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Edited Transcript of AUFI.NS earnings conference call or presentation 22-Oct-19 3:00am GMT

Q2 2020 AU Small Finance Bank Ltd Earnings Call

JAIPUR Oct 24, 2019 (Thomson StreetEvents) -- Edited Transcript of AU Small Finance Bank Ltd earnings conference call or presentation Tuesday, October 22, 2019 at 3:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Bhaskar Vittal Karkera

AU Small Finance Bank Limited - Chief of Wheels

* Deepak Jain

AU Small Finance Bank Limited - CFO

* Rishi Dhariwal

AU Small Finance Bank Limited - Chief of Secured Business Loans

* Sanjay Agarwal

AU Small Finance Bank Limited - MD, CEO & Director

* Shoorveer Shekhawat

* Sunil Parnami

AU Small Finance Bank Limited - Chief of IR, M&A

* Vivek Tripathi

AU Small Finance Bank Limited - Chief of Strategy Business Solutions & Transaction Banking

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Conference Call Participants

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* Amit Nanavati

Nomura Securities Co. Ltd., Research Division - Associate

* Darpin Shah

HDFC Securities Limited, Research Division - Equity Analyst

* Deepak Shinde

SBICAP Securities Ltd., Research Division - Research Associate

* Dipen K. Sheth

HDFC Securities Limited - Head of Institutional Research

* Haresh Kapoor

IIFL Asset Management Limited - Assistant Analyst

* Hiral Desai

Anived Portfolio Managers Pvt. Ltd - Portfolio Manager

* Nidhesh Jain

Investec Bank Limited (SA), Research Division - Research Analyst

* Renish Bhuva

ICICI Securities Limited, Research Division - Assistant VP

* Rohan Mandora

Equirus Securities Private Limited, Research Division - Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen. Welcome to AU Small Finance Bank Q2 FY '20 Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Mr. Sunil Parnami, Head of Investor Relations, AU Small Finance Bank. Thank you, and over to you, sir.

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Sunil Parnami, AU Small Finance Bank Limited - Chief of IR, M&A [2]

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Thank you. Good morning, everyone, and welcome to AU Small Finance Bank's Q2 and First Half earnings conference call. We would like to thank you for joining us.

Today on this call...

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Operator [3]

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Sorry to interrupt, sir. Sir, your voice is breaking up.

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Sunil Parnami, AU Small Finance Bank Limited - Chief of IR, M&A [4]

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[Give me a minute]

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Operator [5]

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Sure.

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Sunil Parnami, AU Small Finance Bank Limited - Chief of IR, M&A [6]

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[Is this -- can you hear me now?]

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Operator [7]

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Yes, sir. Please go ahead.

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Sunil Parnami, AU Small Finance Bank Limited - Chief of IR, M&A [8]

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I hope I'm not breaking up now.

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Operator [9]

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No, sir.

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Sunil Parnami, AU Small Finance Bank Limited - Chief of IR, M&A [10]

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Fair enough. Colleagues, I will go ahead now. Good morning, everyone, and welcome to AU Small Finance Bank Q2 and First Half FY '20 Earnings Call. We would like to thank you for joining us this morning.

Today on this call from AU Bank side are our MD and CEO, Mr. Sanjay Agarwal; our Executive Director, Mr. Uttam Tibrewal; and our CFO, Mr. Deepak Jain and also the members of the senior management team. Since most of you have already interacted with them, therefore I would request them to please introduce themselves as and when they interact with you further on this call.

Before we begin, a standard disclaimer. Certain statements made today in today's discussions may be forward-looking in nature and a note to that effect was stated in the earnings call invite sent to you earlier. We trust you would have received the documents covering our Q2 and first half results and would have gone through the same.

We will now begin this call, following which we will have the floor open for your questions.

Starting first,

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Operator [11]

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Sorry to interrupt once again, sir. Sir, the audio from your line is not sounding clear to us.

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Ladies and gentlemen, thank you for patiently holding. We now have the line for the management reconnected. Over to you, sir.

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Sunil Parnami, AU Small Finance Bank Limited - Chief of IR, M&A [12]

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Thank you for your patience and apologies for this small glitch. So we were -- we are in our opening remarks and I was talking about businesses and economies going through cycles. I didn't know that we will have cycles on our earnings call as well. But we'll now begin our restarting.

Can we have the Bombay line on mute, please?

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Operator [13]

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Sir, the Bombay line is on mute.

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Sunil Parnami, AU Small Finance Bank Limited - Chief of IR, M&A [14]

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Okay. Perfect. So starting first with our basic on the operating environment that all of us have seen that individual businesses and economies navigate through highs and lows and the current state of the Indian economy and banking in general is no different.

Amidst the current cycle slowdown, system-wide credit and deposit growth softening and hovering around 10% levels, our government and RBI has already undertaken a slew of initiatives, most notably the big corporate tax cuts and certain sector-specific measures including for autos and NBFCs to support the demand -- for autos and NBFCs to support the demand in credit offtake.

Some of the key notable developments in the banking sector in the last quarters were external benchmarking of all new floating rate personal and retail loans or as well as floating rate loans to MSMEs, though not really relevant in our case as most of our MSME and retail loan book is fixed rate and also, [on tap] licensing of SSBs, which we take as an indication of early success of SSB model thus far.

Talking about AU Bank. In this quarter, we have completed 10 quarters of our

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journey as small finance bank and reached the exact halfway mark. And we are privileged to have earned the trust of nearly 1.5 million customers in our short journey. Going ahead, AU Bank management team is committed to build a technology-led, secured, granular, customer-centric retail bank and will keep investing in the right skill sets and domains.

In that regard, I'm privileged to apprise you that in our quarterly meeting concluded yesterday and ongoing today, our Board has approved the appointment of 2 new Board members as additional Independent Directors, namely Prof. M. S. Sriram, who is a distinguished faculty at IIM Bangalore, and a renowned financial inclusion expert; and also, Mr. Pushpinder Singh, a veteran with strong 33 years of experience in banking, technology and payments. He had earlier served at Bank of India and CCI. With the addition of these 2 directors, we extended our governance architecture and expanded our Board to 9 members, with a majority of directors being independent who are subject-matter experts in their respective domains.

Now to talk about our asset quality. This quarter our credit quality sequentially remained stable across most product segments and there was a minor improvement in our gross NPA. As we had informed you, AU Bank had migrated to daily tallying of NPAs in the first quarter of this fiscal for all our loans, and we continue to closely track our collections and delinquencies. No major [engrossments] were seen in predefined early warning or nonstarter monitoring system in most products. NPAs were lower on account of higher provisioning. Talking specifically of provisions, as a matter of prudence and sensing the market environment, management chose to and judicially (sic) [judiciously] applies the tax gains in improving the PCR. This is on account of certain additional provisions that we undertook in our [weaved] portfolio, and we'll talk about that more on this call.

