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Edited Transcript of DCBBANK.NSE earnings conference call or presentation 23-May-20 8:30am GMT

Q4 2020 DCB Bank Ltd Earnings Call

Mumbai May 24, 2020 (Thomson StreetEvents) -- Edited Transcript of DCB Bank Ltd earnings conference call or presentation Saturday, May 23, 2020 at 8:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Bharat Laxmidas Sampat

DCB Bank Limited - President & CFO

* Murali M. Natrajan

DCB Bank Limited - MD, CEO & Non-Independent Executive Director

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Conference Call Participants

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* Anand A. Laddha

HDFC Asset Management Company Limited - Manager of Equities, Fund Manager of Foreign Securities, Senior Equity Analyst and Equity Dealer

* Darpin Shah

HDFC Securities Limited, Research Division - Equity Analyst

* Jai Mundhra

Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst

* Kunal Sharma

* M.B. Mahesh

Kotak Securities (Institutional Equities) - Associate Director & Senior Analyst

* Mona P. Khetan

Dolat Capital Market Private Limited, Research Division - Senior Analyst

* Prakash Kapadia

Anived Portfolio Managers Pvt. Ltd - Principal Officer

* Rahul Maheshwary

* Ravi Kumar Naredi

* Renish Patel

ICICI Securities Limited, Research Division - Research Analyst

* Roshan Chutkey

ICICI Prudential Asset Management Company Limited - Associate VP and Analyst

* Sagar Shah

* Susmit Patodia

* Vignesh Shanker

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to DCB Bank Limited Q4 FY '20 Earnings Conference Call. Joining us on this call today are Mr. Murali M. Natrajan, MD and CEO of DCB Bank Limited; and Mr. Bharat Sampat, CFO, DCB Bank Limited. (Operator Instructions) Please note that this conference is being recorded.

I would now like to hand the conference over to Mr. Murali M. Natrajan. Thank you, and over to you, Mr. Natrajan.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [2]

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Thank you. Good afternoon, all of you, and thank you for joining this call. I hope you had a chance to download the investor presentation and press release that went a few minutes ago. Today, we have allocated sufficient time to answer all the questions, considering that this is a very different and extraordinary quarter. So we thought that we will clarify whatever points that comes up in this meeting.

Let me give you some background, and then we can go into questions. So somewhere in the month of February, I have friends in Singapore and Hong Kong from my previous companies, I was having a chat with one global head, and I was generally inquiring about what is happening in this whole coronavirus. He told me that the operations that was managing in China, in Shenzhen, only 5% of people are attending the office and the rest of the people are at home. And even in Singapore, they are steadily reducing the number of people coming to work. It is affecting business. It is affecting delinquency. It is affecting collection calling and so on. And I was thinking this is looking really very difficult. Then you hear 1 or 2 instances of people testing positive in Kerala and in some instances in Rajasthan. And then the last time I traveled by domestic airline was on March 11. And the airport was hardly anybody, and then you had all these staff joking about coronavirus and why there is no crowd, et cetera. All hell broke loose 1 or 2 days later. And then we are faced with such an amazingly extraordinary situation, which is almost impossible, if not difficult to understand.

So from our point of view, we were doing well. We were building our deposit base quite well, for example, although I personally feel that comparing anything with last year or last quarter at this stage is because we are used to doing work like that, otherwise, hardly there is any comparison possible. But having said that, if I look at our retail term deposits, which is less than INR 2 crore deposits, as compared to last year, we have grown 51% and reduced our top 20 to almost 8-some percent in the last quarter in December, and we were well on our road to reduce it further. But the accessibility to customer, the whole situation was so much disrupted that it was -- fortunately, we were able to trigger all our BCP and how -- who plans for a pandemic like this. But still, we were able to kind of deal with our BCP quite well. For example, 160 of our 260 call center employees handles calls from home, thanks to technology. We have created multiple options for us to shift our treasury or any operations. So all this was done within a span of about 3, 4 days as we were seeing this imminent lockdown after that Janata Curfew initiative of the government. So that is where we are.

And then on March 27, when moratorium was declared by RBI, there was, I must admit, a sufficient amount of confusion and debate. We were directly told by the supervisor of RBI that in spirit, the moratorium is to be given to all retail customers, while the bank can do case-by-case on large-ticket customer or corporate customers. As far as retail, the spirit of the announcement was for all to be given the option of moratorium. So while initially, we put out this thing of opt-in for moratorium, later -- 2 days later, we changed it to opt-out of moratorium. So in the spirit, we offered the moratorium to all our customer base, except NBFCs, corporate and some of the large ticket, which anyway, we have very little of large ticket.

So I know that a lot of confusing statistics are given there in terms of some 5% moratorium to 70% moratorium and so on. It is difficult to figure out what exact moratorium is it because there are customers who have taken the moratorium but paid. There are customers who have paid and then later said, maybe I need the moratorium, so take back money. So sometimes, it's not easy to compute exactly -- there is some -- a little bit of percentage change that can happen. But generally, our moratorium is like, if I look at our different products just to give a sense of the moratorium, in home loan, for example, we have given a moratorium of 52% by value. And in business loans, which you call LAP, we have given 56% moratorium. So our moratorium, all in all, would be closer to 60% when you put all the products together.

And since we deal with small tickets, we did feel that moratorium would be a good thing for customers because that gives them the cash flow benefit for now. We didn't want to stress the customers. Of course, commercial vehicle moratorium is slightly higher than this. That is because hardly any trucks are there in operation. They work on simply -- they get the cash for running the trucks, they are -- they pay the banks. I mean it's as simple as that. So that is where we are on the moratorium.

In March, we have taken NPA. March month itself, we have taken an NPA of INR 43 crores, but took benefit of the asset classification on INR 89 crores. Why we took that INR 42 crore is we went account-by-account to check which are the accounts that we felt was not possible to -- because it was an account where we felt that only recovery proceedings will work whenever moratorium ends, so it's rather that we take it as NPA. But in other cases, where customers were habitual late payers, and we had a very good track record in terms of the customer repaying us, so we took moratorium asset classification benefit on INR 89.3 crores. On that, we provided entire 10%. Over and above that, we provided about 54 -- INR 53 crores for the specific -- the COVID package provision, which we call, and we estimated. And we believe both these provisions put together is ahead of what is required by RBI at this stage.

Other than that, the business has been very tough since March 15. A lot of our energies have gone in keeping employees and staff safe, somehow coordinating from home. Except for treasury, some of the head office people like myself, clearing some staff in product team almost, and then the entire branch team, everyone else is working from home. And we have enabled them to work from home. And we have put tracking mechanism to make sure that we are able to talk to the people even if they are working from home and deliver the results. Of course, it's not as easy as them coming to office, but still, we have learnt a lot of tricks in the last 2 months to make people, even if they are at home, track them and track their performance.

The other good thing that has happened, which I would say is that during this period, we are -- we were able to generate -- that is from April and May so far, we have generated almost close to INR 800 crores of retail, retail term deposits and replace a lot of our bulk deposit. And we also got some refinance from NHB, SIDBI kind of refinance. So that improved our deposit profile further. We have been well above 100% on LCR almost every day. In fact, we have been very well above LCR. We said we were at 132% in March. I don't remember the LCR going too much below that in single day because that is something that we are tracking. We have maintained excess liquidity -- far in excess of what we normally maintain. So liquidity, touchwood, has not been a challenge here for us. Of course, keeping excess liquidity comes at a cost of 4, 5 basis point NIM. But I think during this time, that is the right thing to do.

Now what I will do is, if you can please look at the investor presentation, I have made a few slides on COVID impact. I request you all to go to that slide. It is, I think, Page 18. If you can refer to Page 18, which is a COVID impact, then go to Page 19. We have put a very quick commentary, nothing that you do not know. As of now, of course, economic activity is significantly impacted. And what is also problematic is that there is a lot of disruption of labor and supply chain. Some of the shops known to us in Karol Bagh, they opened about 2, 3 days ago, but promptly shut down because they felt that there are hardly any customers and there's hardly any supply. So they thought why don't we wait for things to improve further before spending the money or opening the shop.

We think that economic activity will slowly come back in some way, but it may take 3, 6 months. We think a lot of the shops and establishment may take almost about 3, 4 months for them to become really cash positive because they also have to kind of reorganize themselves. As we speak, our credit team is speaking to each and every customer, not that we didn't speak to them but we have been speaking on collection call, but we are doing a detailed understanding of each and every customer, over 60,000 of them. Collecting data on what exactly is happening, what is the situation. Some of the news is very encouraging because there's a lot of confidence saying that once the lockdown gets over, they are confident that over a period of time, their business will revive. I mean there is a confidence that at least 60%, 70% of the customers have expressed, which is very heartening to us. But again, we have to see how that goes. We will, of course, look at our credit policies once again. And in the near term, our intention is to preserve capital, manage the portfolio stress, reduce costs, and I will explain that a little later. And obviously, maintain adequate liquidity.

I'll also try to give you some color on business volume impact, which is Page #20. Page #20, I'm saying CASA. CASA has been up and down because we find a lot of businessmen and SMEs using their CASA to meet their expenses during lockdown, paying some wages and things like that. So it's been not a great story there. There has been no great outflow, but there has been usage of CASA.

Retail term deposit has been a fantastic story. We also launched a product called Zippi, rather relaunched a product called Zippi. Sitting on your desktop in about 3 to 5 minutes with just your Aadhaar card and PAN card and phone number, you can create a deposit in the DCB Bank. It has some glitches here and there, but it is working quite well, and we are getting decent volumes on that.

