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Edited Transcript of SBIN.NSE earnings conference call or presentation 5-Jun-20 11:30am GMT

Q4 2020 State Bank of India Earnings Call

Mumbai Jun 9, 2020 (Thomson StreetEvents) -- Edited Transcript of State Bank of India earnings conference call or presentation Friday, June 5, 2020 at 11:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Arijit Basu

State Bank of India - MD of Commercial Clients Group & IT and Director

* Challa Sreenivasulu Setty

State Bank of India - MD & Director

* Pawan Kedia

State Bank of India - General Manager of Performance Planning

* Rajnish Kumar

State Bank of India - Chairman of the Board

* Venkat Nageswar Chalasani

State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO

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Conference Call Participants

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* Abhishek Murarka

IIFL Research - VP

* Adarsh Parasrampuria

CLSA Limited, Research Division - Research Analyst

* Amit Premchandani

UTI Asset Management Company Limited - Fund Manager

* Anand A. Laddha

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

* Anirvan Sarkar

* Bhavik Dave

* Deepak Agrawal

* Dhaval Gada

DSP Investment Managers Pvt. Ltd. - Assistant VP of Investments & Equity Analyst for Financials

* Jai Mundhra

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

* Kajal Gandhi

ICICIdirect.com, Research Division - Banking and Financial Services Research Analyst

* Kunal Shah

Edelweiss Securities Ltd., Research Division - Associate Director

* Mahrukh Adajania

IDFC Securities Limited, Research Division - Director

* Manish J. Karwa

Axis Capital Limited, Research Division - Executive Director of BFSI

* Nilanjan Karfa

Jefferies LLC, Research Division - Equity Analyst

* Pankaj Agarwal

AMBIT Capital Private Limited, Research Division - VP of Research

* Prakhar Sharma

Jefferies LLC, Research Division - Equity Analyst

* Rahul M. Jain

Goldman Sachs Group Inc., Research Division - Executive Director

* Roshan Chutkey

ICICI Prudential Asset Management Company Limited - Associate VP and Analyst

* Srinath V.

Bellwether, Inc. - Equity Research Analyst

* Ravi Singh

HSBC, Research Division - Senior Analyst of Banks Research

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Presentation

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Operator [1]

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Ladies and gentlemen, good day and welcome to the Q4 FY2020 Results Conference Call of State Bank of India. (Operator Instructions) please note that this conference is being recorded.

I would now like to hand the conference over to Mr. Ravi Singh from HSBC Securities. Thank you, and over to you, Sir.

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Ravi Singh, HSBC, Research Division - Senior Analyst of Banks Research [2]

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Thank you, Janis, and hello, everyone, to all who have joined us on this call today to discuss 4Q FY '20 results of State Bank of India. To discuss results and address questions from investors and analysts on this call, we have entire top management team of SBI led by Chairman, Mr. Rajnish Kumar. Thank you, sir, for this opportunity.

I will now hand over this call to Mr. Pawan Kumar Kedia, General Manager, Performance Planning and Review, for further proceedings. Over to you, Mr. Kedia.

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Pawan Kedia, State Bank of India - General Manager of Performance Planning [3]

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Thank you, Ravi. Good evening, ladies and gentlemen. I am Pawan Kedia, General Manager, Performance Planning and Review. On behalf of the top management of SBI. I extend a warm welcome to all joining us today on SBI's Q4 FY '20 Results Conference Call. On the call today, we have with us our Chairman, Mr. Rajnish Kumar; Mr. Dinesh Kumar Khara, Managing Director, Global Banking & Subsidiaries; Mr. Arijit Basu, Managing Director, Commercial Clients Group & IT; Mr. CS Setty, Managing Director, Retail and Digital Banking, with additional charge of Stressed Assets; and Mr. Venkat Nageshwar, Deputy Managing Director and Chief Financial Officer. Our Deputy Managing Director heading various verticals are also on the call with us.