Besides this, starting this quarter, we have increased the standard asset provisioning for NBFCs to 1% from required levels of 0.4%, the pretax amount of which is around INR 14 crores and is part of the credit cost for this quarter's P&L.

Touching upon our financial performance. Despite all the challenges, this quarter we delivered our all-round best quality result so far on our asset quality, margins, cost-to-income ratio, profitability and ROA and ROE with measured growth on a smaller base. I will briefly read out the key highlights, as you have these numbers in the press release and presentation and then we will have the floor open for your questions.

In first half of FY '20, our disbursements grew 25% led by 44% year-on-year growth in all retail assets, including used vehicle, SBL MSME and smaller ticket loans of business banking and agri SMEs.

Disbursement yields improved to 15.6% in the first half as against 13.7% as on 30 September 2000 -- for the first half of FY'19, leading to improving spreads, but were -- also were maintained at the same levels of the first quarter. Compared to first half FY '19, our non-Rajasthan disbursements grew at 49% in FY '20 via-a-vis a growth of 38% in the Rajasthan disbursement over the same period last year.

On 30th September, our total assets came in at INR 35,826 crores, up 45% year-on-year. Our portfolio IRR continues to improve in the second quarter at 14.7% and with a parallel reduction in cost of funds as spreads expanded to 6.9%. Importantly, incremental cost of funds improved to 7.45% for the second quarter compared to 7.55% of the first quarter of this financial year. Incremental cost further improved for the month of September to 7.33%.

We remain focused on reducing our overall cost of fund in the last 3 quarters. We significantly reduced our reliance on certificate of deposits, which was 4.5% as on September '19 vis-à-vis 8% on March '19. We prepaid some of our grandfathered borrowings in the first half. The rest of the high cost grandfathered borrowings is expected to be repaid in the next 12 months. NIM therefore sequentially improved to 5.5% from 5% in the first quarter. NIMs for the first half were at 5.3%. We should see the positive impact of the increasing spreads in getting more pronounced -- pronounced we expect will affect it in the next few quarters. Talking about deposits, the criteria for personal CDs [Saturday] and second quarter mobilized INR 1,000 crore of time deposits. [Shasta] and retail spending continues to [core] around 42% of the total deposit. We added 1.1 [exact] new deposit accounts during the quarter. Overall, our deposits grew 72% year-on-year. We had covered it to further intensify our granular focus in building deeper [test we have our] distribution in all our core markets. Our cost to income ratio declined further with improving operational efficiency of the bank branches. [As well extra] 6.6% for the first half [as with] 60.7% in the first half last year. Importantly, 10 branches have achieved [base year] in the last quarter. Also there was a marked improvement in our ROA and ROE. Our return on average assets including -- excluding gains on sale of our [last came in at] 1.7% for first half and 2% for this quarter. And our ROAE came in at 17.5% for first half and 20% for Q2. In line with the market environment we continued to maintain very healthy capital adequacy and liquidity as a bank. Our capital adequacy as on 30th September was 17.9% and if we include the profits of the last 2 quarters, the same was 19.7%.

Our net worth grew at 20% year-on-year to [track] INR 3,516 crores. Besides that we also have additional pool of -- ready pool of capital, which includes the warrants [the margin fee mo] of INR 525 crores from Temasek expected in this quarter and the value of the equity stake in Aavas Financiers was INR 840 crores based on current market price.

Talking about our liquidity, AU Bank maintained an investment book of INR 8,500 crores. Bank maintained an LCR of 95% for September quarter against the requirement of 80%. Moreover, we have ready pools of unutilized treasury resources, including securitization excess PSL refinanced as additional liquidity buffers.

I'd like to conclude by saying that for the last 24 years, AU management team has been building AU as a well-governed, transparent, granular, secured, retail franchise of all seasons. We've been avoiding the unnecessary risks. We'll continue to adhere to these first principles in our journey ahead.

On behalf of the management team, we convey our best wishes for the upcoming festive season. And that concludes our opening remark and now we can take your questions. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Haresh K. from IIFL AMC.

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Haresh Kapoor, IIFL Asset Management Limited - Assistant Analyst [2]

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Sir, congrats on a good set of numbers. So a couple of things from my end. First, I think if you could, we've seen some sharp improvement on the margins front this quarter. So first, could you just -- you spoke about grandfathered loans too, but if you could just give us some indication in terms of the outlook for the margin front for the year, that will be helpful.

Second, I think if we kind of look at the P&L right now for Q2, on the OpEx front, there's been moderation on the growth front. So if you could just help me understand how should we look at growth on the OpEx side for your business moving forward, considering your budgeted numbers and also utilization of the tax rate benefits.

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Unidentified Company Representative, [3]

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Yes. So I think you have got 2 questions. One is on the margin outlook, second is on the OpEx outlook. So if you were to take the first question on the margin outlook, as you would see that in the last 3 quarters, there has been an increase in our spreads, which is on account of both the things that we're working on, which is increasing our disbursement IRRs for the new loans as well as keeping our costs contained. And I think we expect the same to continue from hereon. So our margins should sequentially improve.

Obviously, there is some stock of the outstanding book, which is -- on certain years, which is getting replaced with the new book. So overall, that margins sequentially for new loans you should see an improvement as well as on the portfolio, which will come with a bit of a lag effect.

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Sanjay Agarwal, AU Small Finance Bank Limited - MD, CEO & Director [4]

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Yes, Haresh. So I think, Haresh, Sanjay Agarwal on this side. So I personally believe that from here onwards, there will be a cost reduction in terms of cost of money because still our money is priced around 7.9%, and I believe that a lot of measures has been taken by the government, the RBI to reduce that cost. We are still around 7.8%, 7.9% because of there are old book numbers around it. But I believe that there can be a drop of around 20, 30 basis points from here onwards for next 6 months. And I think we will be able to price our assets because there's not much competition on the ground from NBFCs and HFC. And the kind of growth we are looking for, we believe that our yield on assets will continue in that level. So it will be more of an expansion in our margins. And of course, other than that, our other income is also shaping up well.

And third in terms of our overall OpEx because now the operating leverage is coming up, people have become more efficient, it is already 10 quarters since we started bank. So a lot of understanding has come around our what you call in terms of the OpEx, in terms of infra costs, in terms of our IT costs, so I believe that it will have always that downtrend kind of trajectory. So there also, there can be expansion of our ROAs.