Long-term refinance. Given the quality of our portfolio and given that it is SME, given that it is small ticket, we get a lot of refinance. The details are there in press release as well as to what is our refinance. Some people ask, why didn't you grow your deposits? I say I want to grow deposits to an extent where I'm having refinanced, I don't need to grow the deposits. And during the whole of last year and slightly over the previous year, we have been replacing a lot of bulk deposits. Touchwood during March and during this COVID time, we never faced any liquidity challenges.

When it comes to business loans, negligible growth, except for gold loan. There is some demand for gold loan. Again, we have to be careful from health and safety point of view of staff, customer and so on, but some amount of gold loan we are doing. Corporate bank, there are select opportunities, which we are pursuing as we normally do. We think that agri retail will immediately start after lockdown, wherein tractor finance also should be quite okay, at least maybe 60%, 70% of the volume should come back. That is our feel. But BC/MFI loans are pretty much on a standstill at this point in time.

When I look at financial impact, what I see during this lockdown, well, net interest income is likely to be stable only because we are on moratorium, the loan book will be stable. And we think that some demand will pick up only after the lockdown starts to ease up a bit. Fee income is a bit of a challenge because ATM fee, as per law, we cannot charge beyond a particular level. CASA-related AQB charges, we cannot charge. Since there are hardly any movements in penal charges, processing fee, insurance that we have an attachment for loan, all these are important components, and those are pretty much not there because we have hardly done any loans in these 1.5 months.

Net interest margin, we expect IT to be stable, but over a period of time, if some NPAs increase, it may impact. Also, we are keeping excess liquidity, so that might have some impact on our NIMs. On staff cost, we have taken a call to delay new hiring and replacement. Already as compared to what we ended in March because of resignations and so on, we are already down by about 100 headcount. So intention would be to continue to maintain a very tight control over the staff costs. And we have a little bit of advantage where we may not have to pay the variable or accrue the variable pay, which is also a component of our salary cost.

As far as operating costs are concerned, variable costs are definitely getting saved. Travel costs, for example, is getting saved. Any connector payout, DSA costs are getting saved. Some amount of processing charges like valuation, legal, that is getting saved. So we will see how it goes. As of now, we don't have enough data points to see what exactly will happen, but it does appear that there will be some save there.

NPA provisions, we'll have to see what happens after moratorium. And as far as recovery upgrade is concerned, even at the -- in March, we missed out on at least about INR 12 crore to INR 15 crore of recovery upgrade, which was very much in the pipeline, but we just couldn't complete it because of the restrictions. So this may be a little slow. Our bank has been very good in recovery and upgrades in the past, almost 50%, 55% of the thing. But what I want to tell you is that all the customer conversations that we are having in collections leads me to indicate that while there is distress amongst customers, but there is a lot of keenness to work with the bank to move forward. So that's quite encouraging for us.

Coming to the bank trends. And unfortunately, some of the analysts have missed out on some of the strengths that the bank has, and we feel very confident. Our operating profit is INR 700 crore plus, and we have cost flexibility. Not all our cost is variable, but not all of our cost is fixed either. So we have cost flexibility. And if you look at our capital adequacy, we ended at 13.9%. And more importantly, look at the usage of risk-weighted assets. We hardly have used about 4%, 5% of assets. So it looks like if you add INR 100 of loan, we probably may not use even 7% or something of that. That's kind of capital efficiency that we have in our model. If you look at our margin of safety, which is operating profit divided by provision, even after including 64 crores of -- INR 63 crores of COVID provision, it is 2.9x provision. If you exclude that, because that's a one-off event, perhaps, it's 3.8x, which is a pretty strong operating profit margin of safety.

If you look at our underlying provisions, without including COVID-19 provision, it is at 53.5%. Our loss given default generally in mortgage hasn't been more than 15%, 20%, even in some of the large-ticket cases, which anyway, we don't have too many. If I look at deposits and liquidity, continuously, we are reducing the top 20. It is at 9.07%. We are confident that step-by-step, this will keep coming down. I had committed that in 2 years, we'll bring it down to 5%. We think even now, we are very confident that, that could happen. LCR has been well above 100%. We don't have any reliance on certificate deposits at all. I mean hardly -- I mean we have never run this bank on certificate of deposits. In fact, probably today -- as of today, it may be less than INR 100 crores in our balance sheet. And of course, the quality of our portfolio and the segments that we operate allows us to access all the refinance facilities, SIDBI, NABARD and NHB.

Portfolio, diversified and secured, granular, and I'll show you how granular is little -- in another slide, but INR 35 lakhs is kind of average. Low LTVs. It is self-occupied residential or commercial property. And top 20 loans percentage is just 5.3%, right? We don't have big-ticket loans, not too many. That is why our SMA-1, SMA-2 is hardly any number, and it's very stable. Low loss given default, I talked about it. We have a very experienced in-house collections team and strong customer connect, both by credit and buyer.

From a management point of view, the top team continuity stability. In 2009, we all joined hands at the time we were facing a different kind of challenge. The same team, 99% of the team is the same team, which is operating today, which understands what needs to be done and response to each other to move it forward. Our expertise on product and segment, especially in the self-employed segment, our demonstrated control over NPAs and frontline staff strength and flexibility. If I tell you that our operations people who are sitting in Chennai in centralized operations delivered 35 retail term deposits for us in the last 7 days, you will not believe that, but that is true. We are trying to train everybody in this time to see what can they contribute for the bank to move forward because they have nothing to do. If they don't have volumes, they can do something for the bank to move it forward. And of course, excellent analytical capability and digital capability, we relaunched our mobile banking, and I think we got a rating of 4.8 in Android, which is pretty good.

Moving forward, our near-term focus is going to be manage portfolio stress and potential risk, continuously engage with customers and provide relief within regulatory guidelines. We intend to use the government guaranteed scheme to see what are the various customers we can -- who are various customers we can help with; actively reduce cost and accelerate our digital agenda, which we probably might increase our headcount in technology during this time to try and see if we can accelerate some of the things. I talked about retail deposit momentum that will continue and generate whatever fee we can through phone banking and digital channel and wherever possible disburse new loans. This is our focus.

My last slide, and then we can take questions. There has been a lot of discussion on our mortgage portfolio. I want to throw some light on that, so that you put it in the right perspective, okay? Somewhere, it is felt that salaried customers are safer than self-employed customers. Salaried customer may be safer for now, maybe in the COVID times. But I do know there are companies whose CEOs or CFOs are known to me, what type of moves they are considering in terms of reducing their cost. A bank has an advantage of balance sheet, so they can reduce their costs, they can pace reduction of their costs. But companies who have -- fully sales companies, what will they do? They're incurring cost for the loss. So self-employed is not a bad segment. Self-employed, I have a lot of belief, they have a lot of resilience. In India, self-employed is the bloodline of the country. And I think they will -- they are key to generating employment, so we still completely believe in self-employed segment. And we are confident they will bounce back in due course.

But looking at our portfolio, 38% of our loans are home loans, 62% is loan against property. Within that, salaried in home loan is 21% and self-employed is 79%; in business loan, 90% is self-employed, obviously. Moratorium by value, I mentioned, 52% in home loans and 56% in business loans. This is after we gave them opt-out, which means we offered the moratorium to everyone, okay? If you look at the EMI collected, we are tracking this. EMI collected means, whatever EMIs have -- are billed every month, that and what is the collection. You see in April, we have already collected 56.9% in home loans and 52% almost in business loans. This is data from collection.

Average LTV, please pay attention to this. Average LTV, 49% in home loans, 37% in business loans. What does it tell you? There is so much of customer equity in this property. And the next slide is far more important. Self-occupied residential, commercial is 87%. Customer has so much of equity in the loan. Now there are 2 aspects to it. One, he is not likely to default because he will lose his home. Two, we have the flexibility to give him top-up wherever possible to help the customer to nurture the loan, nurture the business bag. Look at the flexibility that we have, right? If you look at the ticket size, INR 17 lakhs, INR 20 lakhs, and when you look at how many of them are leveraged, 35% in home loans don't have any outside debt as per our bureau scrub. That number is 30% in business loans. Less than 10% of our sanctioned amount, 23% of them don't have more than 10% -- I mean less than 10% of exposure outside our bank. Those numbers tell you that these customers are not too much leveraged, and the bank has flexibility in order to support them as and when required, plus the government scheme. So yes, things are not easy. Post moratorium, there could be a lot of action on how things pan out, but we are prepared.

So those are the things that I wanted to share with you. I am ready for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We take the first question from the line of

(technical difficulty)

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [2]

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Go ahead.

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Operator [3]

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(Operator Instructions) We take the first question from the line of Renish Patel from ICICI Securities.

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Renish Patel, ICICI Securities Limited, Research Division - Research Analyst [4]

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One question is on the deposit rates. So as you have rightly highlighted that the retail -- some deposit has been tracking really well. So do we plan to reduce our rate, which is still on the higher side, it's about 7%, where most of the industry peers are around 6%. So do you feel there is a scope for a further deposit rate cut that could actually support our NIM in this uncertainty here?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [5]

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No, I have a question for you. I was going through some paper that you had written.

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Bharat Laxmidas Sampat, DCB Bank Limited - President & CFO [6]

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Renish. Renish.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [7]

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Yes. So why do you feel that we have a weak deposits portfolio, that is what was mentioned in your report, I want you to explain to me what you think about that.