Before I request our Chairman Sir to give a brief summary of the bank's Q4 FY '20 performance and the strategic initiatives undertaken, I would like to read out the safe harbor statement. Certain statements in these slides are forward-looking statements. These statements are based on management's current expectations and are subject to uncertainties and changes in circumstances. Actual outcome may differ materially from those included in these statements due to a variety of factors. Thank you.

Now I would request Chairman Sir to make his opening remarks.

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Rajnish Kumar, State Bank of India - Chairman of the Board [4]

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Good evening to all of you. This con call, of course, is taking place in very unusual circumstances. And on audio it is not the same when we say it and we are face to face. I realize that, but can't help it. We have announced our annual results as well as the quarterly results.

I will give you a few highlights of the performance and a little bit on how do we see the situation unfolding. And on numbers, because all the numbers are with you and anything which has not been covered or if you have any questions so that questions definitely we will take.

So the first is that this is the highest ever annual profit recorded by State Bank of India, INR 14,448 crore. And this has come in, I would say not so easy circumstances because COVID-19 is what has started sometime in March, but otherwise also because of the slower growth in Indian economy. The circumstances were not very easy.

Our net interest income has gone up by 11%. Our NIM has gone up by 24 basis points. Operating profit is up by 23%. PBT and net profit in any case in '19, they were not very good, so percentage terms, it doesn't make much sense anyway. And credit costs are down by 79 basis points, and net NPA are also down by 78 basis points. Our provision coverage ratio, including the AUCA, or advances under collection, it has gone up by 489 basis points and now stands at 83.62%. Capital adequacy ratio is 13.06. Advances growth is 5.6% and total deposit is 11.34%. Deposit growth and advances growth, advances growth may look that the growth has not been high, but still we have been able to improve slightly our market share. And in deposits, we have been able to improve our market share quite significantly and that trend is continuing even post March. And we are -- currently, our deposit growth is around 16.5% Y-o-Y basis. The advances growth remain around the same on Y-o-Y basis.

And -- the COVID period, it was a learning period for every one. And our business continued, and I will come to asset quality, earnings, other things later on, but during this period, where first time the bank's business continuity plan has been tested in a very unique way. Earlier, we were always prepared that something happens in our GITC, Navi Mumbai, when we will operate out of Hyderabad, or we'll operate out of Chennai. But this all was of the stepping, no use what was under test was the human BCP and where, I would say that hats off to people in the State Bank of India, we have been able to provide uninterrupted service at all channels. In the same manner, it was in the pre-COVID period and in fact, in some of the channels, the performance is better than what it was in the past. And whether it was branch channel, whether it is our business partners, what we call Bank Mitra, ATM channel, Internet banking, mobile banking, YONO, all were up and running. And there has been no grievance from any corner from any of the customers or the government or the local authorities that they are finding any difficulty as far as functioning of State Bank of India is concerned. So that is the first point, which I wanted to highlight.

We have learned new way of working also and learning from the past, we have prepared a plan that how are we going to reshape the State Bank of India. So that is one. The other issue, of course, which always would come to the mind is about the asset quality so which is always a major area of concern and there have been a lot of reports going around what will happen. So one is that we are very mindful of the fact that if there is a stress in the real economy, the banking system cannot remain unimpacted, and State Bank of India is also no exception. So we cannot ignore the hard reality on the ground. But I and my management team, we sincerely believe that we are much better placed than any other banks as far as dealing with the situation is concerned. On operations side, we have demonstrated that. On the business side, we will be able to demonstrate that. On managing the stress in the book or managing the earnings, that also, I am very confident that we will demonstrate that. And on what basis I am making that statement is very important. One is, if I look back and we -- if I look back the numbers in March '18, our core pre-provision operating profit was INR 51,000 crore. And our net NPA was in excess of INR 1 lakh crore. It was around, I think, INR 1,05,000 crore or around that.