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Haresh Kapoor, IIFL Asset Management Limited - Assistant Analyst [5]

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But sir, anything in particular in terms of the OpEx growth because this has kind of come off uniquely. This quarter it's kind of at 20% number, which we have not seen for a while. Just 1 quarter in the last 5, 6 quarters is what we have actually seen. If you could indicate in terms of percentages or something like that would be kind of helpful.

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Sanjay Agarwal, AU Small Finance Bank Limited - MD, CEO & Director [6]

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It's difficult for us to predict as of now because, again, there's a lot of moving item in the whole system. I would be very happy to continue this kind of spread for next 2 quarters also. Anything above this can be a bonanza. So I will stick to my similar numbers which we are showing in this quarter for next 2 quarters, right?

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Haresh Kapoor, IIFL Asset Management Limited - Assistant Analyst [7]

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Sir, and just in terms of this excess provision that has been created in this quarter, now -- name any key areas where you kind of believe some additional provisions will be required moving forward due to which you have kind of made this excess provisioning? Some clarity on that would be helpful.

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Sanjay Agarwal, AU Small Finance Bank Limited - MD, CEO & Director [8]

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So you know, we got this extra tax benefit to us in this quarter. So we thought that seeing the overall situation, overall environment, some -- in some asset classes, especially HFC -- sorry especially NBFC, we tried to increase our standard provision from 0.4% to 1% just to cover up. This is -- there is no specific account. There is no nothing which we have to comment as of now. But seeing overall situation -- and we are a conservative bank in that sense. So we just increased that from 0.4% to 1%. And that we -- we believe that is good enough for us to be -- on the right side of the assets.

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Haresh Kapoor, IIFL Asset Management Limited - Assistant Analyst [9]

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Sir and lastly from my end, just looking at on the deposit side, on a Q-on-Q basis, the SA and the CA absolute values were kind of falling, so if you could just indicate what really happened there and outlook or any other initiatives that you all are taking?

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Sanjay Agarwal, AU Small Finance Bank Limited - MD, CEO & Director [10]

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So deposit side, of course, we have said you in the earlier call also, CASA is always -- comes with a bang. But our retail deposit is shaping up well and overall cost of money is also in our control. So -- and you know how the whole system is evolving around deposit side, right? So I think now Rishi and Uttam is taking care from Mumbai about this franchise and we hope that we will continue our growth aspiration in a similar way we have done over the -- over 10 quarters, right? So that's our overall call on that.

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Unidentified Company Representative, [11]

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And as you see, Haresh, if you see our retail CA, SA and TD, TD also, which is in retail because you know the gap between the rate of interest on the savings and FD is not much nowadays. So that is 42% of our overall deposits, so which is more of retail. And pure CASA, as Sanjay said, it takes time. It needs hooks with the customers and we are forwarding -- moving ahead with that strategy and soon we'll be on that strategy, yes.

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Haresh Kapoor, IIFL Asset Management Limited - Assistant Analyst [12]

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Okay, thank you, and congratulations as well [and that should come back].

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Operator [13]

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(Operator Instructions) The next question is from the line of Hiral Desai from Anived Portfolio Managers Private Limited.

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Hiral Desai, Anived Portfolio Managers Pvt. Ltd - Portfolio Manager [14]

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Congratulations on a great quarter. So I had 2 or 3 questions. One is sequentially if I see the number of employees, there is an 11% spike. So any specific areas that you guys have recruited recently?

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Sanjay Agarwal, AU Small Finance Bank Limited - MD, CEO & Director [15]

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So, no. I think it's a general trend. So -- of course, we are building our housing book. We are expanding in more deeper markets. So 11% this quarter would be similar in that sense, right? So not much -- no, not much around other verticals. I think that new verticals we are building is just housing loan.

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Hiral Desai, Anived Portfolio Managers Pvt. Ltd - Portfolio Manager [16]

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Okay. Okay. Secondly, I think the earlier participant also alluded to the SA growth, which has come off actually. And if I look at the breakup of SA that you guys provide in terms of the number of accounts versus the average balances that have been maintained, so the number of accounts are actually up 50% while the average balances are down 30%, which is at about 25,000-odd. So just trying to understand why has the balance or the average balance has come off meaningfully and accounts which have been, let's say, 2 years with us, what would be the average balances in those kind of accounts?

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Sanjay Agarwal, AU Small Finance Bank Limited - MD, CEO & Director [17]

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So I'll let Shoorveer answer this, he is our product head on this.

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Shoorveer Shekhawat, [18]

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It's Shoorveer on this side. So there are 3 things which you need to see in perspective. One as a strategy this year, like we commented in the last quarter, we adopted the path of retail deposit -- retail fixed deposits as a traction point on the liability side because there was not much difference between the savings and the FD costs. And FD costs provides us a stable long-term cushion to the overall liabilities base, so the larger foot on the ground is in terms of that. SA continues to be a strong narrative from the perspective of customer acquisition because we want to keep -- we want to keep adding more and more customers to the bank, whom at a opportune time we'll be able to leverage on the larger liability portfolio. So our customer acquisition continues to be on a good trend. However -- and the current account, the current account side, we have built up a separate team through which we are able to scale up the retail current account story, which is shaping up fine.

On the perspective of ATS drop, which you are talking about, we intentionally went down on our certain bulky savings, which is the wholesale savings book because that is not long term and sustainable if and when we are dropping rates. As you are aware, in last 3 quarters, we were very cognizant of the fact that we should not source money at higher cost, thus we have dropped our savings deposit rates. And as a function of that, we were cognizant to not acquire high rate bulky savings money. And due to drop in that, the ATS drop on the overall picture seems visible. However, in terms of the retail acquisition is concerned, we are still acquiring customers in between the range of 25,000 to 35,000 ATS.

The customers -- the last point you mentioned was the behavior of our existing customers. So on that as our narrative to make the customers more transacting and primary account users, what we have initiated is very aggressive campaign on the debit card, e-com and POS usage to ensure that customer gets used to using our bank as one of the primary bank accounts and across those segments, we are seeing good traction. There's almost a 20% increase on the overall spend on these channels as well as the ATS seems to be improving to a range of 40,000 to 50,000 in that segment.

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Hiral Desai, Anived Portfolio Managers Pvt. Ltd - Portfolio Manager [19]

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Okay. Okay. And can I have the cost of deposit for quarter 2 FY '20 because I didn't see that number in the presentation? The incremental cost of deposit?

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Unidentified Company Representative, [20]

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One second.

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Unidentified Company Representative, [21]

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Yes, it's around...

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Unidentified Company Representative, [22]

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It's 7.5% for Q2.

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Hiral Desai, Anived Portfolio Managers Pvt. Ltd - Portfolio Manager [23]

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Can I have the number for term deposits and savings, if that's possible? Incremental cost for Q2?

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Sanjay Agarwal, AU Small Finance Bank Limited - MD, CEO & Director [24]

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So savings is up 7%, right?

