time that we really have had a meaningful spike and a peak. I mean we may all have had some experience with these portfolios and some of our team members might have had it in some (inaudible) or the other. But in the Bank in our own portfolio, this has probably been the first time that we really have seen a spike and a peak.

If I can squeeze in a last question. Can you just comment on the asset quality on unsecured credit or what is the behavior, what are the trends which you are looking at?

There at least in terms of actual NPLs and so on, it's remained fairly stable and remains so. In terms of early delinquencies and losses and so on, we are off the absolute lows maybe a couple of quarters back, but it still remained not just fairly stable but at absolute levels which are very low. I mean if I look at the percentage losses or the percentage delinquencies in some of these products, it's still in a sweet spot.

Okay. That's it from my side. Thanks a lot.

Manish Ostwal, KR Choksey.

The business growth in the outlook and OpEx side because you said this year we have contained the operating cost and we have used the cost reduction measures. Now when we talk about the next year growth of slightly better than the industry, so what kind of OpEx outlook one should look at it?`

Well, I don't have a guidance on the OpEx line. All I'm saying is that there may be some need to pick up on the OpEx growth, which we would be willing to do if we see the higher business momentum or revenue momentum. We all sort of know how inflation has been running and we know that as a bank we've been continuing to invest in terms of not just newer branches, but also rolling out some of our products into new geography and so on. So, I can't put a number to it in terms of what OpEx might grow at, but it will certainly grow at a pace which is higher than what it has grown this year because this was clearly a year in which we institutionalized a lot of severe cost control measures.

Secondly, this other liabilities and provision number on a YoY basis has been (inaudible) so anything that you can comment on it?

Other liabilities and provision. Sashi?

Now, the significant portion is the reval. As probably in the past we have explained this, we follow Accounting Standard 30, which says that all foreign exchange and derivative contracts have to be valued and the positive mark-to-market of that is moved to the other assets and the negative mark-to-market goes in other liabilities. So effectively, you're just grossing up the balance sheet. So this does not have any income impact, but this is just the way you represent it in the balance sheet.

And lastly, this realignment of funding from borrowing to deposit during this quarter because we have seen the deposit has picked up, grew by 5.2% quarter-on-quarter and volume declined. I mean there was a short-term borrowing. And secondly, within the deposit when I look at the industry growth versus your core deposit growth, still is one of the best. So how do you look at that trend to materialize in FY15?

Well, I mean deposit growth has been one of the focus areas for the Bank and driven both new customer acquisition and increase in the average balance so that we can build for our customers. So clearly, the distribution strategy in terms of adding new branches or increasing penetration of our customer bases from our existing branches is all driven by one, the desire to increase our deposit base and secondly of course, to cross sell assets and other products. So to some extent, we got this boost also on a one-off basis driven by the FCNR fees. But as you mentioned, if you were to even keep that aside and look at the core deposit growth, that's still been fairly healthy at about 16.9% or 17%. So hopefully we continue to fund a large portion of our loan growth into this year through deposit growth. The CASA ratio as you know if we look at it on a quarter-to-quarter basis, it has fluctuated from as low as about 41% in the December quarter especially when we had that large inflow of FCNR logistics deposits to close to 45%. So it remains somewhere in the low 40%s and we would be happy to continue to grow our deposits at a pace which one funds the loan growth and secondly, where it allows us to maintain a CASA ratio which is slightly better than industry averages.

And one very small clarification, [yield one] if those investments decline on a quarterly basis so it is a period-end balance phenomena or it's actually declined on average basis during the quarter?

Actually, it's gone up.

(multiple speakers). You're talking about sequentially?

Yes, sequentially, sir.

It should go up.

So sequentially there has been no decline, there may be a margin increase in fact.

Okay. Thank you so much.

Kashyap Jhaveri, Emkay Global.

Congratulations on a great set of numbers. One question on our network, we have spoken about branch expansion during the call. But what's the expansion plans for next about two years now? That number in this year was roughly about 340 versus 500 plus in the previous two years?