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Renish Patel, ICICI Securities Limited, Research Division - Research Analyst [8]

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Sir, that's basically the difference what we pay and what some of your peer banks are paying in terms of the deposit rate. So fixed deposit rate for us is significantly higher than what...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [9]

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It's not significantly higher. See, let me explain to you. Unfortunately, and I have mentioned this even before, a lot of times simply looking at some CASA ratio makes you believe that it is a good deposit franchise. I'm not saying you do that, but I've heard these kind of remarks. I know reliably that certain banks which had shown remarkable growth in CASA struggled in

(technical difficulty)

by paying higher rate of interest. It shows as though you are building a low-cost deposit, but that is not the case, okay? Point one, I want to tell you.

Point two, deposit has got 2 costs. The interest rate that you pay for that deposit and the second is the cost of maintaining and administering the deposit. CASA even after using mobile banking and Internet banking, it is far -- sometimes can be far more expensive depending upon the size of deposit than a term deposit where you may be paying 25, 40 basis points.

Third, our stated strategy was to continuously work on reducing bulk deposit and replacing it with retail deposits. If I have to attract retail deposits, then I have to give it a little bit of an increased rate, so that the marketing efforts that we do helps us to get those deposits. And if you see, systematically, more than 100 basis points, we have reduced on deposit over the last 3, 4 months. You can track our deposit rates in the website. So I just want you guys to get your data pretty much clear.

And May 7 or something we again dropped our deposit. Our bulk deposit rates have been dropping significantly over the last 3, 4 months. Even when people were thinking that the liquidity is so important, we kept dropping our bulk deposit rate. I would rather pay slightly more to a smaller ticket deposit than be at the mercy of some bulk deposits whose price and quantity is completely unpredictable. So please understand our strategy. Our cost will come down of administering these deposits because we don't believe that unnecessary growing CASA, which is meaningless, rather, we want to focus on quality CASA like GeM CASA or some open banking CASA or CMS kind of CASA rather than just get a lot of CASA through the door. That's why we focus on term deposit. And many of the term deposit customers are opening CASA accounts with us after they come as term deposit.

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Renish Patel, ICICI Securities Limited, Research Division - Research Analyst [10]

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Right, sir. So absolutely. So in that note, we have actually looked at the term deposit rate rather than looking at CASA rate because...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [11]

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Which is wrong is what I'm saying. You have to do a complete analysis. So you can talk to us, we can explain our strategy. Because these notes are being read by people and where a simple remark saying that weak deposit franchise. If it was a weak deposit franchise, how did we grow 51% retail term deposit. Weak deposit franchise doesn't grow. Weak deposit franchise don't run around helter-skelter for deposits during March. We never ran around for deposit during March.

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Renish Patel, ICICI Securities Limited, Research Division - Research Analyst [12]

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Right. So I think we'll discuss it separately, sir.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [13]

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To answer to your question, deposit rates are coming down and will come down. Yesterday, the rates were reduced by 40 basis points by governor. So we will relook at our repo and see how to reduce the deposit rate. But I will tell you, we will always keep our retail term deposits higher than some of the key competition because we want to continue to attract customers, and we find it in total cost more effective.

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Operator [14]

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We'll take the next question from the line of Darpin Shah from HDFC Securities.

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Darpin Shah, HDFC Securities Limited, Research Division - Equity Analyst [15]

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So very good disclosures on the LAP portfolio. If you can highlight some more details -- similar details in the MSME portfolio, which is 11%, 12% of our book.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [16]

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The LAP portfolio and MSME portfolio is very similar. In fact, part of the MSME portfolio has got what's called CCOD, probably 33%, 40% of that would be CCOD. The customer profile is similar. The property that we take for that is similar. The tenor -- when we give a term loan, the tenor may be shorter than loan against the property, and the valuation of the business or the estimation of requirement is very, very similar. Except that, many customers or most customers in SME would get operating account, and at least 60%, 70% of them would be sole operating account with us. If they have an operating account somewhere else, they will close that account and only maintain our account. So that is how that. The additional information we have on that portfolio is we also -- at least for part of the portfolio, we also get to see their sales -- the sales that goes into their account, the throughput.

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Darpin Shah, HDFC Securities Limited, Research Division - Equity Analyst [17]

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Okay. And sir, what will be the moratorium in this portfolio?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [18]

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It's slightly higher than LAP portfolio, probably closer to 60-odd percent. Again, it depends whether it is a term loan or CCOD, et cetera.

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Darpin Shah, HDFC Securities Limited, Research Division - Equity Analyst [19]

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Okay. And sir, you mentioned about using the benefits of the government's MSME scheme. If you can throw some more light there also.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [20]

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See, the full scheme is not completely available to us. We have understood whatever has been published. There is a registration process for financial institutions. So we are pursuing that product. We got our Board approval, so we'll be pursuing that. On prima facie, it seems like a very simple thing, that you give some loan to the customer and give the moratorium and then recover the loan over the next 3 years or so. And if there is any default on that part, and we can only charge 9.25%, we are fine with 9.25%, provided, of course, if the cost of fund starts to gallop after 1 or 2 years, that may be a challenge. But at the moment, it seems okay to us. And we understand our customer needs. So we will create our own internal credit policy, reach out to customers who are needing this loan and I also told you that a lot of our customers are sole banking with us, so we should have some advantage over there.

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Operator [21]

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Next question is from the line of Jai Mundhra from B&K Securities.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [22]

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Just 2 questions, sir. One is, sir, if you can quantify the total overdue loans as of, let's say, Feb end or March end?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [23]

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What is the total overdue loan means?

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [24]

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So total overdue loans would mean, sir, all SMA-0, 1, 2, wherein, if you were to take the conservative view of the RBI circular, you may have to provide -- I mean so the RBI circular says 5% only on SMA-2, which I believe you have done. But the total overdue loans as of Feb end or March end?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [25]

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So that number is not something that we are making it public. All I'm telling you is that on the INR 89 crores that we took benefit on various products, we provided 10%. On the balance, we have estimated about INR 53 crores or INR 54 crores of provision. And we have taken our statutory auditors through the entire working for them to say that they are happy with that provision that we have made, and it complies with the RBI circular. In my personal view, management personal view, this is higher than what RBI provision was expected.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [26]

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Sure, sir. And sir, in this MSME guarantee scheme, so as you said, the fine details are not out yet. But do you think the LAP portfolio as well as your CV portfolio would be included in the MSME definition?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [27]

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So while this is not a number that is -- I can't give you an accurate number. But in my estimate, we are always higher in PSL than 40%, and we get PSLC income. Much of that income comes because we are always ahead on MSME lending. We are a bank which is SME and MSME segment and lending. So most of our customers in business loan, almost all customers in our SME and almost all customers in our CV portfolio, if possible, would be eligible for this facility.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [28]

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Sure. So including LAP, right? Or you will...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [29]

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No, LAP is a business loan. LAP is not a personal loan. LAP is a business loan. That's why I've written in that chart, it is business loan (LAP) because market thinks it is LAP. We in our -- the thing, call it, business loan, and it is given to MSMEs and it qualifies as MSME loans.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [30]

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Sure, sir. So I mean, a large portion of your total loan book in the form of LAP, MSME, SME and CV book?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [31]

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Yes.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [32]

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That's right. Okay, and home loan will...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [33]

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Will qualify for this benefit.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [34]

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Sure, sir. And last thing, sir, if you can provide some directionally and some quantitative thing on the deposits, maybe after the March, maybe April and if you can just give that number. A lot of banks have given that positional view.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [35]

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No. So let me give you an example. There is hardly any loan growth for the last 45 days. I have explained that in one of the chart on COVID impact, right? Some corporate loans, we are giving. Some gold loans we are giving. Some repayments are obviously coming from nonmoratorium customers. Now why would I want to build my deposit base and increase my costs? So I will maintain my deposit base. But what I'm doing is I'm replacing a lot of the top 20, top 50, top 100 deposits with retail term deposits and refinance. So we are basically improving the deposit profile. In the last 45 days, we are much better on deposit profiles, which is why I said, 9.07% is the May 20 top 20 deposits versus 9.27% on March 31, 2020. So that is where we're. We have no difficulty in getting retail deposits in the last 45 days.

And consciously, we are letting go of bulk deposits, but we have already lowered our rates. That gentlemen before had asked why the rates are down there, we have dropped the bulk deposit rates to make it as unattractive as possible.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [36]

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Sure, sir. And just, sir, because now the moratorium has been extended by 3 more months, do you think that -- of course, you would have initiated a reach-out program, but is it -- do you think is it fairly understood by the underlying borrower that this is just a moratorium because there were some guys saying that it may be difficult for some section of borrowers to understand that this is not a waiver and the moratorium and the interest implication thereof?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [37]

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It's a good question. It's a good question. As soon as moratorium was announced on March 27, there was a very senior FMCG person known to me, he called out and asked, this word forbearance has been used, does it mean that I don't have to pay 3 months EMI? So I explained to him, forbearance, there's going to be no forbearance of the EMI, it just tells you that for the next 3 months, you don't have to pay. So there was a lot of misunderstanding even amongst -- see outside banking, we think people know banking, they may not know. So they ask questions, and we should be patient with them. So we have reached out to all customers through our collections and explained what exact implication would be on the moratorium, what interest they will have to pay, et cetera. Whereby, a lot of customers, when I say lot means not a significant number, but quite a lot, actually, withdrew their moratorium and said, don't worry, I want to continue to pay. If I need help, I'll come back to you later. That also happened.

There are customers who have called us and said -- all kinds of things have happened. There are customers who have called back and said, "I have paid. I'm comfortable, but I feel comfortable if you return back the money because I want to stay on liquidity for a while, is that okay?." We said, okay, give it. Some customers have said, "I want the moratorium, but please apply this immediately. Don't return back my money, apply it immediately after the moratorium is over." So we have dealt with all types of questions and doubts in the last 45 days with almost all customers.