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Unidentified Company Representative, [25]

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Yes.

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Unidentified Company Representative, [26]

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That we can give you separately, I mean for incremental.

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Sanjay Agarwal, AU Small Finance Bank Limited - MD, CEO & Director [27]

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I can just share you the broader numbers. The savings rate in terms of the Q2 comes around 6% as well as the -- on the fixed deposit side, it is around 7.65% on the overall book.

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Hiral Desai, Anived Portfolio Managers Pvt. Ltd - Portfolio Manager [28]

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Okay. Perfect. And sir -- and Sanjay just one...

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Unidentified Company Representative, [29]

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[And it was up 1%] for Q2.

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Hiral Desai, Anived Portfolio Managers Pvt. Ltd - Portfolio Manager [30]

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Just one request, if we can have the call slightly later in the day because the presentation just came out late last evening. It's a little difficult to actually get a hold of the numbers.

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Sanjay Agarwal, AU Small Finance Bank Limited - MD, CEO & Director [31]

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Okay. So we'll plan better next time.

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Operator [32]

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The next question is from the line of Renish Bhuva from ICICI Securities.

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Renish Bhuva, ICICI Securities Limited, Research Division - Assistant VP [33]

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Congrats on a great set of numbers. Sir, a couple of questions. So one is on the our used vehicle segment. So just trying to understand so what has been the key driver behind such a robust growth in the used vehicle segment? So is it because of we are gaining market share at the existing dealer point, or are we adding more locations and we are deepening our presence where we have branches earlier? So what are the key drivers there?

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Unidentified Company Representative, [34]

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Yes, so Bhaskar here, he will supply this.

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Bhaskar Vittal Karkera, AU Small Finance Bank Limited - Chief of Wheels [35]

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Bhaskar here. So if you look at -- simply let me give you some data points on the channel that we were working with. Just about a year back, same month, we used to work with close to about 500, 600 channels because earlier the used vehicle is also comprised of, one is refinance, which is on your own -- off your own customer you do off a time and use basis so there were 2 separate parameters which contribute to that vertical.

So as earlier -- in the earlier -- for us even more during the refinance and less of going to the channels and things like that, that was because we had more work to do on the new as well. So starting last year on the same time, what we have done is that 700 number of channels that we worked with has now gone up to 2,000. Number one.

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Renish Bhuva, ICICI Securities Limited, Research Division - Assistant VP [36]

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So, sorry. How much, sir?

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Bhaskar Vittal Karkera, AU Small Finance Bank Limited - Chief of Wheels [37]

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2,000. 2,000 channels. Yes, number one. Number two. As you asked, we've also penetrated deeply, we have also gone to the smaller cities and in the smaller towns, in the smaller villages also, where we get used dealers and then there are [referents] which are available there. So we have gone and engaged with them also meaningfully to give them an entire value proposition as to why to work with us for used vehicles business. So combination of A plus B is what has helped us get to that additional number.

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Renish Bhuva, ICICI Securities Limited, Research Division - Assistant VP [38]

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So just a follow-up on that. So basically, is it fair to assume that the recent locations of the geography are the same where we have been doing the new vehicle or...

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Bhaskar Vittal Karkera, AU Small Finance Bank Limited - Chief of Wheels [39]

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Yes, yes, yes. By geography, profile, application. Nothing has changed. All of them remain in common. We have also extended -- we've also made ourselves available for the used business also. Perfectly right.

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Renish Bhuva, ICICI Securities Limited, Research Division - Assistant VP [40]

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Okay. And, sir, just another follow-up on that, I'm so sorry. Is it right to assume that the center, liquidity challenges for all and -- versus 1 and 2 used vehicle segment, are actually helping us to gain market share? Or...

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Bhaskar Vittal Karkera, AU Small Finance Bank Limited - Chief of Wheels [41]

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Yes sir, yes.

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Renish Bhuva, ICICI Securities Limited, Research Division - Assistant VP [42]

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Okay.

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Bhaskar Vittal Karkera, AU Small Finance Bank Limited - Chief of Wheels [43]

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Yes, that's a fact, yes.

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Renish Bhuva, ICICI Securities Limited, Research Division - Assistant VP [44]

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And sir, a last question from my side is to Sanjay, sir. So sir, now we have reached almost 2% ROA and 20% ROE, so what sort of written ratio improvement you expect going forward, or I would say, what will be our journey for next 10 quarters, if I may ask, sir?

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Sanjay Agarwal, AU Small Finance Bank Limited - MD, CEO & Director [45]

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So if I continue these kind of numbers for next 10 quarters it should be good enough, honestly, because this franchise will require more investments, more distribution. And you know how the overall environment is. So I will reserve this overall 10-quarter forecasting for next 2 quarters. So if we go step-by-step and [build] down AU franchise in the right way, I think these numbers are good enough to live with this.

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Renish Bhuva, ICICI Securities Limited, Research Division - Assistant VP [46]

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Right. So I mean is this right to assume that -- so we'll be more into expansion more than...

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Sanjay Agarwal, AU Small Finance Bank Limited - MD, CEO & Director [47]

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So I won't say this will go up, but I will say -- no I won't say -- but I think any sustainable numbers we are looking, I think these numbers are there, right? So if you can sustain this number for next 10 quarters, by any means, in terms of the disbursement, in terms of yield, in terms of distribution, in terms of people management, in terms of compliance, everything, right? So I think then -- this set of numbers are good enough to live for next 10 quarters.

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Renish Bhuva, ICICI Securities Limited, Research Division - Assistant VP [48]

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All right. So actually, sir, where I'm coming from this question is that, since we expect the margin expansion plus operating leverage to play out, I mean, it looks like the ROEs actually will jump meaningfully in next 2 or 3 quarters. So...

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Sanjay Agarwal, AU Small Finance Bank Limited - MD, CEO & Director [49]

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I believe this is for future -- I believe this for future honestly because there are a lot of things which we don't control. And we, being in a conservative bank, we don't want to unnecessarily highlight that we can go to a 2, 2.5 or our ROE can be upward of 20%, right. So once we started the journey, we said that anything around 18% ROE, anything around 1.8% to 2% ROA is good enough in a 5-year journey, right? So by the grace of God, the overall support of the overall team, customers, of course the government and RBI, we are getting 10 quarters. So let us see how we remain sustainable around this number for the next 2 to 3, 4 quarters. And then we believe that what is our next trajectory of growth for us.

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Renish Bhuva, ICICI Securities Limited, Research Division - Assistant VP [50]

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Right, sir. So just the last question from my side. Sir on the NBFC exposure, so we have put a slide on 25 page number. So just wanted to know the BBB and below rated book is actually almost half of the total NBFC exposures. So what gives us comfort level, or let's say, confidence about the maintaining asset quality despite having such a high exposure on the investor side, specifically below BBB rated book?

