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Edited Transcript of DCBA.NS earnings conference call or presentation 31-Oct-20 1:00pm GMT

·61 min read

Q2 2021 DCB Bank Ltd Earnings Call Mumbai Nov 1, 2020 (Thomson StreetEvents) -- Edited Transcript of DCB Bank Ltd earnings conference call or presentation Saturday, October 31, 2020 at 1:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Bharat Laxmidas Sampat DCB Bank Limited - President & CFO * Murali M. Natrajan DCB Bank Limited - MD, CEO & Non-Independent Executive Director ================================================================================ Conference Call Participants ================================================================================ * Darpin Shah HDFC Securities Limited, Research Division - Equity Analyst * Gaurav Jani Centrum Broking Limited, Research Division - Research Analyst * Jai Mundhra Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst * M.B. Mahesh Kotak Securities (Institutional Equities) - Associate Director & Senior Analyst * Pranav Gupta * Rahul Maheshwary * Renish Patel ICICI Securities Limited, Research Division - Research Analyst * Roshan Chutkey ICICI Prudential Asset Management Company Limited - Associate VP and Analyst * Sagar Shah * Sunil Jain Nirmal Bang Securities Pvt. Ltd., Research Division - Head of Research ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, Good day, and welcome to DCB Bank Limited Q2 FY '20 Earnings Conference Call. Joining us on the call today are Mr. Murali Natrajan, MD and CEO; and Mr. Bharat Sampat, Bank Limited. (Operator Instructions) Please note this conference is being recorded. I now hand the conference over to Mr. Murali Natrajan, MD and CEO. Thank you, and over to you, sir. -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [2] -------------------------------------------------------------------------------- Thank you. Good evening. I know it's a bit late, today is Saturday. We had finished our work some time ago, but I guess lots of results going on today. So you were all in another call. So we'll try to make it as crisp as possible in the next, say, 45 minutes to an hour or so. I'm here with my management team, including Bharat Sampat. Bharat, can you make the disclaimer first before we start? -------------------------------------------------------------------------------- Bharat Laxmidas Sampat, DCB Bank Limited - President & CFO [3] -------------------------------------------------------------------------------- What I would like to place on record is that some of the statements we make today may be forward-looking statements. These statements would be based on information currently available to us. There are risks and uncertainties which could cause actual outcomes to differ materially from these forward-looking statements. We assume no responsibility to update these statements as circumstances change. -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [4] -------------------------------------------------------------------------------- Okay. Thank you. So I think this is the first quarter after the moratorium got over. Of course, we still had to deal with the situation with the Honorable Supreme Court order, which we had to deal with. A lot of the people thought that we are all entering an unchartered territory in September and what would it be and so on. Internally, we were very confident that things would improve. That is because we have been in constant touch with customers throughout the moratorium, plus, if you recall, we also did a survey of quite a lot of customers and put it out in the stock exchange. So we were quite up-to-date on the pulse of what was happening with the bulk of our customers. I must say that even whatever was said in the survey, we were able to do far better than that. As you can see, I hope you've received the press release, which is pretty detailed and also the investor presentation. So if you see on Page 4 of 7 on the moratorium, first point I would like to make is the moratorium deferment extended on the INR 1,908 crores as on February 29. We were down to INR 356 crores. And then actually, when I look at the number on October 26, it's more like INR 313 crores. When I compare our numbers with some of the other results that I have come through, we believe that we have done a remarkably good job in terms of improving the collections on these numbers. If you look at the collection efficiency, again, home loans has already crossed 90% and I believe in the next 3 to 4 months, it should move up further. What we are noticing in business loans is as businesses are coming back to some level of activity and so on, customers are starting to respond. Once the Supreme Court issue also gets resolved, I guess, the response would be even better. That is our sense. In CV loans, again, we have seen that customers are responding well as the transport, the thing is picking up. All these numbers that you see of collection efficiency has very little probably next to nothing in terms of ECLGS. We have an approval of about INR 2,000 crores sanction of ECLGS approximately INR 38,000-odd crores. So far, we have disbursed only INR 300 crores. So the entire helpline of ECLGS for the customer is available, and we want to use it prudently based on some of the risk profiling and so on, so that the customer gets maximum benefit out of these things. Again, when you look at customers who have paid at least 1 installment, if you recall my previous press release, these numbers were in the 20s and 30s. Now things are moving towards a single-digit number, which means that we have been able to -- this includes restructured and delinquent account, which means we have been able to kind of move the dial on customer collections very well. And as I mentioned before, we don't have any external collection agencies. All collection is done by in-house collectors. We have about 680-odd people. We only use some external lawyers and sometimes repossession agency for picking up the truck. Other than that, we are not seeing. Even in MFI loans if you see, 93% of our customers have at least paid 1 installment. Again, we have not done any top-up. We believe that some level of top-up or help would have to be extended to some customers in the coming quarters. But as of now, we have not done. Business volumes are picking up. Our disbursals are definitely picking up. If you see what disbursals we have done this quarter versus what we have done, again this does not include much of ECLGS at all. This is all our business that we are talking about. One of the big change that is happening is on gold loans. We shifted the focus of the branches to predominantly gold loans somewhere in May or April end. It is starting to show us results. We are able to disburse anywhere from INR 180 crores to INR 200 crores of gold loan per month. I believe it is sustainable, but we have to see for another 3 to 6 months before it is fully engraved in the branch, scorecard and performance. The unfortunate thing about gold is that since it's an OD product, if you disburse INR 100 crores, usually you will end up growing only about INR 40 crores or INR 50 crores. So -- but again, customers keep coming back and taking this thing. Margins have bounced back a bit. I had explained last time in the margin that we are keeping excess liquidity. There were some challenges in terms of some restructure that we had to do on MSME, plus some loan cancellations that happened all that. Fortunately, we didn't have any of those things. And you also can see our cost of funds and cost of deposits steadily coming down. We are doing extremely well on the top 20 depositors. I am confident that over the next 1.5 to 2 years, our numbers should be one of the best in the industry in terms of, say, about 5% or so. Right now, it is at 7.89%. Consistently, it has come down. We are repaying bulk loans and replacing with granular retail deposit, which has grown by 33%. So while overall deposits haven't grow, we don't need it because if our loan book growth is at the moment moderate, we don't need to unnecessarily have excess liquidity, which anyway we have. And our LCR has been every day well above 100%. So those are some of the comments that I wanted to make. I'm happy to take questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) We have a first question from the line of [Karma] Kunal from Perfect Research. -------------------------------------------------------------------------------- Unidentified Analyst, [2] -------------------------------------------------------------------------------- In the case of -- sir, I have a few questions. I'm listing down together. -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [3] -------------------------------------------------------------------------------- I can't hear you. I can't hear you well at all. Can you speak into the phone? Are you on speaker phone by any chance? -------------------------------------------------------------------------------- Unidentified Analyst, [4] -------------------------------------------------------------------------------- Am I audible now? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [5] -------------------------------------------------------------------------------- Yes, much better. -------------------------------------------------------------------------------- Unidentified Analyst, [6] -------------------------------------------------------------------------------- So I have a few questions. I'm listing down together. Sir in the case of numbers, since they are out, our exposure is INR 6.82 crores as per Brickworks rating report. Was this part of corporate loan book? And also we have been never fan of microfinance business. So can you please shed some light on it? The second, recently RBI has imposed INR 22 lakhs fine on DCB Bank due to violating the marketing norm relating to NSEL. So could you please throw some light on it? And then lastly, in the terms of cost savings, can you please share some -- any color on any permanent savings in the light of COVID, and any thoughts on cost-to-income ratio going forward? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [7] -------------------------------------------------------------------------------- Okay. So I'll go in a reverse direction for you. We don't talk about cost-to-income ratio. We only talk about cost-to-average assets. Our cost to average assets have been coming down steadily over year-on-year, quarter-on-quarter. We believe that in a matter of about 1.5 to 2 years, we should be probably best-in-class for a pure retail SME kind of book. We are targeting at about 220, 215 basis points kind of cost. In COVID related, some are volume-related benefits we have got in the first quarter and partly also in the second quarter. If you look at our headcount, we have been able to reduce our headcount from 6,800 to 6,100-odd through various activities, including some of the headcount which got released because of 106 projects that we put on digital agenda. We believe that the headcount will start moving up now because we are adding people to mortgages and a couple of other businesses. So it will go back to something like 6,400 odd, that's our expectation, by March. We believe that training, which we used to do physically has completely moved to digital. It's a big cost for a 6,800 kind of teams. So I think that's a permanent thing. There are electronic interventions we have introduced in monitoring branches as opposed to having physical security guard. I believe that is a permanent cost save. There are digital checking that we have done for new loans, where it is removing people intervention or some physical touch with customers, those, I believe, are going to permanent cost. So there's a long list of items that we are working on, each of them adding meaningfully to the cost reduction. So we are confident our cost would -- should go down to 220 to 215 basis points on a permanent basis over a period of time. That's what it is on cost. Regarding the 22 lakhs penalties that has been put, I am unable to give any more comments than what has been put out in the stock exchange on January 2019, please go to the stock exchange. We have given our views on the matter when this matter came up. Those are the clarification. The clarification that is there in the January 2019 stock exchange declaration -- this thing is still absolutely valid, so there is nothing further to add in that matter. On Sambandh. Sambandh is an MFI company, which we have been dealing with for many years. We believe preliminary report suggests that there is some orchestrated fraud by the management team. We have a net exposure of about maybe INR 6 crores or so after considering some term deposit and other lien that we have. So we have already provided INR 2 crores in this quarter and it is part of AIB. Like I said, we have to do MFI lending in all in order to meet our agri loan target. So some of these issues are not avoidable. And this is the first kind of fraud I think the whole industry has faced in MFI segment. And I'm in touch with regulators also and trying to figure out as to how we should be -- as an entire entity, as banking industry, how -- what kind of controls we can put additional, so that such things don't happen in the future. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- (Operator Instructions) We have next question from the line of Gaurav Jani from Centrum Broking. -------------------------------------------------------------------------------- Gaurav Jani, Centrum Broking Limited, Research Division - Research Analyst [9] -------------------------------------------------------------------------------- Sir, am I audible? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [10] -------------------------------------------------------------------------------- Yes, Gaurav. Please go ahead. -------------------------------------------------------------------------------- Gaurav Jani, Centrum Broking Limited, Research Division - Research Analyst [11] -------------------------------------------------------------------------------- So firstly, last quarter, we had sort of quantified our non-EMI portfolio at 26.5%. So any color on that as to how is the portfolio trending in terms of... -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [12] -------------------------------------------------------------------------------- What is non-EMI, sorry? -------------------------------------------------------------------------------- Gaurav Jani, Centrum Broking Limited, Research Division - Research Analyst [13] -------------------------------------------------------------------------------- Non-EMI portfolio that was 26.5%, right? So how is that trending as of now? Any number you want to give out as to... -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [14] -------------------------------------------------------------------------------- Look, can you explain what is non-EMI portfolio? I'm not clear what you are saying. -------------------------------------------------------------------------------- Gaurav Jani, Centrum Broking Limited, Research Division - Research Analyst [15] -------------------------------------------------------------------------------- The portfolio that has not paid a single EMI, sir. -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [16] -------------------------------------------------------------------------------- How is that non-EMI portfolio? -------------------------------------------------------------------------------- Gaurav Jani, Centrum Broking Limited, Research Division - Research Analyst [17] -------------------------------------------------------------------------------- Yes, sorry, sorry, my mistake. What I meant was the portfolio that has not paid a single payment? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [18] -------------------------------------------------------------------------------- So you're talking about moratorium, which we defined because market was confusing all of you guys so we defined it as to what moratorium we are actually looking at, which is what I said is 26%, which is not even single this thing. Now if you can see that all this has come down to a single-digit number, the bulk of the portfolio is business loans, home loans and commercial vehicle, SME, can already see it is at 96%, so it will be below 10%, so I would imagine since moratorium is not there, moratorium is over, I believe it should be about maybe 3% to 5%. -------------------------------------------------------------------------------- Gaurav Jani, Centrum Broking Limited, Research Division - Research Analyst [19] -------------------------------------------------------------------------------- Okay. Okay. Sure. This is helpful. Sir, and any color on what would be the probable restructuring/resolution under our new scheme? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [20] -------------------------------------------------------------------------------- Yes. We have given that information also under the Category 18, moratorium. At the moment, based on whatever analytics we have done, whatever collection feedback we have done, whatever survey we have done, whatever portfolio analysis we have done, which we have been doing for the past this thing, we believe the number would be somewhere between 3% to 5%. That is both together. That is we have business loans, and we have personal loans. When I say personal loans, it means like a home loans, that would be considered as personal loans. When we put together, we believe somewhere it will be at 3% to 5%. Why we can't give you a concrete number is because a lot of work is still going on. Customers are saying that they don't want restructure. They will be quite happy with this ECLGS and they can fix the business. They don't want any moratorium or restructuring. So each customer is dealing with separate, separately, but we'll have to kind of structure it meaningfully in the next month or so and administer it. So that is why it will be around that range. And we don't have a corporate -- we don't have a big corporate loan portfolio. Even in corporate loans, we don't have any -- seen any of the restructure. That is why I can't tell you anything because if another large bank does a restructure and therefore they are participate in ICA that information is not available to us. But looking at our portfolio, it doesn't seem like any challenge there. -------------------------------------------------------------------------------- Gaurav Jani, Centrum Broking Limited, Research Division - Research Analyst [21] -------------------------------------------------------------------------------- Sure. Sir, last question I would like to divide into 2 parts. One is in terms of growth, probably you were a bit (inaudible) this time also probably, obviously, no one is focusing on growth at this juncture. But when do you think can we push the pedal out there? Secondly, qualitatively, if you could comment on the last portfolio and what's the capital situation of customers? That will be very helpful. -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [22] -------------------------------------------------------------------------------- So last portfolio, I've told you that customers who have not even paid a single installment is at 7.4% as on October 30, 2020. This number was something like 29% when we last had a call with you guys, maybe in the last quarter. So this number is coming down steadily. What is very, very clear based on our survey as well as our