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Operator [38]

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We take the next question from the line of Anand Laddha from HDFC Mutual Fund.

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Anand A. Laddha, HDFC Asset Management Company Limited - Manager of Equities, Fund Manager of Foreign Securities, Senior Equity Analyst and Equity Dealer [39]

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I just wanted to have some color, sir. By now, you could have reached out to all your customers across SME, CV, MFI, home loans. Sir, specifically on the small business segment, what are you hearing? Are they telling you that as the economy up, they do expect the business to come back to normalcy level? How much time does they take to come back to the Jan 20 business level? Do you think that can happen in Q3, Q4? Or do you think the growth -- normalized growth will be only next year?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [40]

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You are asking about my set of customers or who are you asking this question about?

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Anand A. Laddha, HDFC Asset Management Company Limited - Manager of Equities, Fund Manager of Foreign Securities, Senior Equity Analyst and Equity Dealer [41]

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Sir, I just want to understand the ground-level reality. So since you interacted with a lot of SME customers, so what you've seen, when the business will return to normalcy, do you think there will be a lot of business disruption?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [42]

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Okay. So frankly, nobody knows, everybody is like looking for answers. However, hopefully, in about next 7 to 10 days, we would have done a complete survey of at least 50,000 to 60,000 of our customers by the same credit team who had done the personal discussion with them before giving the loans. So they are pretty familiar with these type of customers. So we will get some good answers. I'm not sure I'm going to give you all the answers of that. But day before yesterday, when I was speaking to my credit head who had done part of the survey, he said that, look, at least 60%, 70% of the customers feel that once lockdown is eased, in 2, 3 months, they can come back to some level of business back is what they felt. Now whether it will go to pre-COVID level or 50% of pre-COVID levels, all these are guesses, okay? Nobody has an answer to that. But customer confidence tells you that part of the -- not all of them are desperate. Part of the customers feel that yes, they can bring back this thing.

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Anand A. Laddha, HDFC Asset Management Company Limited - Manager of Equities, Fund Manager of Foreign Securities, Senior Equity Analyst and Equity Dealer [43]

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Okay. Sir, of the customer who has taken moratorium with you, what proportion of customers do they have a liability relationship with you?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [44]

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I don't have that number off-hand. But in SME business, a lot of them have liability, this thing. On our LAP, maybe 10% to 15% of them will have liability, this thing. A lot of the SME customers have taken -- have given us retail deposits during this moratorium period because they felt that they don't have any use of this money because there is hardly any business, so they just put the money in deposits.

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Anand A. Laddha, HDFC Asset Management Company Limited - Manager of Equities, Fund Manager of Foreign Securities, Senior Equity Analyst and Equity Dealer [45]

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Okay. Okay. So you assume customer who have taken morat still have seen -- increasing deposit balances with the bank?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [46]

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Yes. I mean I'll tell you, this customer is not our customer, but he is a customer of some other bank. He came and said that he wants to put a deposit. And normally, you ask for source of funds. He said that I have drawn down my credit limit from that bank and giving you as a deposit. Now these kind of transactions are also there, right? We took very good action on May -- March 27 itself. We put a limit on all withdrawal from our CCOD accounts, whether it is corporate or SME. And we started monitoring every INR 5 lakh, INR 10 lakh transaction because we didn't want to be in a situation where suddenly they draw down the available limit, and then they struggle to repay our loans. So we already put that control on March 27 or 29, somewhere like that.

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Anand A. Laddha, HDFC Asset Management Company Limited - Manager of Equities, Fund Manager of Foreign Securities, Senior Equity Analyst and Equity Dealer [47]

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Perfect. And sir, with the fact now that there's another 3-month of moratorium, do you believe customer who have not taken first moratorium, now they will also go and opt for a moratorium?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [48]

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Don't know, boss. We'll see how it goes. It's too early to say. All these customers who wanted moratorium, we have -- like we did it absolutely in the spirit of what RBI said, and we are in discussion with RBI. And we have given all of them options to have moratorium. We have reminded them twice. And what balance we have is after having reminded them on the moratorium.

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Anand A. Laddha, HDFC Asset Management Company Limited - Manager of Equities, Fund Manager of Foreign Securities, Senior Equity Analyst and Equity Dealer [49]

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If you permit me, 1 last question. On the cost side, on the other OpEx side, I mean if I have to look at the large heads like rental costs or any other head, if you know how much flexibility we have to control costs or one can expect a reduction in those costs?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [50]

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Over a period of time, we have flexibility on all costs, including rentals, okay? Because our initial discussion with certain large landlords leads us to believe that there is flexibility. Now how well all this is panning out over the next few months, we will see. We believe that we have a lot of flexibility. We may not have a flexibility on depreciation of our technology because that's -- already cost is incurred. We may not have the flexibility on depreciation of our branch assets. But anything that we are incurring on a regular basis, we believe we have flexibility.

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Anand A. Laddha, HDFC Asset Management Company Limited - Manager of Equities, Fund Manager of Foreign Securities, Senior Equity Analyst and Equity Dealer [51]

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So what proportion of the other costs will have that flexibility?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [52]

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I think I've already mentioned that in our presentation. Take a look at it to say which are the costs, like I'm saying, for example, connector costs or DSA costs, we have immediate flexibility. Valuer and legal costs, we have immediate flexibility. So each will have its own characteristic.

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Anand A. Laddha, HDFC Asset Management Company Limited - Manager of Equities, Fund Manager of Foreign Securities, Senior Equity Analyst and Equity Dealer [53]

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Perfect. Sir, we have seen a fall in the OpEx, cost-to-income ratio for us. Do you -- are we still on the track to say that our cost-to-income ratio has space to fall further? Or now since with the COVID event, that agenda would get forwarded?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [54]

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No, no. I think the agenda right now also, I have explained what is our agenda of capital preservation and managing stress and reducing cost. That's our agenda. But remember, if we have some challenge on income, which may happen because of fee income not being there, for example, in processing fee, et cetera, then we have to way -- find ways and means to at least offset some of it through cost. So that flexibility will happen.

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Operator [55]

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We take the next question from the line of Susmit Patodia from Motilal Oswal PMS.

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Susmit Patodia, [56]

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So Murali wanted to check the 60% morat data point that you gave us. That is as on which date?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [57]

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April.

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Susmit Patodia, [58]

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End of April, right?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [59]

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Yes.

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Susmit Patodia, [60]

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Yes. And secondly, what...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [61]

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March, there is no moratorium. I mean how to calculate a moratorium when the circular itself came on 27th and all PDCs were presented by 20th of March. So that can only be calculated for customers who call back in April and say, please return back my March one. I mean you know what I mean?

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Susmit Patodia, [62]

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Yes. But no, some banks did give us the March number. I don't know how.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [63]

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March number would be very low for us. I told you in the spirit of RBI, I offered it to everybody.

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Susmit Patodia, [64]

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Yes. Just secondly, I wanted to check this extra 20% credit limit, assuming that the circular in details is also -- is palatable. What do you think will be the end use? Will you be okay if a large part of the customers take that money and pay you back? I just wanted some...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [65]

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So any customer who takes money and pays back, I'm very happy with that. That is a short answer. But the fact of matter is customers will have difficulty collecting their receivables from other customers. That is point one. If you see, out of the INR 89 crore, I have done a sample of quite a lot of accounts there with collections. In many, many instances, customers are ready to pay, but his customer is in lockdown, he is in lockdown. And these are -- somebody told me, why don't you make it digital? Yes, we can make it digital, but these are all cash customers, the guys are expecting in cash and paying in cash. So those are the type of -- so I feel that we have to help those guys in overcoming the receivables challenge, number one.

Number two, believe it or not, one customer called my collection guy, and said, "Can you use your -- because banker is allowed to travel anywhere, right, we're essential services, not anywhere, but we are allowed to travel. So he said, "can you use your pass and take me to my shop, so that I can vacate my shop and take out all the goods because I will be able to pay you by getting rid of that stock." You know what I mean? So I think the funding will mostly go to helping them take care of their near-term cash issue because they will be cash negative at this point in time -- and which will be because they will not be receiving money from their customer, number one. And number two is to get some traction on stocks and so on. That is what -- and our team is quite expert in finding out or maybe they want to pay some laborer because they want to keep the laborer. If they are in some technical business, they may want to keep the laborer -- labor payment. So therefore, that also could be possible.

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Susmit Patodia, [66]

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Right. And just following up on an earlier question, Murali, is that, while it may be very early to comment on the extended moratorium impacts, but broadly, looking back, would you say that the morat number goes up for you as we go into the next couple of months? Or do you think whoever had to take has already taken in?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [67]

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I feel that majority have taken moratorium. And now that lockdown is actually easing, I really welcome this moratorium because people are planning for restructure. Yes, restructure opportunity is already there for SME in -- as per the circular, and a lot of customers approach bank for restructuring because they know about the circular and they say, listen, if you remember, even in February, January, it's not that economy was buzzing, there were challenges in this thing. So customers were approaching banks for restructuring. So I feel this particular moratorium is at the right time because as the lockdown starts to ease and as some cash flow starts to happen, the customer has a breathing time for him to bring everything together. So I think it's good.

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Susmit Patodia, [68]

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And just last question, Murali, is you just wrote a line in your presentation about fee income levers by selling third-party products. Could you expand a little bit and...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [69]

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Which slide are you referring to, so that I tell you the right thing? Is it covered by COVID-19 presentations?

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Susmit Patodia, [70]

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Yes. I'll just tell you...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [71]

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Yes, generate fee income through digital channels and phone banking?

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Susmit Patodia, [72]

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Yes. Yes. Yes.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [73]

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Okay. So...