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Sanjay Agarwal, AU Small Finance Bank Limited - MD, CEO & Director [51]

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So you know we remain NBFC for 22 years. And we know about the house model NBFC operate. They actually run on their own capital base with a smaller output, with smaller aspirations. And we have just funded them because we were knowing them from last so many years, right? And if you know that, the higher -- the larger the NBFC, they are more in trouble, right, because they need consistent supply of money to really sustain themselves.

So in these [volatile] NBFCs, there is no challenge around their ALM, there is no challenge around their asset quality. And in case they don't get money, they can even operate on a lower level, right? So these books, we are running from last 5 years now and they have extremely, extremely performed very well, right?

So we don't think any reason for any kind of default or worry around this book, it is always in my opinion there is a lot of crisis of confidence in this whole NBFC sector, right? So once this crisis of confidence goes out, I think this sector can become again normal. And as we are nearing the end of this financial year, we reported 3 quarter [full], a lot of money will come through securitization, assignment, refinance to the sector again, right?

So I don't think that overall the sector will go for a bad shape. Of course, there are 2, 3, 4 names, which already is there on the, under [avado]. So apart from them, there might be some [pertal] damage here and there but largely, I believe that we are in firm command of our book. But seeing the overall economic situation and environment, we thought that let's increase our standard provision from 0.4% to 1% to power ourselves with any kind of thing which we do not know.

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Renish Bhuva, ICICI Securities Limited, Research Division - Assistant VP [52]

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Right. And just to follow up on that. So basically, so whatever the number of entities we have on the BBB and below, what would be -- what could be the AUM side -- I mean it would be less than INR 500 crore or around that number?

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Deepak Jain, AU Small Finance Bank Limited - CFO [53]

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Yes. So, so you understand [usually], I can't answer now -- I can't answer you now but we will take it separately with you.

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Renish Bhuva, ICICI Securities Limited, Research Division - Assistant VP [54]

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Okay. okay, sir. Fair enough.

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Operator [55]

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(Operator Instructions) The next question is from the line of Amit Nanavati from Nomura Securities.

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Amit Nanavati, Nomura Securities Co. Ltd., Research Division - Associate [56]

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Congrats for the great set of numbers. Just one question on growth. Basically just wanted to check what kind of growth target you're looking for FY '20. When I look at your new vehicle book, plus NBFC plus RE, these 3 segments clearly are kind of dragging growth and disbursement trends are weakening there. So in that context -- in this 40% of your AUMs, so in that context, just wanted to understand what kind of growth targets you're looking for in the near term.

And secondly, in terms of market share in the new vehicle side, if you can talk about why the market share gains, which unlike you see in used vehicles, why are we not kind of looking to gain market share in the new vehicle as well.

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Unidentified Company Representative, [57]

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So I'll answer the first one. So overall we always commented that if we can grow our book by 35% to 40% year-on-year, we will be very happy. And you know there is an unprecedented kind of environment in the last 12 months. So but still we're able to grow our book by 40% on assets. And of course, the disbursement is growing by 25%, right?. So I believe that if you can again continue this kind of trajectory in the next 2 quarters we'll be very happy. And I would say that there [isn't] always trend there, overall business trend happens around 40% in the first half, 60% in second half, right? And that should -- also allows us to grow our book again by 35% to 40%, in the range by March '20. And of course, disbursement should grow by overall business around 25% to 28% kind of thing. And we believe that we have enough book, enough assets around -- enough product line like we do -- used, we do housing loans, we do SBL, we do REG, we do a lot of things, right? So we have around 10 to 12 products trying to give this kind of growth.

And adding -- in my opinion, to be very honest, we are not targeting any growth in this year, I think we are targeting more a good asset quality. We want to be really firm on our ground that whatever there is right, we should do that and eventually if we are doing everything right, we will grow by this number. So that is one thing.

Second in terms of new and used, I think because in my opinion a lot of people are buying used because it has a more value proposition, there's a lot of clarity around now used vehicle asset and so new is being replaced by used for now. So -- and that is a lot of value for us also because we can price used around 15-plus -- 15% IRR plus. And the new is around 12% IRR, right? So for us also, it makes a lot of sense to do more used than in new. We are there in new also but at our own prices, at our own product range. So -- and we really want to continue that stance, and that is why also if you [re-lease] your growth on used vehicle is around, what, 40%, right?

So I think we have placed ourselves very well in the last 6 months or maybe 9 months -- last 9 months and we want to do that only.

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Sanjay Agarwal, AU Small Finance Bank Limited - MD, CEO & Director [58]

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So Amit, to add on this. If you remember our earlier calls, 2 or 3 quarters back calls, we could gauge the market largely on the value chains and we changed our gears more to used and refinanced, and we wanted to increase our yield also. We increased around 200 bps in our base portfolio. So we were knowing that the new market is not that conducive and so our growth is stagnant in that new and we focus on used and refinance. So we are therefore, new vehicles, we are there in the market, those dealerships, those products. What we actually want to do, which is -- has a good liquidity and, there is no -- there's no pressure on those collaterals. So I think we are managing that and moving ahead with the higher yield products, and we are there in the market.

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Operator [59]

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The next question is from the line of Rohan Mandora from Equirus Securities.

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Rohan Mandora, Equirus Securities Private Limited, Research Division - Analyst [60]

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Sir, if you can share how is the first [wicket], second [wicket delear] moving in the retail finance portfolio? And if we were to look at it from one quarter lag basis?

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Unidentified Company Representative, [61]

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I think we can take this question off-line.

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Sunil Parnami, AU Small Finance Bank Limited - Chief of IR, M&A [62]

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Rohan, we can take this question off-line. I don't have this data offhand with me but we will be able to share that with you.

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Rohan Mandora, Equirus Securities Private Limited, Research Division - Analyst [63]

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Secondly, we have increased our provisioning commission 45%, 46%. So [interim] will we look to maintain the PCR at these levels or was this just a onetime number that we have done and will gradually trend towards close 20% or 30% if we are going ahead?

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Unidentified Company Representative, [64]

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No, no. I think this year we will keep improving and because there is -- we have done some NPA coverage policy change, right, where we have said that above 360 for wheel loans we're going to make more provision, right? So I think this will be our consistent policy to have more PCR on our assets -- on NP assets.

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Rohan Mandora, Equirus Securities Private Limited, Research Division - Analyst [65]

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And, sir, any targeted share of home loan 31 provision next 2 to 3 years? As a percentage of the overall ALM?