customer interaction is, a lot of customers have started their businesses, things are moving on, but they are trying to balance their cash flows. And the major amount of customers have got approval for ECLGS. So if they need any working capital, we can help them. We have 38,000 customers across our bank, about INR 2,000 crores worth of sanction order, which only INR 300 crores have been disbursed. We are going to disburse the next balance, INR 1,600 crores, INR 1,700 crores in this quarter, that is a plan to do so. So I would say that, that portfolio is behaving far better than what one may have thought in March of 2020. And regarding the growth, pressing the pedal, we are fully pressing the pedal on gold loan. We used to disburse INR 30 crores per month or so last year. This year, we are already at about INR 180 crores, INR 200 crores per month. I think that is pressing the pedal. On mortgages and home loans, we had to kind of relook at the credit structure because we didn't want to go headlong once again without knowing what is happening there. So all that is done. And I think the team has started about INR 150 crores, INR 160 crores of disbursal per month, which used to be about INR 275 crores INR 280 crores. We think that by March, April or so, we are going to add more people as well there. We -- by March, April or so, we should be back to those kind of levels in mortgages, including LAP. -------------------------------------------------------------------------------- Operator [23] -------------------------------------------------------------------------------- (Operator Instructions) We have a next question from the line of Rahul Maheshwary from Ambit Asset Management. -------------------------------------------------------------------------------- Rahul Maheshwary, [24] -------------------------------------------------------------------------------- My 2 questions are these. First, sir, in last quarter, you had mentioned that the bank is planning for internal analysis based on the trade policy, the different parameters which are going on, on a pilot stages. Can you highlight a bit in detail where you had alluded different parameters are to be considered, which can help for more alignment of better credit growth? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [25] -------------------------------------------------------------------------------- No. See, whatever credit policies we had, we were doing quite okay on that pre-COVID, and we didn't have any major issues on our portfolio. Our NPAs have been pretty much in control. Recoveries have been very strong. So we never had, touchwood, any blow up in the things. Any challenge we had, it has been more towards the market kind of challenges on commercial vehicle, which even the market had faced, we had faced probably -- faced a little more. I mean, that is how it is. As far as the credit quality is concerned, see, the first thing is, if you have to look at 6 months bank statement as an example to see whether a customer is good enough to be given a loan. We don't have 6 months of performance post COVID for many customers. We don't have GST data. I mean you can't lend based on just 2 months data, which is just say, for example, July, August or something, it doesn't work that way. It'll be more like a leap of faith, which is not a right thing to do in our view, right? So we have tweaked some of the credit score, internal credit score. We have tweaked some of the CIBIL that is basically the bureau score. We have said that some of the programs that we need to do in the past, we will wait for at least December or January till we build up enough data around it before we go back to those programs. Some of the programs which used to be of micro LAP concerned, we don't see any issues because those are all based on actual assessment of the customer on the ground. So we don't see any much change in that. So we are able to continue those programs. Unfortunately, the approval rates are still not picking up because maybe there are customers who want to have a loan, but we are not in a position to approve those loans. So approval rates are, I would say, slightly lower than what it was in the pre-COVID. But from February, March or so, I believe that we will have enough track record and data to go back to how we used to do the business pre-COVID. -------------------------------------------------------------------------------- Rahul Maheshwary, [26] -------------------------------------------------------------------------------- Just in case, can you mention the approval rate range? On top of... -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [27] -------------------------------------------------------------------------------- Those are not items that we -- I mean, does other banks are giving you those data? -------------------------------------------------------------------------------- Rahul Maheshwary, [28] -------------------------------------------------------------------------------- No, sir. But because... -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [29] -------------------------------------------------------------------------------- So I can't give you the data. I mean you guys ask for too much data from us. We can't give you that. -------------------------------------------------------------------------------- Rahul Maheshwary, [30] -------------------------------------------------------------------------------- Okay. Okay, sir. Second question, sir. Few years back, you had concentrated on Odisha as a state, and you became within the top 5 bankers over there. And that strategy went very well for you. So which are other geographical areas, leaving apart this 6 months because we are in pandemic. But, sir, going forward, what are the initiatives on the geographic levels where you are going and similarly prototyping what you have done in Odisha state, sir? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [31] -------------------------------------------------------------------------------- So I don't think we are going to open any new state. We are quite happy with Orissa, Madhya Pradesh, Punjab for deposits and loan against property and home loans. Andhra, Telangana. Tamil Nadu is doing very well for us on mortgages and LAP even today. Gold loan is quite good in Tamil Nadu. Across India, we are doing quite well on gold loans, barring, maybe 3, 4 branches, which are laggards, otherwise, things are moving quite well. On fee income across the board, we are doing well. We are doing quite well on tractors in some of the states, which are showing signs like, again, Orissa, Maharashtra, we are doing quite well on -- even of parts of Madhya Pradesh, we are doing quite well on that. So it depends on product by product on this. On MFI loans, we tried to be very careful in terms of not concentrating too much on any geography because if, for any political reason, any geography gets hit, then you will get mold by that delinquencies. So we are trying to be very careful about that. Other than that, there is no change in how we were doing business pre-COVID. -------------------------------------------------------------------------------- Rahul Maheshwary, [32] -------------------------------------------------------------------------------- And just to continue, sir, the branch guidance, leaving apart this FY '21, the next year also it remains in -- within 15 to 20 branches that you would continue to open? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [33] -------------------------------------------------------------------------------- Yes. We have already identified branches -- enough number of branches for us to execute. We got a little tough because there are no architects or carpenters or civil work people available. Only now people are available, so the work has restarted. Even during the time, we were able to manage some of the branches. So this quarter, we opened 1 branch and then combined -- sorry, opened 4 branches and combined 1 branch in Punjab because we felt that combining that would be a better idea rather than have 2 separate branches there. And we are confident that we should be able to do about 15 to 17 branches -- maybe top 20 branches every year. -------------------------------------------------------------------------------- Operator [34] -------------------------------------------------------------------------------- We have next question from the line of Sagar Shah from SK Analytics. -------------------------------------------------------------------------------- Sagar Shah, [35] -------------------------------------------------------------------------------- So I had a question on the liabilities front, actually, especially on our deposit side. As you have mentioned in your press release, actually, almost -- our CDs are almost nil, actually, as compared to Y-o-Y. So -- and -- but I can say on the CASA front, it has been a degrowth of 5% actually. So I just wanted to... -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [36] -------------------------------------------------------------------------------- Year-on-year, I mean year-on-year is quite okay, but maybe flat, I think, year-on-year. -------------------------------------------------------------------------------- Sagar Shah, [37] -------------------------------------------------------------------------------- Yes, maybe this 5%. -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [38] -------------------------------------------------------------------------------- Yes, 5%. And we lost some deposit during that March time. Probably there were some deposits like maybe a large ticket deposit who have being paid some 6% or so, we kind of lost that. Some of them probably know why we lost because they were using that for the -- these agencies were using it for the pandemic, so it was quite natural that we lost. I want to tell you that we are concentrating on retail term deposits. I'm not -- for a bank, we have come to the conclusion, get the retail term deposits on a granular basis, okay? CASA will come as we get the customers. Going out and getting these CASA, if you get 100 accounts, 30, 40 account becomes inactive and another 20 accounts come and dump cash because they are very cash heavy kind of customers despite all the digital intervention and so on. So we feel that from a cost perspective -- on an overall cost perspective, while CASA, you pay only say 4% or whatever, but the total cost doesn't make that much sense. Whereas in term deposit, it completely digital, customers are serviced digitally with our phone banking sometimes to support them. And those customers who opened CASA, after having got the term deposits, are behaving with us much better from a cost perspective. So that's our plan. Our CASA ratio is unlikely to go beyond 20%, 22%, and we are going with that, that is our model. -------------------------------------------------------------------------------- Sagar Shah, [39] -------------------------------------------------------------------------------- So but at least in the coming -- the second half of the year and even next year, if we plan to increase 15 to 20 branches, so can we expect at least a decent growth in the deposit front? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [40] -------------------------------------------------------------------------------- Our branches -- our new branches are told to get retail term deposits. Gold, mortgage loan, fee income, these are what they are told to do. CASA, they are not told to do. This has changed already about 1, 1.5 years ago. That is why you find that our retail deposits have been increasing, plus our top 20 deposit has come down to 7.89%. If we have to grow INR 4,000 crores, INR 5,000 crores every year, it's not possible to grow CASA at that level for a bank of our size. We would rather grow our CASA on existing customers, which is giving us a much better overall cost. -------------------------------------------------------------------------------- Sagar Shah, [41] -------------------------------------------------------------------------------- But on the overall deposits, do we -- can we expect growth going ahead on the deposit front? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [42] -------------------------------------------------------------------------------- Our loan growth should start to pick up, in my view, by January because we would have -- also we have to disburse these ECLGS plus our mortgage is picking up and our KCC, tractors are picking up. So I think that by January or so, we should start uptake. And next year, we are targeting a decent growth. -------------------------------------------------------------------------------- Operator [43] -------------------------------------------------------------------------------- We have next question from the line of Darpin Shah from HDFC Securities. -------------------------------------------------------------------------------- Darpin Shah, HDFC Securities Limited, Research Division - Equity Analyst [44] -------------------------------------------------------------------------------- Sir, can you just mention the overall collection efficiency for the -- in the book, for the month of September? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [45] -------------------------------------------------------------------------------- Overall, collection efficiency means, Darpin? -------------------------------------------------------------------------------- Darpin Shah, HDFC Securities Limited, Research Division - Equity Analyst [46] -------------------------------------------------------------------------------- (inaudible) business loans which is almost 87.5% and CV loans is also 77%. So on the entire book, which includes corporate, gold loans, agri, everything. -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [47] -------------------------------------------------------------------------------- No, gold loan, agri, corporate loans, what else do we have, KCC, we don't have a problem. Gold loan and all, collection has not been a problem. Because they just have to service interest which is pretty small. Like in a INR 2 lakhs loan, if you have to service a small interest, it's not much, right? And their customer, even if he gets delayed by 2 months, he can come and he pays off 2 months or 3 months altogether, right? And so we really don't worry about the collections on that, although collection team does that. I only reported this because these are the major products which determine the bulk of our loans. Corporate loans, we have had the, touchwood, no problems at all in moratorium and collections and all we have not had any challenges at all in that. And it's a small portfolio of about INR 3,000-odd crores. BC loans are also doing quite well. Okay, which is -- I think if we start giving some top of here and there to support some of the stumbling customers, then they should also open. In BC loan, it is very clear Darpin. Unless you start giving new disburses, there is a limit to which you can collect your money because that's how the product works in the market. But we have been very strict and said that show me that you pay first, and then we'll start disbursing. I think that is how you see these numbers. So rest of the business has been, touchwood, in pretty decent shape. I only represented for you guys, the main products so that you get a feel of what's happening. -------------------------------------------------------------------------------- Darpin Shah, HDFC Securities Limited, Research Division - Equity Analyst [48] -------------------------------------------------------------------------------- Okay. And sir one lastly, as you have mentioned in the press release that restructuring will be anywhere between 3% to 5%. This will be over and above already that -- already 1.9% effective which you have added? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [49] -------------------------------------------------------------------------------- See, that restructure happened pre-COVID. Most of it has happened pre-COVID. So this 3% to 5%, we are estimating, see, I'll tell you how we have estimated. We have taken the collection feedback on all the accounts which are paying part or not paid, et cetera, number one. I'll give an example. We even from the boardroom here, we got into the call with collection officer right on the field, picked up some sample accounts. So one customer, for example, had not paid. And we said, how is it not paid because -- and most of these customers who have not paid were bucket zero in February 29. In the sense that they were not delinquent. I hope you understand that. These are not delinquent customers, right? So when we asked as to why you did not pay, he said, "no, no, he doesn't want any restructure and all. He is getting the INR 7 lakhs payment from government this week. And all installment, including what moratorium he has taken, he wants to pay and doesn't want any extension of tenure, et cetera," he said. So even though the guy has not paid, we know that, that customer is not requiring any restructure. Then he called another customer in Kolhapur. And we figured out that customer has got 2 businesses. One is marriage hall business, another is tent -- renting of tent and shamiana and things like that. You can understand what would have happened to his business. He's a squeaky clean, excellent customer as on February 29, and we can even see some prepayments in that account, in the sense that he has paid some of the monies in advance rather than -- more than the EMI. We figured out that his business is just not taken out. And he is not able to service this loan. So we figured out that he needs about 6 months moratorium and about 20% reduction in his EMI for about 12 months. Then he's very confident that he will be able to support. He also has some land and other things, other properties, which we can use to. So like this, each and every case has to be gone through. There is no one-size-fit-all approach in self-employed. However, we are trying to categorize that into different, different bucket so that it is easier to execute these structuring or whatever at the ground because I can't educate all these young collection officer on multiple options. I mean, you can imagine it'll be very difficult to execute that. So we believe we should be able to contain that between 3% to 5%. And I'm not even counting what would be the impact of ECLGS. The ECLGS is used prudently by the customer, maybe we may not have to do this much also. I don't know. -------------------------------------------------------------------------------- Operator [50] -------------------------------------------------------------------------------- We have next question from the line of Renish Patel from ICICI Securities. -------------------------------------------------------------------------------- Renish Patel, ICICI Securities Limited, Research Division - Research Analyst [51] -------------------------------------------------------------------------------- Congrats on great set of numbers. Sir, just 2 questions. So one is on the asset deals, which actually had done well and has been improving this quarter also. So sir, what explains the yield improvement in this quarter? Because I feel the incremented business spend is actually largely towards the corporate loan. So I'm assuming then this will be slightly lower? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [52] -------------------------------------------------------------------------------- Wrong, wrong, wrong. Why do you think corporate loan is -- the corporate loan is an intercorporate loan. Corporate loan -- we never give long-term loan. INR 450 crores (foreign language), repayment also would have been that much in this thing. Otherwise, we could be growing our corporate loan book, no, my friend? -------------------------------------------------------------------------------- Renish Patel, ICICI Securities Limited, Research Division - Research Analyst [53] -------------------------------------------------------------------------------- Right, sir. -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [54] -------------------------------------------------------------------------------- Yes. The disbursal has happened banking, which also has got gold loans, then gold loans, INR 400-odd crores and mortgage INR 271 crores. That is the bulk of the -- and SME/MSME another INR 150 crores. So that is the reversal that we have been able to do, which all come at decent yield of about 11-odd percent. Like gold loans are coming at 10.5%, 11%. Mortgage home loans comes at about 8.5% to 9%, whereas LAP comes at about 10.5 kind of percentage. Agri & Inclusive Banking, tractors comes at 12, 12.5 kind of percent So that is how we have been able to keep the yield. And the recent EBLR portfolio, there has been no change in EBLR, so there has been no pass on to the thing. And MCLR changes, whatever happened, I think we already passed on, but one will get passed on in November 1st week, I think, right? There is one change that will happen in November 1st week. So the mix of portfolio is what is helping us to keep the yield steady. -------------------------------------------------------------------------------- Renish Patel, ICICI Securities Limited, Research Division - Research Analyst [55] -------------------------------------------------------------------------------- Got it, sir. So any guidance on margin, sir? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [56] -------------------------------------------------------------------------------- No, the margin guidance remains exactly the same as what we have been telling you. We should be at the range of about 3.65% to 3.75%, and we will, of course, continue to keep some excess liquidity, so that may have some here and there impact. If we are able to contain the slippages in the next 4 quarters, I don't see any challenge to our margin. -------------------------------------------------------------------------------- Renish Patel, ICICI Securities Limited, Research Division - Research Analyst [57] -------------------------------------------------------------------------------- Yes. Okay. Sir, next question is on the credit cost numbers. So since our nonpaying customers are already into single digit and any which ways we expect restructuring to remain around 3% to 5%. So sir, what sort of credit cost do you expect over next 3 to 4 quarters, sir? Or you feel that whatever the buffer we had in terms of a floating provision of (inaudible) billion plus INR 1.4 billion of the COVID related, I think that is enough for the future credit cost? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [58] -------------------------------------------------------------------------------- I'm unable to give you any sense of what the credit cost would be. Our independent directors are of the view that the management team should be conservative in making provisions. So we are going by the independent vectors guidance also on that. Not that management team wants to do anything different, but I'm just telling you that the independent directors are aware of what is happening in the environment. They have the responsibility towards shareholders and the regulators. So there is a guidance that has been given to us right from the beginning saying that "guys just make sure that you have more than adequate provision -- continuing more than adequate provision." So if we make a provision and if it is not used, I don't know how to calculate the exact credit costs. All I know is that we will be making adequate provisions even in the coming 1 or 2 quarters to make sure that we are actually strengthening the balance sheet. There is nothing else. And that 14.2% Tier 1 capital, we believe that we are in a such strong position, and we may not have to raise capital anytime soon. That is our sense that we are coming towards. And if I'm growing gold loan, which is at 0% risk weight, and you see the risk weight performance. Our risk weight is actually becoming more and more efficient. We are at some 22,000 odd risk weight, which is, again and again, we are looking at more and more efficiency in using this and home loans take only 35%. So I believe that risk -- credit cost, not possible to tell you right now, let there be 1 or 2 more quarters. Then maybe we'll get more sense on that. I have a question for you. I hope we have convinced you that we can raise deposits because that was one of the things that you kept writing saying that we don't have a deposit franchise and all. I hope we have been able to convince you that we can raise deposit? And other guys are actually copying our strategy on retail term deposits and following it. So I just hope that you are aware of what we are doing. -------------------------------------------------------------------------------- Renish Patel, ICICI Securities Limited, Research Division - Research Analyst [59] -------------------------------------------------------------------------------- Yes, yes, sir. I'm very much convinced now, sir. -------------------------------------------------------------------------------- Operator [60] -------------------------------------------------------------------------------- We have next question from the line of Roshan Chutkey from ICICI Prudential Mutual Fund. -------------------------------------------------------------------------------- Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [61] -------------------------------------------------------------------------------- Firstly, how should I think about the dip in core fee income? If you have any comments to offer there? I mean is it higher than my expectation? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [62] -------------------------------------------------------------------------------- Sorry, sorry. Not clear, sorry? -------------------------------------------------------------------------------- Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [63] -------------------------------------------------------------------------------- Yes. The dip in core fee income, sir, about 26% -- 25% thereabout, how -- year-on-year, how should I think about this? How much (inaudible) fee income as to what is it coming from? How much of it is processing fee related, disbursement related? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [64] -------------------------------------------------------------------------------- Every other fee like ATM fee and trade fee and third-party fee starting to pick up. There are only 2 fees that is still not at the level that we would like it to be. One is the processing fee, which is directly reflective of the volumes. We believe that as we build our volumes, which we are confident that by March or April, we should be back to similar levels, barring any unforeseen interruptions and so on. We should be back on that as well. The second fee, of course, is that we normally make healthy PSLC fee. Unfortunately, that also has not been to the level that we were delivering last year. For market conditions, it's not that we don't have the portfolio, the market has been different. So we should expect all these fees to come back to some level of -- back to the same level by April, March, like that. That's the expectation. We can't possibly give you any sense on these trading-related fee on treasury because those are all opportunistic things, which we can't give you any item. What we are doing is -- what we are trying to do is the model that we are trying to build, and we are hoping that, that would fall in place sooner than later, is at about 370-odd basis points would be our NIM; about 215, 220 basis points is our cost to average asset. About 55-odd basis points would be the steady state credit cost. Obviously, the next 4 quarters may be very different. We'll see. But then about 1% has fees to average assets. That's the way we are trying to build the model and that's where we're working towards. -------------------------------------------------------------------------------- Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [65] -------------------------------------------------------------------------------- And what is the disbursement level this quarter? What is the instrument... -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [66] -------------------------------------------------------------------------------- So we have given you that data on Item 10 on advances. You can have a look at it. It's about INR 1,800 crores, INR 460 crores on corporate, which is basically an inter -- which is intra-quarter kind of number, which is likely you disburse it in start of the quarter and most of it gets paid off in the end of the quarter itself. But these are all long-term business like Agri & Inclusive Banking, gold loan, mortgage. Mortgage numbers should start to look up better in my view, in the coming quarters. Because that's our core business, and I think we are fully padded up to deal with that opportunity. -------------------------------------------------------------------------------- Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [67] -------------------------------------------------------------------------------- And on the ECLG scheme, how should we think about it as in considering we are offering this to about (inaudible) book, right? So this comes at around 9%. What do you expect in terms of customer behavior? What is the (inaudible)? What is the communication to the customer that this is available for a limited period of time, again it goes back to 11% rate? Now in terms of customers behavior, already few people take extra 70% to repay their existing 20% of the loan (inaudible) within their book at a lower rate, what is the behavior that you are looking? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [68] -------------------------------------------------------------------------------- See, we are offering that -- barring a few customers, we are offering that ECLGS at the rate which has been managed by government. And same tenor, which is 1 year, they have to service the interest. In the balance 3 years, they have to repay the entire loan, okay? Some of the customers are mistaken that it is some kind of a grant given by the government. So there is a lot of communication that needs to be given to the customer saying that they need to actually start repaying this as well because they shouldn't treat this as some kind of a dole or grant or something like that, which we have been successfully able to do. Next point I want to tell you is that customers also need to be educated that supposing I've given a, say, loan against property, the property is secured against the loan, the second charge on the property is automatically for ECLGS. That's how the contract is with customers. That is how the government wants it, right? So customers are being educated on that as well saying, look, if you don't pay that loan, then if any repossession happens, the balance money will be applied against that loan. So all these processes happening. Barring a handful of customers, most customers are quite responsible. We have divided the entire customer base into high risk, low risk, medium risk and all, and we are using that ECLGS to make sure that it is used for picking up the business and not buying some LED television or something because he's getting some INR 2 lakhs. So we are being very careful about it. That is why the disbursals are taking a little time. We are confident, we'll complete it by December. -------------------------------------------------------------------------------- Operator [69] -------------------------------------------------------------------------------- (Operator Instructions) We have next question from the line of M.B. Mahesh from Kotak Securities. -------------------------------------------------------------------------------- M.B. Mahesh, Kotak Securities (Institutional Equities) - Associate Director & Senior Analyst [70] -------------------------------------------------------------------------------- Two questions from my side. First is on the recovery side. If you could just kind of give an indication as to how is the condition looking on the ground with respect to the expectation of the value of assets that you can get out of these loans? Or you kind of hold back and allow the customer to be there in your books as a stress loan for some time. The second one is on the kind of application that is coming up for you in terms of -- for loans. What are they asking for? Are they asking for replacement of credit? Are they asking for increase in business? What -- how are you -- what is the situation on the ground? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [71] -------------------------------------------------------------------------------- So on home loans, it is very simply buying a new property, very less maybe 10%, 15% arbitrage is happening between, say, NBFC or (inaudible) lending to us. So therefore, I would say that 80-odd percent of the customers are buying new property. At least that is what the sampling that we did told us. It may change depending upon the way sales are approaching it, but at the moment it looks like that. On business loans, we are very careful. There again, customers are actually -- I mean, I was pleasantly surprised by looking on some of the applications, where a new shop is being set up by a guy who already has a shop, somebody is expanding their business. And when we checked out, it found that they have been holding this back for almost 6, 7 months because of COVID and then now they feel confident so they are starting, even like that applications we have seen. Some are obviously coming from -- balance also coming from other things. What I see as a phenomenal is that there is multiple filters we have put because we don't want to be in a situation, it can easily happen if you don't watch out, where somebody is in stress in some other financial year, and we end up doing a bad drop of that customer. So therefore, there are multiple filters to see if there is any such challenge. Therefore, the rejection rate is definitely 10% more than what it was -- at least 10% more than what it was before in loan against property. On gold loans, it is clearly emergency kind of loan, most of it. And that is why it is a very short tenor. People take it for 3, 4, 5 months, use it and then come back. That's why we have to keep disbursing more and more to make sure that the balance sheet keeps growing. As of now, we don't have the problem because we are still small. You should notice that gold loan has already become about some 6-odd percent in our portfolio. I believe in 2 years, we should be at least about 10%, 11% of our portfolio if we do the same thing -- continue to do the same thing. Regarding recoveries, Mahesh, it's a very good question. If you ask me more than slippage, I am more focused on saying getting the momentum back on recoveries and upgrade -- as much as -- not upgrade, recoveries. The reason is we used to do INR 60 crores of recoveries every quarter almost average. We are at about INR 20 crores, INR 25-odd crores. That is because the logistics of recovery, registrar, selling of the property, this or that and other hasn't completely fallen in place, and we don't want to do any distress kind of a thing because then unnecessarily we'll lose value. So we have taken a call in many instances where we will put the customer on a payment stats where, for example, even NPA and you have to pay, say, INR 50,000 per month on normal installment, we probably will settle him by saying, okay, for the next 12 months show me that you can pay INR 30,000. It will be downgraded as NPA, but after that, we'll do INR 30,000 or something so that we keep him in play rather than try to take his property and all. That also we are doing in many instances. But recovery is one of the more important challenge that needs to be dealt with, in the coming days. -------------------------------------------------------------------------------- M.B. Mahesh, Kotak Securities (Institutional Equities) - Associate Director & Senior Analyst [72] -------------------------------------------------------------------------------- And this would entail higher cost, or you think your team is now sufficient for what could come in as higher amount of focus is -- higher amount of effort, which needs to be done in the second half. Are you well staffed on the recovery front? Or you think that somehow that expenses has to go there? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [73] -------------------------------------------------------------------------------- 680-odd people are there. We do capacity planning every 2 months or so, and we decide as to where the number of people have to be added. Usually, collection team increases by about 30 to 50 people every year. So that cost is already baked in, in the way we are doing. One of the good things that has happened in collection is by some digital interventions, the number of field visits is reducing. So therefore, when we add that into the capacity plan, it seems that some more efficiency can come into our collections. -------------------------------------------------------------------------------- M.B. Mahesh, Kotak Securities (Institutional Equities) - Associate Director & Senior Analyst [74] -------------------------------------------------------------------------------- Perfect. My last one, 1 clarification. You have been able to reach out to all your customers who have missed a payment to date? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [75] -------------------------------------------------------------------------------- No, not yet. A lot of them have been -- a lot of customers are reachable, yes, but not in their location that they were when the loan was given because they have gone to some village or this or that, the other. So some of the delinquency or lack of payment is also because of the disruption of people not being in their location. That is there. Even in CV, it is there. -------------------------------------------------------------------------------- Operator [76] -------------------------------------------------------------------------------- We have next question from the line of Sunil Jain from Nirmal Bang. -------------------------------------------------------------------------------- Sunil Jain, Nirmal Bang Securities Pvt. Ltd., Research Division - Head of Research [77] -------------------------------------------------------------------------------- Two questions. One is on a broader scale with this COVID, do we need to have some corrections in our -- what is the learning list, whether the business model which we are fulfilling? How -- whether this will be similar once -- say after, say, 6 months or maybe 9 months when the things are normalized. Sir, we will be doing the business in the similar way, the way we were doing, or there will be some big changes in that? And second question related to ECLGS. We had sanctioned around INR 2,000 crores. So how much of that could be to the people who had not paid even a single EMI? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [78] -------------------------------------------------------------------------------- See, the people who have not paid a single EMI, if you look at our collection efficiency, let's say, way back in January, and all, it is at some 98%, 97%, correct? If you look at our delinquent portfolio on which we took the moratorium is INR 1,908 crores on February 29, right? So INR 1,909 (sic) [INR 1,908] crores divided by 25,000, we're just calculating these things roughly, is what about 7%. So 93% of customers, if you have to take that as the worst case, for example, 93% of the customers were not delinquent on February 29. So automatically, if they have a business, they think they are eligible, right? The only drop off that is happening is customers, some of them are behaving well with us may have been delinquent in some other -- some auto loan or something. So when he hits the bureau, they get rejected because of these other delinquencies that they may have. So that is a drop off that is happening. So other than that, a lot of customers are eligible for this thing. And like I said, 38,000 odd customers are eligible. So we are pretty confident that will be very useful for our portfolio. And if you look at it, the INR 1,908 crores numbers, we have reduced to INR 313 crores. Please compare with other banks and see how those numbers have improved from February to October. It's a remark to our bank. And INR 313 crores doesn't mean, they're all NP, they've got to become NPA. If a customer is an SMA2 and continues to keep on pay, he is an SMA2, doesn't mean that he becomes NPA. He has to pay 3 installment for him to become current. Sometimes customer just keeps at the same level and keep paying 1 or 2 installment and remain delinquent. That happens in the self-employed. -------------------------------------------------------------------------------- Sunil Jain, Nirmal Bang Securities Pvt. Ltd., Research Division - Head of Research [79] -------------------------------------------------------------------------------- And about the second question, about more of how you will be seeing any broader changes in the -- your way of business or on... -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [80] -------------------------------------------------------------------------------- Yes. So in the month of April, I could tell any business manager, mortgage business manager, agri business manager as to what should be done. And they will accept those things without even questioning, I would say no, we are not going to do this, we are not going to do this, we should stop this, we should do like that, everything was like that. But from the month of June, what is happening is, I'm getting a lot of pushback from my team with actual empirical evidence saying that, look, we don't need to stop this, we don't need to stop this, this is looking good, we should open up this. So I don't see fundamentally any big change in the way we are going to do business. What is lacking today is I don't have enough data. If I want to give a business loan to a new customer, I need 6 months performance of GST or bank statement or some cash flow, I need to see that. I don't have that. It is very erratic at the moment. So that hampers our ability to -- of course, if you are going to do for a grocery store or a pharmacy that may be different. But I'm just saying, generally, it's not -- enough evidence is not there, which was built up by, say, January or February. So I'm confident that we will do that. Second thing is, we have included a lot of digital interventions, whereby some of the checks and controls are far more robust because we don't have to do physically some of the checks. So that is improving the cost as well as our efficiency. Those are all under test. Hopefully, it will all fall in place by March. And as far as the credit 0 cutoff is concerned, we have done some tweaking for certain segments, so that we just don't need to dabble in those segments. So those are the some of the changes we have already done. Anyway, credit policy is a thing that cannot be static. As we get more and more experience, we have to keep doing it. And even before COVID or something, we used to do these credit policy changes. So life continues like that. -------------------------------------------------------------------------------- Sunil Jain, Nirmal Bang Securities Pvt. Ltd., Research Division - Head of Research [81] -------------------------------------------------------------------------------- Okay. Okay. So broader business system and policies will remain more or less same and you are confident about that. -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [82] -------------------------------------------------------------------------------- Yes. And what I also think is that guys who are transforming themselves to digital, I know you must have read this 100 times, but let me repeat it in this call because it is a fact. Guys who are transforming themselves into digital mode, it will be -- it's a permanent change that is happening in our country, and that is good for us in my way -- in my view. -------------------------------------------------------------------------------- Operator [83] -------------------------------------------------------------------------------- We have the next question from the line of Jai Mundhra from B&K Securities. -------------------------------------------------------------------------------- Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [84] -------------------------------------------------------------------------------- First, on this INR 318 crores number, which is the overdue as of now this is not the SMA-0, plus 1, plus 2 number for the entire bank, right? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [85] -------------------------------------------------------------------------------- It will be the delinquent portfolio. INR 1,908 crores was a delinquent portfolio. So we have selected 1, 2, 3, whatever installment from those customers or interest that was due, et cetera. So if you had to take the same snapshot now, that is INR 313 crores or -- as on October, whatever, that is what it is. -------------------------------------------------------------------------------- Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [86] -------------------------------------------------------------------------------- Right. But sir, if I will go by the data that you have given in the product wise, then let us say, 7.4% of the LAP customer, 5.4% of the home loan and 10.8% of the CV. If I put together, even for these 3 buckets and divide it by your loan book, then it should -- the number is closer to around INR 750-odd crores. -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [87] -------------------------------------------------------------------------------- How will you do that? 7.4% of customers who have... -------------------------------------------------------------------------------- Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [88] -------------------------------------------------------------------------------- 7.4% of LAP portfolio. -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [89] -------------------------------------------------------------------------------- 7.4% of LAP portfolio have not paid me a single installment, that doesn't mean that he was delinquent on February 29. This data INR 1,908 crores is customers who are delinquent on February 29. Out of the 7.4% for all, you know, 6.8% or 6.9% maybe bucket 0 on February 29. So that is not the calculations to be done at all. This is a INR 1,908 crores. Customers who are delinquent SMA-0, 1, 2 or bucket 1, 2, whatever, on February 29, on whom we have taken moratorium because, if you remember, on April 27 circular, RBI said you can take moratorium on delinquent customer, but you have to keep a 10% provision. That is this portfolio. So it will have a mix of everybody, including gold loans could be there, some corporate could be there, anybody could be there in that INR 1,908 crores. -------------------------------------------------------------------------------- Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [90] -------------------------------------------------------------------------------- Right. And sir, could you share, let us say, some of the banks have started sharing 30 DPD number for the entire bank. Maybe it's not an absolute, but maybe pre-COVID, let us say, because maybe the business model that we have and given the customer profile, it is not, let's say, comparable to other banks, the SMA-1 plus 2. But even as relative to your bank, how would this debt be? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [91] -------------------------------------------------------------------------------- We will consider. -------------------------------------------------------------------------------- Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [92] -------------------------------------------------------------------------------- Sure. And second thing is, sir, this 3% to 5% restructuring that we are estimating, this should take care of the entire COVID stress, right? So apart from business as usual slippages, 3% to 5% should take care of the COVID-related stress. Is that the way to understand? Or how do I understand? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [93] -------------------------------------------------------------------------------- This -- we went through a major lockdown and so on, okay? And things are looking pretty difficult in March, April, et cetera, correct? Now we have seen 2 months which is September, October post COVID, post moratorium. Our analytics run different models to see, okay, did he pay September, October? Did we pay at least 1 installment during this time? What business was he in? What was his bureau score before -- pre-COVID, what was his bureau score? What was this delinquency strength? There's a number of variables that are going in for them -- for the analytics team to give us some range on what could be the kind of customers who could be asking for restructure, okay? Or maybe need some restructure. Now it doesn't -- resecure also have different colors. Some customers have written to me. I have a letter, which says, "Please give me only 3 months more moratorium, my business is going to be back." Now strictly speaking, it is moratorium and restructure, and we have to take a provision on that. But frankly, 3 months doesn't seem like a big restructure. But there are customers who are saying, "I need a 30%, 50% drop in my monthly EMI for at least 12 months." That also letter I have customers. So I was looking through these samples. So based on what we know, we believe this is another. Now when we get more payment data or if something new happens in the environment, some lockdown happens or some other second wave happens, I can't -- don't hold me to these numbers. I'm telling you based on what we know today. -------------------------------------------------------------------------------- Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [94] -------------------------------------------------------------------------------- Right. So based on today, the 3% to 5% should take care of COVID-related stress, rest could be business as usual? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [95] -------------------------------------------------------------------------------- No, no know what should we take care of? I'm saying that it will take care of -- it seems like the restructured number. What will you take care of only time will tell. -------------------------------------------------------------------------------- Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [96] -------------------------------------------------------------------------------- Right. Okay. And the last question is, sir, on MFI, you have not given any loan as it was written in the press release. -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [97] -------------------------------------------------------------------------------- No. I'm talking about MFI BC loans. MFI companies, we never gave any -- this thing. They are all paying as usual. And this is only MFI BC individual loans, SHG, JLG that type of loans. -------------------------------------------------------------------------------- Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [98] -------------------------------------------------------------------------------- Right. But why would that be so? I mean the -- I mean the -- if some of the MFIs that are pure MFI companies, they have been giving stock up loan, additional funding I think that the business is -- I mean this is a very usual practice for them. So just what's -- just curious on that? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [99] -------------------------------------------------------------------------------- We are just -- we are just being conservative. This is what, you know, get the team to first demonstrate that -- if I give that kind of easy options to team, I'm not sure what would be the final outcome. I wouldn't know what has happened and what has not happened. Now that we have pushed the team to the brim, now we know what the behavior is. Now we can sensibly decide which customers will require support, which not. So it's -- have been a little bit more hard on us. That's all I can say. Last question, operator. -------------------------------------------------------------------------------- Operator [100] -------------------------------------------------------------------------------- We have the last question from the line of Pranav Gupta from Aditya Birla Sun Life Insurance. -------------------------------------------------------------------------------- Pranav Gupta, [101] -------------------------------------------------------------------------------- Sir, just a follow-up question. So 3 -- of the 3 months, so if I look at the collection efficiency numbers that you have given, they sort of look slightly lower than from the previous answers that have reported already. And we've started seeing some stress even before COVID. So is there something which we are looking to change in the way we do this business going forward? Have there been any learning that is the first question? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [102] -------------------------------------------------------------------------------- There have been -- I mean, COVID is something that -- who would have expected this kind of impact on the economy, on lockdown, on business and so on? I don't know. It is something that world cannot be prepared for these kind of things. I mean theoretically else, but practically, it is not possible. Customers who have been paying -- I just gave you an example in the earlier in the call, where a guy is running a marriage hall and shamiana and all, he's an absolutely squeaky clean customer. Even today, if COVID was not there, I would give him a loan without hesitation. So I don't think if the business is running well and cash flows are good, we are back to the same levels, but we have to give it some more time because we have only like 3, 4 months of data. I personally believe that we need to see one more quarter of economic performance, cash flow, et cetera. Many customers have not been able to come back to the same 100% level, they were pre-COVID, they are at about 80, 90. We want to give it some time. Yes, on a cautious basis, we have changed some criteria. We have tightened some CIBIL score, et cetera. But in any case, we were operating -- majority of our loans were 700 plus. So therefore, it's not that we were giving us some low rate or, I mean, low CIBIL score or anything like that. The other point I want to tell you is even customers who were not having a CIBIL score at all, which is called, I think, 1 plus or 1 minus, those portfolio also performs extremely well. So the learning is that you improve your process, you keep constantly changing your credit policy based on whatever experience you have and just keep pruning the portfolio, and that is what we have been doing. So I don't think there's any special learning from COVID other than sometimes we have to pray hard in these kind of circumstances. -------------------------------------------------------------------------------- Pranav Gupta, [103] -------------------------------------------------------------------------------- No, sir, actually, my question was more specific to the CV book, because we have started seeing some stress even before COVID? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [104] -------------------------------------------------------------------------------- CV, we are going to hold our horses on CV. We want to see a much better improvement in the environment before we start booking new loans and CV. But we are continuing to give some support and top-up and things like that, like a guy who's got 2 trucks, wants to buy another truck, those kind of things we are continuing to do to retain the customer. But we will start looking at that business growth, again, only post January or something. See more data points before we go into that. -------------------------------------------------------------------------------- Pranav Gupta, [105] -------------------------------------------------------------------------------- And my last question, just on the capital side. So you have been very efficient with the well utilization of RWA growth, especially with more focus on gold loans at least in the near future. Does that push out our capital raised even further than what we have been planning earlier? -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [106] -------------------------------------------------------------------------------- It appears to be so at the moment. It appears to be so. If you look at our yearly operating profit, we last year delivered about INR 750 crores of operating profit. We have a secured loan book. So even if we had some unfortunate situation on NPAs or so, the provisions are unlikely to overwhelm the operating profit. So our operating profit are strong enough to absorb the -- so we don't have too much of unsecured loans and all that stuff. So given our strong operating profit and capital efficiency, we will look at when to raise capital. At the moment, we'll wait. -------------------------------------------------------------------------------- Bharat Laxmidas Sampat, DCB Bank Limited - President & CFO [107] -------------------------------------------------------------------------------- Tier 1 as at September does not include year-to-date profit. -------------------------------------------------------------------------------- Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [108] -------------------------------------------------------------------------------- Thanks, Bharat. The year-to-date profit is not included in the Tier 1 of 14.22%. Thank you, ladies and gentlemen. I mean, we'll catch up again sometime next quarter. In the meantime, if you have any questions, please feel free to write to Gaurav or Bharat, and we'll be more than happy to respond back to you. -------------------------------------------------------------------------------- Operator [109] -------------------------------------------------------------------------------- Thank you very much, sir. Ladies and gentlemen, on behalf of DCB Bank Limited, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.