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Susmit Patodia, [74]

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So it's a good -- yes.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [75]

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What has happened is we are not able to sell any insurance product where medical is required. That's not possible right now because how do you convince anybody to do medical? And who will be ready to do medical at this time? So I don't think that's possible. But there's a lot of interest in health insurance. So we are able to do assisted health insurance. So our trained phone banking -- certified phone banking people are able to call out, talk to the customer, and he agrees, then we guide them through a portal of our third-party provider and complete the transaction, all digitally. So we are able to do that quite well. Phone banking is doing it. Some other teams are also doing it. And that is true for even term insurance.

We have a product called DCB Remit.

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Susmit Patodia, [76]

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Right, yes. I saw that, yes.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [77]

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DCB Remit is, by far, the most superior way in which you can remit funds abroad, up to $25,000, just sitting on your desktop, in about 5 minutes with just PAN card. You don't need to have a bank account of DCB Bank. You don't need. You can be any bank account. One customer in Punjab -- Punjab does a lot of remittance because they have a lot of people in Canada, okay? Their favorite location is Canada and Australia, right? But there was no contact also, I'll tell you in a minute. So 1 customer went to a public-sector bank. That public-sector bank was equipped to do only deposits and withdrawals. So they said they can't do remittance. By chance, our RM met him, he said we can do your remittance. We did a $400 or $500 remittance of that customer on remit to Canada. We got a sizable term deposit from that customer because of that service, right? But Canada students have been paid $2,000 by their government for COVID. So all of a sudden, India parents don't have to send any money apparently. So that's why that's important to learn.

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Susmit Patodia, [78]

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Are they sending money back?

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Bharat Laxmidas Sampat, DCB Bank Limited - President & CFO [79]

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Direct benefit transfer.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [80]

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Direct benefit transfer (foreign language) -- that business was going around very well in April, but May, many of the students got money, so...

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Susmit Patodia, [81]

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Right. Okay. Just one last, sorry, Murali, was that in mortgages, while the 6-month moratorium can be a little draconian for the borrower. So are you monitoring [choir] also when you come to mortgages? And how are you going to make money from that?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [82]

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How will the choir change all this?

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Susmit Patodia, [83]

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Your -- I mean, your -- this part gets accumulated, right?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [84]

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Yes. But he will get a tenor extension on that, right? Minimum 3 months, so he will get a tenor extension or maybe it will actually go to 4 or 5 months depending upon his interest rate. See, the 3 months can never be perfect 3 months because if you capitalize the interest, it will definitely go beyond 3 months, 4 months like that. That is how we explained to the customer saying that you will be paying this loan longer, do you want to take it or not? That way.

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Operator [85]

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So we take the next question from the line of Roshan Chutkey from ICICI Prudential Mutual Fund.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [86]

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Firstly, when you mentioned about the SMA number, are you referring only to greater than INR 5 crore ticket loans?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [87]

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Which SMA number I referred to?

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [88]

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I mean qualitatively, you mentioned that SMA number is low.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [89]

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We report an SMA number to RBI on a monthly basis, SMA-0, 1, 2, and that is INR 5 crore and above. That number in the last 24 months, if any, would have got better, but it's never gone out of hand for us.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [90]

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And if we take the less than INR 5 crore ticket loans, what would that number be?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [91]

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That will be portfolio by portfolio. And those numbers, we don't disclose. And frankly...

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [92]

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Private portfolio, if you can mention, and what is it like?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [93]

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No, frankly, I want to tell you that there is a difference between SME portfolio, that is self-employed portfolio and salaried portfolio. In all these years of banking in Standard Chartered, Citi, I found that the SMA-0, 1, 2 number would always be slightly higher for a self-employed than salaried customers because of the cash flows that may be up and down for a SME unlike a salaried customer, point one. Point two is, as of December, we have compared our NPA numbers on various portfolios and SMA numbers on various portfolios with CIBIL data. We are either at private banking industry level or better in some cases, barring 1 or 2 what do you call as subsegments.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [94]

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Okay. And what percentage of our customers who have outside liabilities more than 20% of our sanctioned amount have sought moratorium?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [95]

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I don't have that data. We can't disclose all that data to you guys. We give you some color, so that you have an idea of what our portfolio -- if some other bank is disclosing that, tell me. I will figure out what...

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [96]

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But at least if you can make it quantifiable in terms of the consolidated...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [97]

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I don't have an idea. I'm just telling you -- because people keep on saying LAP, LAP, LAP, they just keep thinking some ghost is sitting in LAP. So I decided to give you guys some color on LAP and home loan.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [98]

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Thank you so much for the disclosure, sir. It's very well appreciated. So wanted to understand this bit, what are the kind of unutilized limit among SME and the LAP customers?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [99]

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LAP customer unutilized limit?

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [100]

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Okay. There is -- the term loan side, sir. And I was referring to CCOD product.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [101]

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CCOD unutilized limit would be like -- average utilization would be like 40% or something. That's all. Like barring a few handful of customers who would probably be 60%, 70% or 80%.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [102]

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But at the portfolio level, has that -- how has the number moved?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [103]

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It has not moved because we already restricted that as on March 27 or 29. So it has not moved. We won't allow that to move because we don't want customer to use our CCOD to figure out his cash flow. So we want to be careful as to where he's using the money. For example, on 31st March, I saw 1 transaction where a customer is trying to buy a car with the CCOD. So we stopped it because of the restriction that we put.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [104]

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Perfect. And with respect to this COVID provision that we have made, how did you go about estimating this?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [105]

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So we looked at our entire portfolio. We looked at the moratorium numbers. We used our analytics team. We looked at the payment behavior. Then we produced set of working, gave it to our statutory auditors. They subjected that to their own analytics and review. And we answered all their questions in a satisfactory manner, and then we said this is the provision and they accepted it.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [106]

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Okay. How are you thinking about the extension of 3-month moratorium that the RBI announced yesterday?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [107]

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I welcome the moratorium extension, as I mentioned earlier in the call. I feel that this has come at a very, very right time, apt time. There were 2 issues with the previous moratorium. One was that there was no forward indication as to if lockdown continues, then moratorium will continue, so people were anxious about it, which was resolved by the governor. Secondly, in CCOD account, it would not have been possible for a customer to pay the entire interest immediately as per the circular in the first week of June, that also governor has clarified. Now that the cash flows are likely to improve if lockdown improves, then the -- what they're called, the moratorium actually helps him to manage his cash flows better.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [108]

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Okay. And one last question, if I may. What proportion of our customers benefit because of this MSME program?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [109]

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Like I said, the -- I mean, who all will take, I don't know and who all we will give, I don't know. But business loans, entire business loans, is eligible. Commercial vehicle portfolio is eligible. SME/MSME portfolio is eligible. In some corporate who are less than INR 25 crore also may be eligible.

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Operator [110]

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We take next question from the line of Vignesh Shanker from TVS Capital.

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Vignesh Shanker, [111]

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First of all, let me compliment you on the extensive disclosures that you made. Excellent presentation. First question...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [112]

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Okay. I hope I didn't add to the confusion that was already there for the last 40 days or so.

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Vignesh Shanker, [113]

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No, sir, I think you only clarified, sir, I can confidently say that. Sir, my first question was on disposals. What is the outlook on disposals in Q1 and Q2, especially given the moratorium extension?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [114]

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So Q1, see, let me tell you, supposing you tell me tomorrow, can you start disbursing home loan or business loan? My first question would be, because of lockdown, what is the impact on property prices, valuations, et cetera? I suspect that there may be at least a 10% impact, okay? Number one. Number two, the second question is our serviceability of loan has everything to got to do with the sales number. What is the sales of this person? It has got disrupted in the last 2 months. So I don't think -- I don't know if some banks were confident of immediately starting. I don't think we are in a position to -- we have to assess all this and check our credit policy and then only start moving. At the moment, looks like first quarter, there may not be any action.

I know some banks are disbursing personal loan and all. We are not into personal loans, so we are not disbursing anything. Gold loans, we are dispersing. Some corporate loans, we are dispersing. Some tractors, we are dispersing. Some KCC loans, we're disbursing. And some customers who have already taken home loans and are looking for a little bit of disbursal for completing -- the builder completing the work, that also we are disbursing. Other than that, first quarter doesn't look like a possibility. Second quarter, perhaps, we will see how the lockdown and all goes through. My worry also is what if some spike happens on some infection and then again, some more restriction come. How to start -- we need to have some certainty of operations before we can step forward.

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Vignesh Shanker, [115]

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Got it, sir. Sir, last question, what would be the outlook on branch rollout for FY '21?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [116]

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At the moment, physically, it is impossible to roll out any branches. Even the branches that we have rolled out, about -- Bharat, how many, 7, 8, 10 branches, how many?

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Bharat Laxmidas Sampat, DCB Bank Limited - President & CFO [117]

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We did 8 in the year.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [118]

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No, no, what happened to the branches we -- that -- the work is held up, right?

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Bharat Laxmidas Sampat, DCB Bank Limited - President & CFO [119]

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10 to 12 branches is less than 1 month completion left.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [120]

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Yes, 10 to 12 branches, we're on standstill because our work is done, lockdown, so we cannot complete that. So that will complete as and when we have a chance. And then suddenly, we would have lost all the people that we have hired, and all this drama would be there in that. So that's where we are. So at the moment, very difficult to say.

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Operator [121]

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Next question is from the line of M.B. Mahesh from Kotak Securities.