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Unidentified Company Representative, [66]

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It's difficult to answer now, but I can only share you this that housing loan will be an important part of our retail status -- retail asset strategy. If you take my view for next 10 quarters, it should be around 10% of our retail assets. It should be. And we are seeing lot of opportunity for us because many HFCs are not working on the ground because of this challenge in their own ALM stance. So we hope that in next 10 quarters, you can really build some meaningful housing book in those markets.

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Rohan Mandora, Equirus Securities Private Limited, Research Division - Analyst [67]

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Sir, but [what will the main] 20, 25 lakh ticket sizes, [in all though]

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Deepak Jain, AU Small Finance Bank Limited - CFO [68]

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Yes, yes, same. Because we want to price our asset again, so we have around yield of 13% right? So it is more about the unsold, unleased markets and again with a similar kind of the segment.

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Rohan Mandora, Equirus Securities Private Limited, Research Division - Analyst [69]

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And, sir, lastly, like [I think you] added more channels for the used vehicle financing segment growth and although I find it in the new geographies. But are there any specific schemes that we were running for employees or for directors during this period, and which would also likely continue in the next quarter? Or it was just [several] distributions?

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Unidentified Company Representative, [70]

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Bhaskar, do you want to answer this?

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Bhaskar Vittal Karkera, AU Small Finance Bank Limited - Chief of Wheels [71]

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Yes, so if -- you're asking, if I understand correctly, you were asking whether there was any particular scheme, right? You're asking me that right?

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Rohan Mandora, Equirus Securities Private Limited, Research Division - Analyst [72]

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Yes, yes. Any particular incentive [or other] schemes for employees or the directors.

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Bhaskar Vittal Karkera, AU Small Finance Bank Limited - Chief of Wheels [73]

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As you told, see, we have always been in the same market. So by geography, profile, application, I have not changed anything. The same, yes, what we have done is, you know, working with the channel, we have engaged with them more meaningfully. Like, just to give you an example, we have had car mailers being organized, used car mailers being organized in and around the vicinity of that dealer. So we have called 4, 5 dealers, we have plenty of displayed cars during the festive season, the [time of Diwali], now that has given some engagement. Last year, we did it around the last -- month of December.

So what we are doing is, we are doing proactive engagement programs with them, which in turn helps them to sell more that has to finance more and then it is a long-term meaningful engagement. Just like you do with new dealers, we're also deploying the same strategy of staying engaged, stay -- let the dealer and you work long, rather than a short-term, just 4, 5 vehicle numbers. So we're playing with the long game.

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Rohan Mandora, Equirus Securities Private Limited, Research Division - Analyst [74]

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Sure. But...

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Bhaskar Vittal Karkera, AU Small Finance Bank Limited - Chief of Wheels [75]

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So incentive is a part of it. That's naturally a part of it. But I just think it is not topical. It is more strategic and long drawn and not just one short burst.

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Operator [76]

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The next question is from the line of Nidhesh Jain from Investec.

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Nidhesh Jain, Investec Bank Limited (SA), Research Division - Research Analyst [77]

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Congratulations for a great set of numbers. So firstly, what is the thought process behind that reduced tax rate, given that this may give us opportunity to invest in the franchise by either adding infrastructure or be more competitive on the savings rate side or be more competitive on the yield side. So what is the strategy, or what is the thought process on tax rates?

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Unidentified Company Representative, [78]

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So I do believe a combination of all things which you described on the call that we will invest in franchise so we want to go more deeper in our geographies. We really want to invest more in people because I think those -- people are most crucial to build any franchise. So we really want to train them. You really want to hire more. We really want to make people more responsible, more productive. So I think that is the one thing which we really want to work.

And third, of course, because you know how the overall environment is, so we want to really safeguard our asset quality and book. So we want to really make more provision.

And I hope because I think this is one of -- I wouldn't say in my lifetime about this kind of tax [will endure but] which is 35% to 25%. So we really want to be judicious enough to decide how to use this money, which has come just from nowhere. So I think that's where our lead is but you will see more and more our strategy coming out in play in next 2 quarters. But we are very sensible around that. We should use it in favor of franchise.

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Nidhesh Jain, Investec Bank Limited (SA), Research Division - Research Analyst [79]

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And second is around, just not able to understand why you are dropping the interest rate on the savings account, given that we are not seeing very strong traction on the growth. Will not it help to have a higher interest rate on the savings account and build the franchise and then probably the strategy which was followed by the new generation private sector banks?

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Unidentified Company Representative, [80]

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So honestly, we have done a higher rate of business in last 10 quarters and we believe that a rate is not a hook for saving customers. It's about these services, it's about relationships, it's about the positioning of your own franchise, right? These are more the higher rate. And lots of people really challenge that, whether the bank is safe enough or not.

So -- and we really want to do more on the other aspect like [growth like] we done in the earlier call, that about how we engage with the customer, right? Whether we engage through debit card offers. We engage them through the specialized offer to the specialized segment like whether we can do something for the senior citizen, right? Whether we can do something for our female customers, right?

So I think a lot of thinking is still going. I would ask that. Let this team understand how this whole thing works. And also -- and I believe we haven't reduced the rates so that it is only on higher end. But I believe anything above 7% on savings account is not sustainable. And so we have to put right kind of frame to our own team and to the customers so that there's a right narrative about our franchise. So we believe that if you really work on retailing and do build the organization on trust, responsible service, we will get our numbers in place in coming quarters.

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Nidhesh Jain, Investec Bank Limited (SA), Research Division - Research Analyst [81]

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Surely, sir there's some data keeping question. When is there -- if you can share number of collection employees on asset side -- collection and sales employees on the asset side and number of known [special spots] on the vehicle finance and SME?

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Unidentified Company Representative, [82]

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My friend, we can take this off-line because this is too much data point, so you can be in touch with IR team and we can share with you that.

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Operator [83]

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The next question is from the line of Darpin Shah from HDFC Securities.

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Darpin Shah, HDFC Securities Limited, Research Division - Equity Analyst [84]

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First question is the assets worth INR 63 crores are still below [90] DPD and form part of the NPS and this has reduced from say INR 140-odd crores in Q4. So very sharp decline. So what has led to this sharp decline?

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Unidentified Company Representative, [85]

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No I think it's a condition time, you should not read much in this data because once staggered, NPA will always go down in terms of -- so, it's the conversion from NBFC to bank and then from onetime tagging to now, the holistic number. Why we want to comment on this number because we always said that in AU 90-plus recovery methodology is in place on the last 22 years. That is why our asset quality is so good enough. So this number does indicate that there are some number where -- which is below 90 days also. So -- but that doesn't mean here that sharing this number shows that our quality is getting worse.