So, I think we have achieved a large portion of the coverage that we want to achieve and this year in particular we have added a large number of branches in unbanked locations. I think as we come into this year, we would probably continue to add somewhere between 200 and 300 branches, maybe 200, 250 branches. We haven't sort of completely formalized that because we have a certain number that we would like to increase or like to add in terms of branches and we'll renew this along the way. Fortunately with the new regulatory regime, we have a little more flexibility provided we are maintaining a certain proportion and since we have opened a large number of unbanked branches already or branches in unbanked locations already, we have the flexibility of how many branches we may want to add in other locations. But roughly a couple of 100 branches a year is what right now seems to be our plan.

And just out of curiosity within the network, ATM on QonQ basis we have reduced maybe a very small number, but still we have reduced about 200 odd ATMs. So any particular reason over there?

We have been rationalizing the number of ATMs where we find that the usage is very low and therefore the cost doesn't work out because clearly the whole idea of having an ATM is to provide convenience to our customers and to have a more optimal servicing cost. But in some locations, which sometimes may be higher cost locations but where the usage is below a certain threshold, the viability of that ATM would get reviewed and those would get pulled out and then redeployed as other locations need them.

And we could see sort of this not as a continuous process, but as and when required would this happen?

Oh yes. This has again been an ongoing process. So we would do the same thing whether it's an ATM, whether it's a fast terminal, whether it's --. Again I had mentioned this kind of cost control doesn't come without literally looking at every single line carefully. So yes, it will be an ongoing process, which hopefully we should continue on an ongoing basis.

And is it possible to give a breakup of provisions on a full-year basis; NPA, standard asset, MTN?

So this is the breakup for the full year of the P&L breakup of provisions. So the loan loss provisions is INR1,633 crores, provision against standard assets is INR221 crores, the floating provisions at INR30 crores, this year INR30 crores and then negative. No, this is actually net zero, sorry, and other provisions is negative INR296 crores.

And this negative would be particularly -- I mean any particular head where this would be there?

There's a couple of heads. Sashi, you want to (inaudible). And there is also where we had certain provisions for the MFI and derivative fees, as those exposures ran off or those contracts expired, those relative provisions have got reversed out across various quarters and also something on the --.

On the indirect taxes since we've got a lot of decisions in our favor especially on service tax and some on VAT, so that have also got reversed during the year.

But that would be part of provisions and contingencies?

Yes, that would be a part of contingent provisions.

Okay. And let's say this year in that case, the total provisions are about INR1,588 crores and as a percentage of overall assets, this number would be about 10 basis points lower than what we have seen in the previous year. Next year, any indicative I mean not a particular number, but what could be the total provision then in that case? Because let's say if this INR296 crores negative does not come through once again, then can the provision cost actually inch up?

Yes, obviously. I mean I think the contingent provisions are in respect of specific items, which if they get reversed or they are not there, then they wouldn't be there. For the deratives and MFI, I think that's a closed chapter so there's certainly nothing more to be done there. So it really boils down to more what is our standard asset provisioning which is dependent on the rate of loan growth, what is our specific provisions which is again a function of the incremental NPLs. And the only thing is on the floating side, as you know, now as we have given a specific requirement -- I mean a specific window in terms of the fact that the banks can use a certain portion of their floating provisions, which is something that we figured out whether we might want to or not. At this point of time like I said on a full-year basis, there had really been no change on the closing balance of floating provisions at the beginning of last year and the beginning of this year.

Right. Sure, yes. That's it from my side. Thank you.

Before you invite the next question, do we have -- because it's been almost an hour and hour and 20 minutes. How many questions do we still have in queue?

We have more 10 questions, sir.

Okay. If I can request all of you to just maybe stick to one question and if something has already been asked, then of course, I'd be happy if you can just move to the next one. So, let's move to the next question, please.

Jigar, OHM Group.

Congratulations. Sir, my first question is are we open for any inorganic growth maybe for some levers for fee income or maybe any other issue?

We are open to looking at inorganic opportunities, but realistically I can't see too many opportunities at this point of time. Also from a pure timing perspective at a time when the economy has gone through a tough period, we'll just tend to be that much more cautious about looking at inorganic opportunities. So yes, we remain open, but unlikely that that could be a driver of growth.