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M.B. Mahesh, Kotak Securities (Institutional Equities) - Associate Director & Senior Analyst [122]

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Just 2 questions from my side. One, if I were to just look at this provisioning number, let's say, for the next 12 months to probably a little bit longer than that because the impact of this might be extending for more than a couple of years. Given this backdrop, how are you wanting to build your provisions on this particular line item? Do you say that looked like let's hold on and see the portfolio before we start building? Or do you want to kind of make it a little bit ahead and start building for this expected losses that would come in for...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [123]

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Even pre-COVID time, we have always made provisions more than required by Reserve Bank of India, point one. Point two, as of today, our floating provision is INR 100 crores. Even in this quarter, we have made about INR 2 crores, INR 3 crores of floating provision. And our floating provision stands at INR 100 crores or INR 102 crores as we speak. And you can compare with several other banks' balance sheets whether they are making regular floating provision. I guess not, okay? So the intention of management team and the guidance from the Board is that we should stay ahead in terms of making provisions. We can reverse the provision once the situation is more -- the more clarity is on the situation. That's our intention.

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M.B. Mahesh, Kotak Securities (Institutional Equities) - Associate Director & Senior Analyst [124]

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Okay. And on the other question, on the restructuring circular that you had kind of indicated earlier, why is there so much reluctance for all banks to utilize this proposal, while we see a fair amount of bankers discussing this openly, asking for a onetime restructuring. But this proposal is already there in the public domain.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [125]

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No, no, onetime restructuring, you don't have to downgrade. So you're talking about this circular, which is valid...

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M.B. Mahesh, Kotak Securities (Institutional Equities) - Associate Director & Senior Analyst [126]

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December.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [127]

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December 31? Yes?

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M.B. Mahesh, Kotak Securities (Institutional Equities) - Associate Director & Senior Analyst [128]

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Yes, yes.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [129]

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We like the circular. Actually, a lot of customers in CV approached us in January and February, and we also encouraged our customer because I have said in another call before that if a customer who has a, say, INR 8,000 load per day or something was actually getting INR 3,000, INR 4,000 load, which was not enough for him to pay the EMI of bank. So what happened in the circular is you have to take a 5% provision, and customer has to pay, I think, 2% or 3% of the principle for his portion, okay? So we are not at all reluctant. In fact, I would say that wherever possible, as we move forward, customer wants a restructure, we will do that. The reason I say that is in the government-approved scheme, which is the 1 plus 3, this thing, sometimes, it may not be possible for customers to repay the entire loan in 3 years because I think it is a little hefty, in my view. Whereas in the normal loan, if you restructure, take the provision and reverse the interest, you can actually give maybe a little bit more longer tenor. So I don't have any problem with the restructure mechanism. It's a good mechanism.

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M.B. Mahesh, Kotak Securities (Institutional Equities) - Associate Director & Senior Analyst [130]

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Perfect. And just 1 final question. With 50% of your loan book sitting outside of metro, have you started seeing any material differences in the -- in your EMI collections out there?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [131]

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See, the first 30 days is no indication at all. Only now we are starting to see some -- like for example, Delhi was opened 3, 4 days ago, people are reporting a lot of traffic; Telangana, a lot of traffic was being reported. Now that airline is also going to start functioning. So the correct data would be what we see perhaps from now onwards. But accessibility of customer was far more easier in smaller locations.

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Operator [132]

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Next question is from the line of Rahul Maheshwary from Ambit Asset Management.

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Rahul Maheshwary, [133]

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Very great detailed presentation on LAP. Two questions, sir. One, on LAP, can you give a color little bit on the floating rate and fixed rate between the home loan and LAP? And any chance of -- now the RBI is also focusing more on transmission, so on balance transfers going forward, any chances of balance transfer from your bank to the bigger banks and also from the NBFCs to small private banks, toward you? Any such color or change can you give on that part?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [134]

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So the good news during the moratorium is the balance transfer out of our bank is very minimal. And frankly, how anyone will assess in a moratorium period as to who -- which account to take and which account to take is difficult, unless they decide that anyone who has been paying during the moratorium is a good guy. I don't want to make that conclusion because it may be possible that customer refreshed his cash flows during the moratorium through his savings. That is also possible, okay? So I would say that we expect loans to come from NBFCs and smaller companies to us because we have a competitive rate. Generally, small-ticket LAP and small-ticket home loan prefer a semi-fixed rate, which means for 1 year, they want a fixed rate; after 1 year, they move into EBLR, previously MCLR. So some part of our book is fixed rate for at least some period of time. And we are passing on the EBLR almost immediately, as required by law. And MCLR changes, we have been making consistently every month.

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Rahul Maheshwary, [135]

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So on mortgage, sir, not about a precise number, but what is the range, which is a semi-fixed and...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [136]

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I don't have that number here. I don't have that number. I do know in smaller ticket like a home loan of say, INR 12 lakh will be fixed for 1 year. So as we speak, some would be 6-month fixed because that is all part of that. Some who got booked in February would be still full year fixed.

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Rahul Maheshwary, [137]

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Okay. Okay. And also, sir, in opening remarks, you had mentioned that we might go and look forward in more detail towards the credit policy. Looking at your customers right from the CV, SME, LAP, any internal -- how internal credit ratings or benchmarks are you using? And going forward, how much more strengthening you would be doing? Any, sir, some parameters or highlights you can make us -- give that how internal ratings are being done for a particular customer like CV or LAP as compared to how that rating is being taken by the external vendor?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [138]

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Why don't I give you what we are doing, and we hope that, that will really help us to understand how to manage our portfolio risk. Our credit -- sorry, our analytics team has basically used 4 parameters: moratorium behavior, type of industry, payment behavior with us and payment behavior outside -- in the outside liability. So to repeat, payment behavior within us; payment behavior outside, that is in the bureau; third, moratorium behavior; four type of industry that they are there, right? And certain weightages are being given for each of this. And we have tried to figure out how much of our portfolio would be requiring a lot more attention. That activity would get finished perhaps in about a week, 10 days, that will give us the idea on how to design our credit policies to pursue this. And if any repair is required of some of these customers, how to go about doing it. So we are working on it. Hopefully, that will get completed in a week's time.

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Rahul Maheshwary, [139]

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And also, sir, currently, the customer mix, which is there, how much is a little bit lower notch in terms of -- I know for corporates, you can...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [140]

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We don't book any loans above -- below 700 score. We don't do that. Very handful of our customers are below 700 score. We have customers called 1 plus or 1 minus, which means they don't have any bureau score. Those customers behave quite well. In our experience, customers below 700, whatever rate you charge doesn't seem to fit because their delinquencies and NPAs are high. So we don't do those customers at all. Yes, customers may have, like when you go to smaller areas, customers may have no track record. So they have no CIBIL record or Highmark record. Those customers we do and they do it -- they perform well.

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Rahul Maheshwary, [141]

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And also, sir, the customers as on date or whatever the moratorium has been availed by the customer. What is the past history in terms on a broad range have suggested you? How much percentage of customers had bounced not because on the intentional part, because of the cash flows in the industry they're doing, let's say, whether it's agri or textile or et cetera. So what is the bounce rate that is taking place?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [142]

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There are -- every segment has a different, different bounce rate, okay? Smaller-ticket, self-employed customer who pays us interest rate of 11%, maybe 11.5% may have a bounce rate of even 18%, 19%. Customers who are slightly bigger-ticket size like INR 40 lakh, INR 50 lakh may have a bounce rate of 5%. It depends. But that customer may be paying us only 9.75% as an interest rate. In our model, we try to figure out risk-adjusted, what is the impact. Now let me tell you, that is all in due time. After COVID, how all this will pan out, what will happen, we may not be able to use any of the old model. So we have to see how that all happens now.

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Operator [143]

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(Operator Instructions) We take the next question from the line of [Nitesh Poddar], individual investor.

We take the next question from the line Sharma, Kunal from Perfect Research.

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Kunal Sharma, [144]

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Sir, I have a few questions, sir, I'm listing down together, of course. So the first question is, can you throw some light on the bounce ratio of customer EMI payments? And how much percentage of the loan book is under moratorium? The second question is, sir, what is our strategy on fund raising going forward given our paper is being a depressed below book value? The third one, with this increase in moratorium period and maximum loans disbursed to SMEs, how are we looking towards the recovery segment? And then lastly, are we pivoting to any new products or segment in the light of COVID disruption?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [145]

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Okay. There are no new products we are looking at. So that's the easier question to answer. Our focus -- I have put a slide, I hope you have a look at that slide. I've clearly written that our focus would be on managing portfolio risk and portfolio stress by connecting with the customer and providing any relief that may be required as per regulatory guidelines. So the product that you may recall, look, maybe the customer -- sorry, the government-guaranteed product, which is still evolving, so I can't tell you anything, but that seems like a good idea, okay?

Regarding moratorium, I have said that we are closer to 60%, we offered moratorium to 100% of customers in the spirit of RBI circular. After discussing with RBI, they said that their idea was that all retail SME customers should be given moratorium. We didn't try to do any Mickey-Mousing. We offered it to all. We are closer to 60% when we put together all the products, some may be lower, some may be higher, that is how we are. And I have given you specific on home loan and LAP, what is our moratorium, okay?

Then what is the other question? Fundraising you asked. Fundraising, we have no plans for doing -- raising any fund at the moment. We are at 13.9% Tier 1 capital plus another 3-point-something for Tier 2, which is 17.75%. That's a strong capital. Loan growth may be muted at least for first 2 quarters, so I don't see any reason. And if you are able to manage the P&L well -- operating profit, if you're able to manage the operating profit -- there may be some issue on income, we can save some cost. If we are able to manage operating profit in order to absorb any potential hits on provision, we will see how it goes in 1 or 2 quarters before we decide whether we need capital or not.