In 3 years, we have a situation where our pre-provision operating profit, and I'm talking about crore, is INR 61,000 crore. My total net NPA is INR 51,000 crore. So that means that as far as the asset quality in terms of legacy is concerned, we are on the top of the situation. There's no legacy accounts left to be dealt. Even if I look at the slippages in 2020, our normal circumstances best case scenario, the guidance has been that we should be able to manage within 1.5% or 1.6% of our book. But we are higher at 2.16%. And 3 major -- there are 3 major reasons: one is, of course, one, HFC, a chunky account, it slipped. And it happened in the past, it can happen in the future also, cannot rule out. And one company in the power sector restructured and because of it's restructuring, the state of account goes to D3, and it is again a chunky account. And third was the elevated NPAs in our agriculture loan book for various reasons. So these 3 were outliers in my view. And that itself, the performance in 2020, is a pointer in the sense that our slippages, but for these chunky accounts, they have consistently been coming out as far as the corporate book is concerned.

On P segment, home loans, that is steady. There is no elevation. SME also more or less steady. Agriculture was the only one which was elevated on a portfolio basis. So that itself leaves a cushion that COVID takes. Otherwise, we were expecting that if it is not COVID, then we were on track to deliver superior performance in this current financial year. But now we have to give up that upside probably because of the COVID. And our best case scenario is that we should be able to repeat our performance of March '20 with slightly better number on the net earnings. Our PBT is INR 250 billion in March '20 and the taxes 42% and all DT on account of loan losses that has been absorbed, we have moved to the new tax regime, so that itself like some impact would be there, 5%, 10% of the net profit after tax.

Now if things turn out to be like it was then what it is -- then we have still sufficient cushion in our earnings. And we are looking at that -- what happens in the next 8 quarters. So I am not talking about what happens in June. In June, there will be no fresh slippages because of moratorium.

Legacy accounts, as I said that our book is at INR 510 billion. In 2 years, we provide INR 50 billion every quarter, and that takes care of INR 400 billion and that takes care of entire net NPA in corporate book, which is INR 170 billion, entirely taken care of. And then we have a good amount sitting in D3 and loss, 100% provided likes of Bhushan Power and Steel. All those chunky; recoveries will also come in.

So in such a scenario, I'm expecting that in 8 quarters, our earnings would be around INR 140 billion. Is it correct? Someone said it's INR 1,40,000 crore. INR 1.4 trillion. That is what I am expecting over a 2- year period. INR 400 billion we will keep aside for the legacy provision. So that leaves us with INR 1 trillion need straight to take care of all the credit costs which may arise in this 2 quarters. Then, we have our subsidiaries which are performing exceedingly well. There's a lot of value sitting in there. There's a lot of value sitting in our D3 and loss accounts. So in such a scenario, even if there are -- some of the problems of the real economy gets reflected, the bank's balance sheet in my view and in our assessment as we speak, but the situation is dynamic and we will keep on reviewing the situation. Current situation, we have reviewed, in fact, each and every account as far as the corporate book goes. And as of now, I don't see any major concern. As I said, that it's not that it's 100% stress free book, but the stress is definitely manageable, and we are capable of managing that stress.

About -- there are certain steps, and that is where I would -- I think that our presentation will be available to most of you, so I am not going into the numbers. I am going into that how are we dealing with the COVID-19 situation. And I'm not using the word post because nobody knows today when that post will be. So it is COVID-19. And our Slide 17 of the presentation, which shows that how as a very responsible corporate citizen, State Bank people have responded to the situation and have delivered both in terms of the quality service as well as what we call the commitment to the society. And first time, the State Bank employees have contributed their salary to the PM CARES fund. We have already committed that 1% of our net profit, it is -- it goes to our CSR activities; 25% of that, means 0.25%, will be available for our foundation and who are doing tremendous work to help out.

Operation resilience, I have already spoken about. Moratorium, already I gave numbers that 82% of our customers in detail, they have paid 2 or more installments. In corporate, it is hardly any number, 13% or 14% people in terms of amount, insignificant, who have availed the moratorium. And in the corporate book, people are keeping it more as a reserve rather than anything else. Even if they have the capability of pay, just keeping some money for the rainy day. So I don't foresee any problem that our corporates will not be able to service their accounts.