And sir, if I may just touching up some quick ones. Are we looking at rural LAP or something like that and that we can originate for us and retain in our own books because the client profile would be different from what HDFC would be really looking at?

So loan against property even now we do ourselves and keep in our own books. It's only the home loan product that we do with HDFC. The locations of the home loan business therefore are worked out based on obviously what we can do together with HDFC's presence. But LAP not that we offer this across the board in rural branches, but wherever we are doing LAP, we do this on our own books.

So LAP as a percentage of the retail book would be approx?

It's part of what is shown in business banking. Business banking includes what we might do as working capital for customers of that size or loan against property and [debtor] discounting. Business banking today is about 13% of our retail loan book and I would imagine that the loans against property might be about half of that roughly.

Okay. Thanks, sir.

[Daniel Chawla, Athena Investments].

Sir, just want to understand on your interest expense for the Q4. Actually if I see the number, it has degrown from QonQ basis and also if I check it with the interest cost, it has reduced around approximately 15 basis point. So any specific reason within that?

So, two reasons. One is that we have, as I mentioned earlier, had a slightly higher proportion of CASA in the last quarter as compared to the December quarter. And my colleagues tell me that also the number of days is slightly lower in the last quarter as compared to the previous quarter and even the borrowing amount was slightly lower. So, it's essentially a mix and number of days piece.

Okay. But ideally our interest income has grown drastically so that's why I asked you.

No, which was because as the amounts got deployed like I mentioned from what had been raised earlier, there was some sort of slightly better yield on the loan that we have put out.

Because what I see from your advances growth, that has grown from INR296,000 crore to INR303,000 crore and your deposit has gone to INR349,000 crore to INR367,000 crore. So, that's why I was wondering where actually it has gone?

The bulk of the deposit increase if you notice in the third quarter is the foreign currency deposits, the FCNR deposits. So when you compare Q4 to Q4, the cost as Paresh had mentioned in an earlier call, the landed cost was about [INR870 crores to INR880 crores], which is much relatively cheaper than the rupee domestic cost for a similar tenure. So, the increase in deposit cost will not be that much. Also ever since we have got this kind of liquidity, our dependence on borrowing has also come off significantly vis-a-vis the third quarter so that expense has also come down.

Okay, fine. Still I have a question, I'll take it offline.

Hiral Desai, ILFA.

I think most of them have been answered. Just wondering if you could update us on the project financing side on the loans that you guys have got on the debt capital market/distribution this year?

Well, both of those businesses have grown well this year. I guess one sort of tends to have various league tables, but from what we have here, we are somewhere Number 4 or Number 5. So despite being I guess this is our probably second year of this business in a meaningful way we have done reasonably well and looking to grow this business as the market for some of these products picks up in this year.

Sir, any number that you could put on the project financing side as a percentage of the overall loan sale right now?

I don't really have that figure off the cuff, but it would still be in very low double-digits if not even lower than that.

Sir, just last on the business banking piece, is it fair to assume that about let's say 85% of that book would be secured by cash flow or collateral or will that be a higher number?

It would be even a higher number. I mean all business banking is based on cash flows, I mean the evaluation is based on cash flows and all of it would have some security, collateral security would be probably there in about 80%, 85%.

And that will be the case with the business banking work that we are doing in the semi-urban or the rural sectors.

Yes. It's not so much rural, more semi-urban and urban, but yes.

Okay, perfect. Thanks and all the best.

Prabhakar Agarwal, Edelweiss.

Nilesh here again. Just one quick question. Have we done some working on this unhedged foreign exposure for corporate fixed income for [staple], some broad if you can just provide some direction on that?

We have been doing some work, but I don't think -- we have to still size it up completely, but I guess we will because now that it's sort of come into play, a lot depends on also corporates giving us that data that information, which is the first battle. But I really don't have a number to share with you in terms of potential increase in risk rates or for that matter in terms of general provisions as yet.

Okay. Fair enough Thanks.