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Kunal Sharma, [146]

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Okay. And sir, what about disburse to the SMEs, like?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [147]

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Disburse to SME?

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Kunal Sharma, [148]

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Yes.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [149]

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Very minimal disbursal is happening to SME. Only existing customers drawing down line here and there, we are monitoring and giving them. Some existing home loan customers are drawing down. Some committed customers whose businesses are still okay, like an FMCG distributor or some grocery stores, those kind of customers are still getting some disbursal. But all in all, very less.

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Operator [150]

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(Operator Instructions) We take the next question from the line of Prakash Kapadia from Anived Portfolio Managers.

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Prakash Kapadia, Anived Portfolio Managers Pvt. Ltd - Principal Officer [151]

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Yes. Just 2 bookkeeping questions. Last year, we were 6,100-odd employees. What is the number as on today? And the other income has a contribution from PSL -- sale of PSL, what was the number for the full year versus last year?

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Bharat Laxmidas Sampat, DCB Bank Limited - President & CFO [152]

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Full year PSLC income is INR 40 crores, just shy of INR 40 crores, few lakhs shy of INR 40 crores. Last year was INR 28 crores. And number of employees is...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [153]

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We are at about 6,800.

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Bharat Laxmidas Sampat, DCB Bank Limited - President & CFO [154]

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6,800-odd.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [155]

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6,800, but as we speak, all the resignation that we have not replaced, it's already down to 6,700 something.

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Bharat Laxmidas Sampat, DCB Bank Limited - President & CFO [156]

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Exact number is 6,845.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [157]

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Yes, 6,845. Currently, I think we are closer to 6,700.

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Operator [158]

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We take the next question from the line of [Ajay Jaora] from [IDBI].

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Unidentified Analyst, [159]

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Just 1 question. As you already said that LAP part, which is almost self-employed, 24% is almost similar to SME business. So we can take roughly 35% of the portfolio comes from the SME. So if you can share some light, what are these SME businesses into? Different, different industry kind of a thing or different verticals, if you can share some thoughts.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [160]

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No, we don't have that kind of data. First of all, let me tell you, self-employed, I mean at this point in time, nobody can plan, no entity in the world can plan for an event like COVID. Self-employed segment across the world generate employment, they are very profitable. We have run a very profitable business on this all these years. Unfortunate that such a situation has developed. We are confident that over a period of time, yes, some customers may not make it, unfortunate, but we run a secured portfolio. We have self-occupied property of about 87%. Almost 80% of our customer base, wherever you touch, is self-employed. Self-employed -- tractor is self-employed, KCC is self-employed. You talk about home loans, about 70-odd percent is self-employed. Business loan, which is LAP, almost 90% is self-employed. So we do business with self-employed. We understand the segment very deeply. But we do small-ticket self-employed. We don't do big, big-ticket. We do average ticket of about INR 35 lakhs. In LAP, our ticket price has already dropped to INR 20 lakhs.

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Unidentified Analyst, [161]

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Sir, lastly, on the slide on NPA movement. The INR 150 crores, the fresh slippages in Q4 is, we have not considered 27th March approval. It's pure NPA, which has happened during the quarter. Am I right?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [162]

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In the quarter -- in the month of March, we took INR 42 crores, including INR 10 crores of gold loan NPA. We didn't take the benefit of COVID on all items of March, we didn't take.

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Unidentified Analyst, [163]

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Okay. So it's a pure...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [164]

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We only took INR 89 crores, where in -- as per our analytics and as per our collection feedback, we felt these customers are habitual delayed payers, and we have a very good opportunity for us to recover it at a later point in time. So only on that, we took COVID benefit, and we provided 10% of that already.

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Unidentified Analyst, [165]

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Okay. Can we say INR 150 crores slippages, plus INR 89 crores, which is a COVID impact could be the total...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [166]

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Wrong, wrong, wrong. INR 150 crore is the slippage on which we would have provided 15%. [I-Radnor] does that. Everything is done on that. Yes. Only on INR 89 crores, we have, as RBI allowed, we have taken a provision, and we have kept the income on that.

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Operator [167]

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Next question is from the line of [Hal Sehta] from [Merlin Capital].

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Unidentified Analyst, [168]

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Sir, my question was, you said like your -- in terms of giving fresh loans, your focus products will be gold loans. So I just want to understand your strategy there. Will they be in competition to like the gold loan NBFCs? Will the customer segment be the same? And like what would be the differentiating factor in trying to gain like market share from them is something I want to understand.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [169]

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Yes, market share (foreign language). It's not required. There is enough gold loan business. There are customer -- enough gold loan customers. There is no business that is happening. Customers need some money, they need to take some money against gold. Usually, I may be wrong, but usually, the portfolio that we have seen of NBFCs, the ticket sizes are far smaller than the ticket size we do. Our average ticket size will be like INR 1 lakh, INR 1.5 lakhs, maybe INR 1.75 lakhs, that type of ticket size. But I have seen NBFCs at INR 40,000, INR 50,000 ticket size as well. There is plenty of business to go by. NBFCs very superior in terms of the cycle time. They probably can disburse a lot in 0.5 hour or 1 hour. That is where the competition is. Because if we take more time, then it becomes a problem. We don't have in-house valuer in all the branches. So sometimes there is a delay in getting the valuer. So we lose some business, and we are trying to bridge that gap. But there is enough business to do for everybody.

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Unidentified Analyst, [170]

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Correct, sir. And my second question was with regarding the extension on the moratorium. The remaining 3-month extension will also be opt-out for all your customers? That was 1 part of it. And second, how do you think the credit culture of a borrower is affected when he doesn't pay an

(technical difficulty)

EMI first -- of the EMI affect him first, supposing a LAP customer of yours, which is a slightly higher ticket size, how would the cost accrue for him for 6 months? And how would that be distributed?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [171]

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So I think at the moment, customers would be thinking of how do I get my business back to some level of normalcy. They won't be worried that bank -- they're very happy that the bank has given them moratorium. They won't be worried that their loan has got extended by 3, 4 months or some slight cost has gone up on the thing. When you explain to certain customers, who feel that they don't need to pay because they have the money, they have repaid the -- I mean, they've repaid the installment. Currently, customers are all focused on how they can restart their business and how soon they can get to some level of normalcy. That's what the focus is. And if you ask, I know that the favorite discussion always is financing is a problem for SMEs. I have a slightly different view on this. While financing may or may not be a problem, but many customers want infrastructure support, less hassle from agencies. Those are the kind of things that they require, which will ease their business. So I think currently, they will be worried about how to get the business back on track, how to get back on their feet.

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Unidentified Analyst, [172]

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Correct, sir. And my last question, if I may. Sir, the 20%, the additional limit that the government is giving. Will you all be okay in terms of the government guarantee, especially with the government's track record in terms of when they actually pay the guarantee amount in that sense? Sir, are we comfortable giving it?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [173]

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19.5% of my book is in SLR. So if I can trust the government at 19.5%, I can trust the government with 20%.

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Operator [174]

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Next question is from the line of [Saurabh Chatterjee], individual investor.

As there's no response from current participant, we take the next question from Sagar Shah, Alphaline Wealth Advisors.

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Sagar Shah, [175]

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So coming to your results, sir, I have just 2 questions, actually. My first question was concerned regarding your asset quality. As I can see, almost INR 150 crores slippages in your -- in this March quarter. You haven't taken a benefit of around -- of COVID-19 package on the March slippage of around INR 43 crores. But still, I was really concerned if I was seeing the Y-o-Y growth in the GNPAs of each and every segment, actually, especially mortgages. So in the -- after these COVID times, do you plan to take some more risk-averse undertaking measures, so that we can again at least predict better customers who are -- so that we can -- our asset quality actually remains fairly stable, actually, because even if we have to sacrifice on our growth actually in the coming year.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [176]

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So I don't believe that our mortgage portfolio or LAP portfolio has got any challenges. Last year has been a very difficult environment even prior to COVID. Our major challenges have been in commercial vehicle. And my understanding is that most players in the market have faced issues in commercial vehicles. We have hardly had any -- so if I look at our mortgage portfolio as compared to the slippage versus recovery, it has performed quite reasonably barring maybe 1 or 2 loans, which may have been slightly large-ticket loans, which anyway we don't do, but maybe historically, whatever was there. So I won't too much worry about the mortgage portfolio. Commercial vehicle continues to be a challenge and may continue to be a challenge even in the coming -- this thing, until economic activity picks up to some level. Regarding changes to credit policy, we have a full-fledged credit policy team and analytics team. And almost every month, 2 months, we make changes. If we notice any issues in the portfolio, we keep making those changes and translating those new policies and controls to the front line and to the sales team. So that's a continuous process.

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Sagar Shah, [177]

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But then why are we seeing almost a quarter-on-quarter deterioration in our asset quality if you are so confident? Actually, if you compare real estate over Y-o-Y...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [178]

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If you look at it, the recoveries have been pretty good on mortgages, SME and all. The recoveries have not been good in what is called commercial vehicles because it's very tough to get the recovery until you really find some momentum in the business of the customer. Secondly, in quarter 3, we had a large-ticket NPA, about INR 42-odd crores of a customer who has been with us for many years. And if I'm not mistaken, that was a very big-ticket, and it took our NPA to almost INR 200 crores in the third quarter. So -- and the environment has been not very easy even prior to COVID. So there has been some slight deterioration in NPA.

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Sagar Shah, [179]

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Okay. So do we plan to at least scale down our CV portfolio or rundown our CV portfolio in the coming year?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [180]

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With our CV portfolio, there is nothing to disburse. We have already scaled on our new CV portfolio, and we were focusing on old, that is the used CV portfolio. That is why you will find in the last 6, 7 months or even maybe longer, the portfolio was just static at one level. That is because the repayments are being just about met by new sales.