And now COVID-19, how are we going to deal with this situation, and here on Slide 18, I have put 6 points. Very strong liability franchise with a customer base of 49 crore, which is more than the population of a couple of continents. And the kind of capability today State Bank has in terms of its IT, we can serve -- we have created capacity for serving 2 billion customers. So that is the kind of capability we have today. And distribution network, I doubt that any bank in the group can match SBI's distribution network. We have branches. We have digital channels. We have ATMs. We have 62,000 Bank Mitras. So even the physical presence is 62 plus 22, almost 84,000 physical touch points. And let me tell you, during this period when we have to transfer money to almost 9 to 10 crore customers, PM Jan Dhan Bank account, women accounts, Kisan beneficiaries, and everything has gone so effortlessly and smoothly because of the fact that Bank Mitra channel, we utilize their capability to the full extent and they delivered excellent service and variegated help. And going forward, we are going to use them more effectively as far as our collection activities are concerned.

I mentioned that our core PPOP, I'm forgetting -- I'm just not mentioning whatever we get from some strategic investment sale or something like that, that is growing at 10%. And that itself will give us, in 2 years, about INR 1.4 trillion pre-provision operating profit. And that is a big shock absorber against any elevation in future credit cost.

Legal stress -- legacy stress, I have already spoken, and all those numbers are there. So we are at just INR 510 billion, and that is what our net NPA is.

We are well-capitalized, well above the regulatory provisions required. We have large value sitting in subsidiaries. I have not mentioned, but our D3 and loss book also gives us a lot of money by way of recoveries. Today, I can say with confidence and pride that what we have created in terms of YONO platform, no other bank can match it. And we are serving across retail, krishi, YONO business, global and corporate Internet banking which has about 7 crore users. And even in COVID period, our YONO registrations are going on. We introduced a personal gold loan. In 10, 12 minutes, people can get personal gold loan using YONO. Then the special pre-approved personal loan. So we are doing INR 1 billion a day minimum. Sometimes it is exceeding. And the selling of insurance products, credit cards, car loans, home loans. And it is not the end of the story, it's still working in progress. And within 6 months, the YONO business platform, which we are building for the corporates, it will be state-of-the-art, one of its kind, and whatever functionalities are today, the business users are very, very pleased with its design and the performance.

And the productivity gain, it has started happening. It will be speeded up. We are now reducing our staff strength at administrative offices by 20%. Financial inclusion and micro market vertical has been launched and that has been launched 1st of June. 35 RBOs, regional business offices, have been closed. 20 administrative offices have been closed. And as I said that we are redeploying people in a big way in the field. And the new model where the partnership with the BC channel or Bank Mitra's reliance on the people who have retired from the bank. So it's a very differentiated HR strategy to run this channel. Its contribution in branch network is high at 38%. Its contribution in business is just 12%. And even if we improve it by 50% from 12% to 18%, 20%, it will be a huge productivity gain for the bank.

So this is around the FIMM vertical. And our cost-to-income ratio at 52%. So it is improved by 3.5%, but the other only issue is that the payment or provisions for the retirement benefits, because of the fact that yields have gone down, to some extent that is impacting us. And when we do any comparison with the private sector banks, this is the legacy of we have 12%, 13% of our income is going for these provisions, which is inevitable and which is a cost which we have to realize. We can't accept it. But if we just for a moment keep it aside, then our cost-to-income ratio is best. And it is best in class, best in the industry. But as I said that I can't avoid it, I would take it into account. I have to provide for it. But for the comparison purpose only, I wanted to make this point. And further productivity gain will be there. We are having a very tight control over overheads that is like the past 3 years' performance in terms of what is the growth rate in overheads, that is very much for everyone to see. And other than the cost component of -- if I exclude that, then hardly 4% CAGR. So for the bank of our size, it is very good and it is going to come down. That is what I believe.

And asset quality on Slide 19, we have given some flavor about, like, why we believe that we will be able to maintain the asset quality.