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Darpin Shah, HDFC Securities Limited, Research Division - Equity Analyst [86]

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No, no. What I was trying to understand is from INR 140 crore to INR 60-odd crore. So what makes that number go down? Will it be a regular payment for, say, 3 months, 6 months or any other behavior which you see in that borrower and then you reduce it? How does it work?

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Unidentified Company Representative, [87]

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So definitely what really has happened is in the last 10 quarters, we have moved from our reporting to daily tagging rate. So the focus of the collection team has now moved to collect it on the date -- new date itself. So that has gradually led to improvement in this pool of assets, in this particular pool gradually.

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Darpin Shah, HDFC Securities Limited, Research Division - Equity Analyst [88]

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Okay. Fair enough. Second part is -- second thing is like you've increased a provision on standard assets for the NBFC sector, do we think, you know, we should also add for the real estate part?

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Unidentified Company Representative, [89]

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No. It's very small one. And I can only tell you this that in last 12 months, that construction finance is showing some better traction and better performance honestly because we have done this affordable small housing project, right? So our gross NPA is [below just in] there. And so I believe that there's no requirement because it's very gradual and the housing projects are all small.

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Operator [90]

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The next question is from the line of Dipen Sheth from HDFC Securities.

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Dipen K. Sheth, HDFC Securities Limited - Head of Institutional Research [91]

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I was kind of off the call for a while so I must apologize in advance if what I'm going to ask has been answered already. Two quick questions here. One is that we do have a residual state in Aavas. And there would be some kind of a onetime gain were we to exit completely over a period of time. Is that an intent, which is likely to fructify over the next year or so? And there is a related question to that.

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Unidentified Company Representative, [92]

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I'm still not able to answer unless and until we are able to firm up our mind around Aavas because our own franchise is doing so good. It's a very smaller amount of investment in that franchise. So I think the overall approach can be that whenever we need capital, we should use that. But I think it will be always a function of whether we want to raise from outside or whether we want to make it this asset monetized. So we will take a decision as and when it arises. Until that time, we are just enjoy that franchise also and of course the AU franchise sales.

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Dipen K. Sheth, HDFC Securities Limited - Head of Institutional Research [93]

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So I believe the residual stake would be about INR 800 crores in value on that one.

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Unidentified Company Representative, [94]

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Today's value.

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Dipen K. Sheth, HDFC Securities Limited - Head of Institutional Research [95]

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I'm sorry?

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Unidentified Company Representative, [96]

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It's today's value right?

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Dipen K. Sheth, HDFC Securities Limited - Head of Institutional Research [97]

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Yes.

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Unidentified Company Representative, [98]

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I don't know what the future value is, so...

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Dipen K. Sheth, HDFC Securities Limited - Head of Institutional Research [99]

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Yes, sure. So I'm assuming there will be a substantial bit of profit to be booked there as well. The reason I'm asking you is that as a bank now I don't look at you as an NBFC. I've never done that. But if you're a bank now, frankly my personal view and you can reject it completely, is that you are running with a relatively low coverage. It also shows confidence in eventual losses that you might book on your stress.

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Unidentified Company Representative, [100]

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It's low coverage [for that].

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Dipen K. Sheth, HDFC Securities Limited - Head of Institutional Research [101]

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So PCR. So I would be happier if you were there -- up there with the leading banks at 70% and 75% kind of coverage. But that is a personal view. My view is that perhaps you can...

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Unidentified Company Representative, [102]

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Let me answer this, right, because, you know, you have to also understand that AU Bank is a retail franchise. My 90% loans are below INR 10 lakhs, correct? That is secured -- that too secured. I'm not running any book which is -- which in the mind is corporate loans or is more about micro-finance. Nothing in the last 10 years, 20 years where we have seen a stress, AU is not there, right? So -- and we are running this book from -- not from today, it's last 20 years. Maybe on a scale from last 7, 8 years, right? So -- and 46% that too secured and when my NCL is around 1/3 of my provision -- NPA, right? So -- and we will gradually catch up with that level, but how come that NPA coverage ratio is related to the -- my monetization of assets, right? So I can do now also, honestly.

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Dipen K. Sheth, HDFC Securities Limited - Head of Institutional Research [103]

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As well -- I tell you. This is how I look at it.

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Unidentified Company Representative, [104]

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If it was around 1.7 in same quarters, I would have done it. But I think there is no need to rush for anything, which is just on a perception basis. So we know how our assets are performing. We know how -- where we are lending, we know how to -- how the overall franchise is shaping up. So I think we will take all corrective actions as and when it's needed.

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Dipen K. Sheth, HDFC Securities Limited - Head of Institutional Research [105]

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So your sense is that the comfort on the current coverage ratio is very high because of the kind of lending and the kind of security against the lending that you have. You don't see a need to take this to 70%, 75%. And I respect that.

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Unidentified Company Representative, [106]

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As of now, as of now.

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Dipen K. Sheth, HDFC Securities Limited - Head of Institutional Research [107]

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As of now, yes. You might change your mind with time. And that's the link between the [other sticks] because that gives you onetime profits which you can use to bolster your coverage. But if you don't see the need for it, why be in a hurry? I appreciate that.

The second thing, sir, is on your deposit franchise. And that, as you are well aware, is the more fashionable way of looking at financial services companies and banks today, rather than the asset side where we are fully confident. I am fully confident on the kind of lending that you do. I'm reasonably confident on the deposit franchise as well. However, an observation, that 40% of your term deposits are noncallable in nature. The underlying assumption I will make here is that obviously you would have offered a little bit of a higher price for these TDs.

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Unidentified Company Representative, [108]

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Yes. So Dipen, we are very new franchise around deposit, right? So we need to understand that whole environment first. So we took a call that if there is a [stability] of an ALM around deposits, we should price them high, right? But price is not like 100 basis point difference, it is 15 basis points, 20 basis points, 25 basis points, right? So I think that is more to confirm our ALM so that we don't have any systematic issues around our own liquidity. And we believe that if that strategy is working, so why don't we pursue that strategy to really be on a safer side than on an aggressive side.

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Dipen K. Sheth, HDFC Securities Limited - Head of Institutional Research [109]

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So is that -- so 15, 20 bps is totally affordable. And I'm with you there, sir. The thing is, that is -- is it fair to assume that, that is being offered only for your bulk TDs. Obviously, it can't be a retail offer.

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Unidentified Company Representative, [110]

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Yes, yes, yes. Of course, of course, of course. And you know, overall, we don't know how to build wholesale deposit. It is more about retail. And the number which I've shown in terms of our data, say that we are not growing that fast. So that this strategy has been changing in the last maybe 4 quarters that we need to build deposit on relationship, on trust, on services, on product, on offering rather than interest rates. So we are really working very gradually to build our right franchise around deposit also.