Sachin Upadhyay, ICICI.

Just one quick housekeeping query. In employee expenses in every Q4, is there any lumpy provisions that is there usually during the year?

No, there isn't any lumpy provisions.

No, but I know why you're asking. In Q3 there was a bit of a revaluation of our benefits, but there was a bit of a presence there so that's why you're seeing sequentially a pick up in the staff costs.

Can we assume the employee expenses to kind of stabilize at these levels if there is a limited expansion of 250 branches?

The thing is the staffing requirements may not necessarily only be driven by branches because if you remember and as I mentioned in the last one year, we have added roughly 300 odd branches and not added people. We've obviously redeployed people from other businesses or other areas into the branch expansion because volume growth has been slightly lower. So our requirements for incremental people will be now a function of not only what new branches we add, but perhaps some of the other business if they were to see a meaningful pick in volume. So, we'll have to sort of wait and watch.

Fair enough. Thank you.

Alpesh Mehta, Motilal Oswal.

First question is regarding our cost of funds. So what has been the movement during the year? Seems like that has been a fall of almost 20 basis points to 25 basis points in the most volatile interest rate scenario.

Yes. So, our overall cost of fund has actually --. So if you look at the cost of deposits, it's come down from 6.1% to 6% and our total liabilities has come down from 5.2% to 5.1%.

5.2% to 5.1%?

Yes.

So Paresh, in this case our margins have come off by hardly 10 basis points during the year.

That's right.

And our yield on loans are almost down by 30 basis points. So what would have compensated for this because cost of funds are down only by 10 bps?

Investment yields are slightly higher and therefore the overall margin is down from 4.5% to 4.4%. Yield on the investment book and again driven by the composition of that investment book as well has been slightly higher. I don't unfortunately have the breakup of the yield on investments with me right now, but that's been the case.

Okay. And the second question is on our fees. Over the last three or four years, how the mix would have changed between corporate and retail?

Actually, the only real change has been the continued decline on the last two years of the third-party commission income, which at one stage was almost 17%, 18% of our total fees came down to 14% and this year has come down to 11% of our total commissions. Other than that, most of the other fee lines have been largely unchanged in terms of composition. I mean there have been some small differences.

So, retail still should be contributing around 70% of our fees, even more?

Even more, about closer to maybe 80% odd.

Closer to 80% odd. And the last housekeeping question, have you assessed the impact of minimum account balances being withdrawn by RBI?

Well, we certainly have assessed that but since we are not sure how this thing will actually be rolled out, what is the compensating element to what we may charge for transactions above certain thresholds, the net financial impact is tough to try and estimate right now. So we know what we charge obviously for maintenance of minimum balances, but how much of that would get offset by transactional fees for customers who don't maintain minimum balances and who transact. That's something which we are sort of still trying to work out and we've not yet put in the public domain.

Okay. But any ballpark? Would the number be very meaningful or maybe just a couple of crores?

It will certainly be more than a couple of crores for sure. Like I said, every year there will always be some regulatory impact so maybe that's the one that's fixed here, but it is one of the sort of lines which does contribute to fee incomes within retail. It's not in the top 2, 3 but it certainly a line which is a meaningful amount.

Okay. And the last question from my side is regarding this risk weighted assets growth, now we have shifted to the Basel III where most of the restatement would have taken place also now. So would the risk weighted assets growth be equal to the balance sheet growth or do you expect there can be some more leverage of the business?

No, I don't think it's going to be linked only to the balance sheet growth because there are still components of balance sheet which you have different risk weights. And therefore, changes in mix of the loan book does or the balance sheet does make a difference to the growth in risk weighted assets. I mean the composition of the loans, the collaterals, or the various factors which are in play.

Thanks a lot.

We really will have to sort of take maybe one or two last questions very briefly if you can because we thought we will have this call for about an hour-and-a-half and we have crossed that already. .

Chetan Sheth, Saral Management.

I would just like to know in an recent interview, your MD mentioned that our Bank is more optimistically positioned than ever before in its history. What makes you say that, sir? And the second question is that what are the areas which you feel basically are where we can add substantial value to the Bank over the next coming years and what would be the challenges for the same?