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Sagar Shah, [181]

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Okay. Okay. My second question is regarding to our balance sheet growth actually. As our vision is to almost double our balance sheet almost in 3, 3.5 years. But our balance sheet growth and also our actually loan growth, if you compare it from December to March, pre-COVID is almost flat actually. So -- and this year's balance sheet growth is almost just 8%. So do you -- are you still confident that we'll be -- still be able to double our balance sheet in the coming...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [182]

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We will give a new set of guidelines on what we are aiming to grow, provided we get -- because see, the whole dust has to settle down of COVID for us to figure out where, how, what segment, what product, what credit policy, what controls, what geography, a lot of things that would be reconsidered once the dust settles down. Only then we can give you guidance on whether -- what rate at which we can grow. Currently, the focus -- please read my slide on near-term focus. The landscape has changed completely, completely changed. There is no way you can compare what we are facing today with some -- Maruti reported 0 sales in 1 month. When was last time you heard of that kind of situation? So I don't think it is fair to ask for a guidance from management team on doubling of the balance sheet in a situation like that.

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Sagar Shah, [183]

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Yes. But what I was concerned is about even the loan growth actually quarter-on-quarter from September to March, I saw the loan growth hasn't increased actually, and that is pre-COVID.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [184]

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Yes, so March, we decided not to disburse any loans after 12th of March or 13th of March. A lot of our loan -- March is usually a big month. There are at least, I would say, INR 400 crores to INR 500 crores of loans undisbursed because we just decided that this is not the right time to disburse the loan. It is better to just wait and see what happens in the market.

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Operator [185]

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We take the question from the line of Mona Khetan from Dolat Capital.

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Mona P. Khetan, Dolat Capital Market Private Limited, Research Division - Senior Analyst [186]

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So the existing MSME restructuring scheme, which is -- which has been extended until December 21, what is -- do we -- I mean, have any portfolio under this scheme currently that has been restructured?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [187]

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Yes. In February -- January and February, we restructured -- I mean, at the moment, what we have is about INR 130-odd crores of CV, about INR 43 crores of MSME and about INR 43 crores of mortgage and about INR 10 crores of corporate. Corporate is also MSME only, but it is in corporate. That is why it is -- I mean, but it is an MSME account. And what happened is after the previous announcement by the FM, there has been quite a lot of demand by many customers who were servicing their loans, but were having some struggle in terms of their sales, receivables and so on and who approached bank for restructuring. I personally think it's a very good scheme, where you collect some money, make sure the account is standard, collect some installment and work around the customers' new cash flows and restructure the loan and take 5% provision straight away.

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Mona P. Khetan, Dolat Capital Market Private Limited, Research Division - Senior Analyst [188]

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Sure. So the press release that mentions about INR 237 crores of restructuring. That is all under...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [189]

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I gave you the breakup of that.

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Mona P. Khetan, Dolat Capital Market Private Limited, Research Division - Senior Analyst [190]

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Yes, that is all under this...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [191]

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Yes, only under that. Nothing else we do.

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Mona P. Khetan, Dolat Capital Market Private Limited, Research Division - Senior Analyst [192]

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Okay. And this was all done this quarter itself?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [193]

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I'm not sure. So it had some -- a lot of CV portfolio was done in January, February. March, of course, it doesn't make any sense to restructure and all because it was a very different situation.

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Mona P. Khetan, Dolat Capital Market Private Limited, Research Division - Senior Analyst [194]

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Sure. And on the CV book, which is about 7% of your loans, could you just throw some light around what exactly are we into, small transport operators or individual...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [195]

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FTB; FTU; small operators with 3, 4 vehicles; people who -- customers who get contracts from larger fleet operator, those are the kind of segment that we are in.

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Mona P. Khetan, Dolat Capital Market Private Limited, Research Division - Senior Analyst [196]

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Okay. And a lot of these segments, in that case, will not be driver-dependent.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [197]

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Many of them will be driver themselves for 1 vehicle and have 2 other vehicles or 3 vehicles, like that.

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Mona P. Khetan, Dolat Capital Market Private Limited, Research Division - Senior Analyst [198]

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Okay. No, because we are hearing that segments that are driver -- not driver-dependent have still been able to open up because they are not facing migrant issues. So is that the same situation at your borrowers and of borrower as well?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [199]

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So what I want to say is that there is no perfect database of information that is flowing on this COVID as to what is happening on ground. There is some information comes like that, some information -- all we know is when we speak to our customer base, there is fair amount of disruption in labor. So for example, just to give you a sense, not necessarily of CV, we are allowed in our building to walk in the deck area. Since last 15 days, some relaxation has happened. Otherwise, we were just cooped up in our house. So we are allowed to walk. In that -- only yesterday -- last week, I heard an SME customer talking to another person, saying that his labor is unlikely to return before -- I mean, only after raise they are likely to return because now all of them have gone, they are unlikely to return. So he said, how do I restart my operations? It's very anecdotal data. But one thing is clear, there is disruption.

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Mona P. Khetan, Dolat Capital Market Private Limited, Research Division - Senior Analyst [200]

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Sure. And on the CASA portfolio, there has been a decline both sequentially and year-on-year. So could you just throw some light there?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [201]

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Yes. So our focus is purely on retail term deposits, small ticket. Our average ticket size on retail term deposit is about INR 1.5 lakh, INR 2 lakh, okay? For many years, we pursued CASA quite well. We used to grow CASA by about 15%, 18%. We have 2 problems

(technical difficulty)

CASA as compared to some of the larger banks like SBI or ICICI Bank. What we find is that our CASA growth is not enough to fund our loan growth because, supposing our CASA growth is only INR 1,500 crores and we want to grow by INR 3,000 crores, we don't have enough funding. We end up taking some bulk deposit, and that kind of distorts the ratio of our liquidity profile. We changed all that about 2 years ago. We started saying, first, the customer retail term deposit you get, and then you get the CASA customers, okay? So that is how we are operating. And we believe that in the overall cost, our branch cost would certainly come down in about 2, 3 years because the cost of servicing a CASA, even with digital channel, is far higher, in our view, as compared to a retail net term deposit, where there is hardly any existing and cross-sell opportunities are, in fact, better because retail term deposit clients are slightly more, I would say, advanced in their capability to buy products, okay?

Second point is we actively started leaving out any, what you call, bulk CASA, which means that we never wanted to match the pricing of other banks and so on. So some of the CASA, we actively let go as part of reducing our top 20 deposits.

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Mona P. Khetan, Dolat Capital Market Private Limited, Research Division - Senior Analyst [202]

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Okay. And does it have to do anything with some of these large state government deposits that were -- that matured...

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [203]

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We have very limited reliance on state government deposits of any other thing. Across India, we have (foreign language) deposits of (inaudible) government. We may have seen a little bit of outflow here and there and all, but we never relied on our -- and frankly, if you have those deposits on cars, you can't build a balance sheet on that because those tend to be very erratic. Suddenly, a project happens, they will withdraw some INR 15 crores for that project. You can't depend on that flow. So we never built our balance sheet on that. So we don't have any worries on that count.

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Mona P. Khetan, Dolat Capital Market Private Limited, Research Division - Senior Analyst [204]

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Sure. And lastly, if I could have the breakup of your provisions of INR 118 crores this quarter?

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Bharat Laxmidas Sampat, DCB Bank Limited - President & CFO [205]

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Okay. NPA and aging provision is INR 45 crores. COVID moratorium and asset classification benefit, we spoke about, INR 9 crores. COVID moratorium-related other than asset classification benefit, INR 54 crores. Standard asset provisions, which is RBI-mandated, INR 10 crores. We continue to add to floating provision, we added INR 3 crores more and taking the balance to INR 96 crores. And we reversed out investment, we had excess provision on SRs, which got reversed out, INR 3 crores. So net 118 crores.

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Operator [206]

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We take the last question from Ravi Naredi from Naredi Investment.

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Ravi Kumar Naredi, [207]

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Mr. Murali, you are doing very fine. My point is that why not we're giving much stress to gold loan, where we are 100% safe and demand in the community is very high?

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [208]

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Yes, I tend to agree with you, but I'll tell you, everything has some plus and minus in it. The branch capacity has to be directed to whatever strategies that we are pursuing. For example, if I want the branch capacity to be fully focused on getting me retail term deposit and have as much granular deposit, I have to skew the scorecard towards that. If I want fee income, then I have to give some weightage to it. If I want some gold loans, I have to -- so it all depends on what kind of -- supposing I change the weight to gold, it may so happen that they may not deliver on something else. So it's a fine balance that we have to achieve or provide them with more resources. Why gold loan companies are able to do higher volumes is because their branches do nothing else or mostly nothing else other than gold loans, and they do in-house valuation. So it's a good point. And we believe that in this lockdown period, there is opportunity. And hopefully, we will pursue that.

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Ravi Kumar Naredi, [209]

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Yes. Because I -- what I think, and it is -- since this is 100% safe and bank is safe and you get good interest and everything. So you may deploy 1%, 2% separately for gold purpose, and you can manage accordingly. That's my request.

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Murali M. Natrajan, DCB Bank Limited - MD, CEO & Non-Independent Executive Director [210]

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Yes, absolutely. And we may not have to specifically dedicate. We may just have to change the scorecard appropriately.

Thank you, everyone, for -- I'm sorry, I took a lot of time. It's almost 2 hours that I've been talking, and you've been listening. Thank you very much. Look forward to engaging with you again next quarter. Thank you.

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Operator [211]

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Thank you very much. On behalf of DCB Bank Limited, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.