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Dipen K. Sheth, HDFC Securities Limited - Head of Institutional Research [111]

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Yes, so the retailization of your TDs is up, is a runway. It didn't happen overnight and I'm with you there. Meanwhile, to get TD growth even as you grow your books this fast, it's a good idea, and I'm with you that 40% of your TDs, if they can be put noncallable so that you avoid any systemic issues around any ALM even on your deposits. So 65% of your TDs are bulk deposits and 40% out of these 65% are noncallable.

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Unidentified Company Representative, [112]

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Correct. Correct.

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Dipen K. Sheth, HDFC Securities Limited - Head of Institutional Research [113]

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So that means 25% only are callable.

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Unidentified Company Representative, [114]

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Of the total term deposits, 40% is noncallable. And in bulk deposit, it is 60% noncallable.

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Dipen K. Sheth, HDFC Securities Limited - Head of Institutional Research [115]

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Yes, absolutely, 40% on 65%, so that's about 60%. Fully understand, sir.

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Operator [116]

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(Operator Instructions) The next question is from the line of [Sumit Mehta], an individual investor.

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Unidentified Participant, [117]

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What I want to ask is you just mentioned earlier in the con call that there is a low competition on ground. So can you see a significant difference since the last [FS star or FS] crisis turned out and right now that there is significant competition on ground? Or was it always that...

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Unidentified Company Representative, [118]

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So, no. So it's a very changing world. It's a very evolving world. Nothing is permanent. Like last ILFS quarter, post ILFS quarter there was crisis, but in last quarter 4 of last year, end of quarter 1 was good enough. And then, quarter 2 of this year, again, there was some crisis around this environment. So I won't say that it is a very permanent kind of feature. And -- but yes, in comparatively, we would say that around 20% kind of drop is there from NBFCs and HFC in terms of their disbursement, in terms of their positioning into the ground.

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Unidentified Participant, [119]

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So there is a tangible difference, basically, which we can build on going forward.

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Unidentified Company Representative, [120]

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Yes. So -- but I won't say that it will be a very permanent one. We have to build our franchise on our strength, which is we have to build our own product, value proposition, team, delivery, whatever, right? So we can't take away this, that -- no NBFC issues there so we can grow ourselves, so that's not our strength, yes.

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Operator [121]

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The next question is from the line of Deepak Shinde from SBICAP Securities.

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Deepak Shinde, SBICAP Securities Ltd., Research Division - Research Associate [122]

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Savings account rates and TD rates [below this]. Why would customers go for TD? Like what is the kind of customer offer you're having for savings accounts as well as for retail term deposit?

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Unidentified Company Representative, [123]

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Rishi, can you answer this? Rishi?

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Rishi Dhariwal, AU Small Finance Bank Limited - Chief of Secured Business Loans [124]

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Yes, so in terms of the core segments, where we focus on is, one of them, the key one is the senior citizens. Because senior citizen is one segment where we see a high amount of TD growth overall because that is a segment which needs security, safety.

Also from our bank's perspective, when we see interest rates on [TDs or loans we can have] some sense what we're offering in savings, almost there is a 100 basis point difference on that. So customers are actually inclined towards that. Also, TD is a function of overall liabilities. But there is a function of soliciting business, right? So the amount of effort which is put in, in terms of productivity and reach to the customer is [right for this area].

So the larger Retail TD as far as the segment is concerned, the overall segment from this comes through as senior citizens and after then like women, low-salaried and self-employed also plays a part in it because as a philosophical [auditory] nature, typically on a INR 1 investment always people try to lock around 60% on a [sum that's safe]. So that is the reason we are able to [keep that lid].

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Deepak Shinde, SBICAP Securities Ltd., Research Division - Research Associate [125]

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And just one more question. The build of portfolio that has seen very high amount of [VNP] so what kind of return you are expecting from that portfolio?

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Vivek Tripathi, AU Small Finance Bank Limited - Chief of Strategy Business Solutions & Transaction Banking [126]

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Yes, Vivek here. See, if you look at the real estate book, it has 2 components. One is the construction [link] -- construction finance book, which actually is a more granular portfolio. The other is a municipal cost for [vacant lot].

Now the incrementals since last [8] quarters is not dispersing. So the -- if you look at the behavioral change -- the difference between these 2 books, this year where we have 100% control in the cash flow obviously behaves better.

Plus, the question about the stickiness of our NPAs. So I can give you a color that the accounts which are tagged NPA 2 quarters back, the amount of recovery which happens is because in these accounts, one because there is some part of the unit getting sold and the money flows to our escrow. So we -- obviously, it comes to us. Second, by nature itself, that time when [derivatives] are supposed to be sold, right? It is not a LAP book purely. Or it is not an asset which is for the self-consumption of [our board]. So there is a considerable amount of cash flow which comes from this book. So going forward also, we see that there will be substantial improvement in this.

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Deepak Shinde, SBICAP Securities Ltd., Research Division - Research Associate [127]

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[So if we turn on essential con] finance. And on the LAP portfolio?

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Unidentified Company Representative, [128]

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No, so Builder LAP is a very small book, and we're not growing it. So the number's looking -- while in a breakup it's looking large because the fact is that we have not done any business in the last 3 quarters and whatever accounts are there is getting dissolved, actually.

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Deepak Shinde, SBICAP Securities Ltd., Research Division - Research Associate [129]

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Yes, so I was just asking, like last year [could have been seeing] what is the visibility of [the accounts].

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Unidentified Company Representative, [130]

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See. I can give you that in first half, we had a [part] down of about -- on NPA...

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Deepak Jain, AU Small Finance Bank Limited - CFO [131]

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On NPA accounts...

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Unidentified Company Representative, [132]

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On NPA account, close to...

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Deepak Jain, AU Small Finance Bank Limited - CFO [133]

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INR 2.55 crores.

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Unidentified Company Representative, [134]

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INR 2.55 crores.

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Deepak Jain, AU Small Finance Bank Limited - CFO [135]

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Sir, there are only 5 accounts and out of those also, we are expecting recoveries in 3 accounts in this quarter also.

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Operator [136]

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Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments.

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Unidentified Company Representative, [137]

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On behalf of AU, I would like -- we would like to extend thank you to all the participants. Also, wish you all a very Happy Diwali, upcoming festive season. For any further questions or queries, you may connect the IR team for -- we'll get back.

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Sanjay Agarwal, AU Small Finance Bank Limited - MD, CEO & Director [138]

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Thank you.

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Operator [139]

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Ladies and gentlemen, on behalf of AU Small Finance Bank, that concludes today's conference. Thank you for joining us and you may now disconnect your lines. Thank you.

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Sanjay Agarwal, AU Small Finance Bank Limited - MD, CEO & Director [140]

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Thank you.