Okay. I don't know how I can answer this as quickly as I can. If you already heard Aditya, he probably has said it. But I think the point he is making is that today we have in the last two or three years sitting on a branch network, which has close to doubled in the last three, three-and-a-half years. And if the economy starts picking up, we therefore have the ability to reach out to a much larger customer base than what we had the last time the economy was growing at 6% and 7%. Secondly, we have rolled out a lot of our products to a large number of our branches so even for our existing customers, we do have the ability to cross-sell or to increase our share of wallet across multiple products, which we didn't have a few years back. Thirdly, at a time when a large part of the banking system is being constrained by pressure on asset quality and total stressed assets between NPLs and restructured loans of 11%, 12%; the fact that between our NPLs and restructured loans we are at less than 1.5% means that we probably are on a firmer footing as and when growth starts picking up. And finally, we remain well capitalized and have a strong deposit franchise so we are able to fund our growth both from a liquidity and a capital perspective. So, I think --.

We have lot of operating leverage, I mean is there still some where we have already put up the branch network and waiting for the business to come in?

Yes, you can say that. Yes.

And which are the areas which you feel can add substantial value to the Bank over the coming years, sir?

I think each of our businesses, both wholesale and retail, across multiple products. I don't think we are counting only on the CapEx cycle or only on auto loans to pick up or only some other third line. We actually genuinely have a diversified portfolio and a diversified revenue stream and therefore as the economy starts picking up, as demand picks up across multiple segments or multiple products, we are happy to cash in. So essentially we are positioned to grow across multiple businesses rather than say that there is a particular business that is going to drive growth. Yes, to the extent the semi-urban and rural branches or the network there is relatively younger, that's certainly an important part of our strategy which has to pay off in the next few years.

And finally sir, what are the challenges which you see and how you are addressing the same?

I think the challenges remain to manage this growth without compromising on service quality, on margins, on asset quality. So, I think when we look at adding those many hundred branches, there are always challenges in terms of people, training, service levels, and so on. So, that is I think certainly something that we continually focus on. And of course, external challenges in terms of what the macro environment offers us as an environment to growth.

As it is said that banking is supposed to be a very boring business where you basically borrow and lend in a competitive way. Would you continue the same thing or there will be some dynamic things which will be happening?

No, I think we are quite content to look at what you might call boring, which we believe in its own way has its strength in terms of doing things which are innovative when it comes to meeting customer requirements or servicing customers through multiple channels, the entire digital focus, and so on. But I'm fine to be boring if it means having more stable financial parameters and more stable asset quality.

That's what we like, we like the boring part more. That's what we are enquiring, we won't be doing any exotic things.

I don't think we have the sort of special mental acumen to do exotic stuff.

Okay. Wish you all the best, sir. Thanks.

Rakesh Kumar, Elara Capital.

Just would like to know the yield on investment for this quarter has fallen though the investment book overall has grown. So was it

back-ended growth this quarter in the investment book?

No, there hasn't been a drop yet.

Rakesh, when you probably look at it from a period-end basis, you see it has gone down; but actually on a daily average basis, it's

actually gone up.

Yes, that is on the year-on-year basis, it has gone up, but for this quarter?

This quarter also.

Even sequentially it has gone up.

Even sequentially also.

Okay. Can you help us with the breakup of the interest expenses for the year?

So interest on deposits is INR19,048 crores, interest on RBI interbank borrowings is INR3,536 crores, and other interest is INR68 crores.

Understand other income, but all are the cash recovery the INR195 crore or there is any other element also in this?

No, but the recoveries are all cash recoveries. There is no recovery on sale or something of that sort if that's what you're getting at.

Thanks. Thanks a lot.

Thank you, sir. There are no further questions.

Great. Thank you so much, everyone. And I'm sorry this has taken a little longer than what I thought it would. Once again, thank you for being so patient. Bye.

That does conclude our conference for today. Thank you for participating on Reliance Conference Bridge. You may all disconnect now.