And other income, definitely, there is going to be some impact. Our Forex income will be impacted because the foreign trade of India has come down. The NRI remittances also will come down. Recoveries also, we are expecting that there will be an impact. Government business also. But whatever impact is there on the other income, we will be able to make it by NII. I am not talking about NIM. NIM, I don't think that it's going to improve any further. It is 3.19 and we should be able to maintain 3.19 or around. But NII because of the balance sheet growth, that will happen. And I think easily we will cross INR 1 trillion this year itself. So in such a scenario, the pre-provision operating profit, we should be able to maintain it core PPOP. So this year, our [testing] is INR 680 billion. We maybe -- without even this strategic sales, we may be able to touch INR 680 billion. And if there are any investment sale opening, that may be something. External solution cushion is there.

And definitely, I can see that next slide, which is 20, agriculture, I feel that there may be some opportunities coming in now. With all the agri reforms, MSME, end-to-end digitization has happened for so many products, and we are using advanced analytics for underwriting. And that is where, again, we may get some good quality growth without compromising on underwriting standards. So no way our bank is going to dilute its underwriting standards. And we have been prudent in lending. We'll continue to be prudent in lending. But at the same time, if there are opportunities in the market, so we are not going to miss it.

And retail, I have already told that we are growing at 17% Y-o-Y currently. So even if there is some slowdown, but still we will be able to maintain it.

I've already spoken about Slide 21, how strong is the liability franchise, distribution network and transaction banking unit of the bank.

Slide 22, again, I have spoken about that how we are going to maintain our core PPOP. And DTA, on account of loan losses, is fully now taken care of, and we have moved to the new tax regime.

Slide 23, again, about the loan portfolio. And the last point about that, we are moving to cash flow based lending. We are using advanced analytics for the underwriting of the loan. And that is how -- what enables us to give loans on a digital platform.

Then collection mechanism, collection is something where this will be very much under focus this year. And it will be through partnership model, particularly with our BCs. We have tested it successfully in Maharashtra and all India rollout has happened. There are partnerships like Skymet in MP, which has worked very successfully in renewal and underwriting of KCC loans. On YONO also, we are bringing KCC review, which will be just a 5-minute exercise. Again, huge productivity gain. EWS system is very advanced in the bank and specialized agencies, which were appointed for monitoring of large exposure. So many of them are, in fact, bringing a lot of technological capabilities even for monitoring of the account.

25 -- Page 25, I have again spoken about our strong capital position and what are the levers available to us.

I have again spoken about Slide 26, which is all about the digital platform, and I can share that. It has got huge recognition not only in India, but globally. And all our international partners of repute like IBM and McKinsey. So this is their marketing tool now that they showcase, YONO everywhere. And we have a plan, and we are working on it. And I think within 2 years, we are going to create a very large B2B platform called Bharat Craft, which will be in association with the MSME Ministry. And State Bank in India is today best place. And we are trading capability and architecture in such a way that YONO becomes the platform and it will have capability to integrate top 2 other platforms, which are emerging in a big way.

So SBI, you can imagine that what is the future SBI. One, as far as digital is concerned, it will be a platform. YONO will be the brand name, and that is a vision what we started. It is now coming to a sort of -- we are coming to near maturity. I won't say that it gained maturity. A lot of work still needs to be done. And Flexi SBI, which will be capable of delivering not the doorstep banking, bank at the doorstep. Work from anywhere is the now new norm, new motto and our teams are working. They have already have some prototypes. And I have no doubt that in a very safe, secured manner, our people will be able to deliver services from anywhere and even the building in which we are sitting, we are now going to reduce the staff strength by 50%. My CDO is confirming that we are going to reduce the staff strength by 50% in the corporate center. It is not that we are not -- we will not be using that people, but some of the departments, what they are finding that working from home is proving to be more productive. Even for me, when I work from home, I am more productive than coming to the office and that is true for all the entities also.

And again, the Slides 28 and 29 are more or less what I have spoken about that, how are we going to deal with the asset quality, how are we going to protect our pre-provision operating profit, digital capability, HR and the moto is change the bank, run the bank, fix to flexi.

So that is all from my side. And now whatever questions you have, please one by one.

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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 Amit Kumar Premchandani from UTI.

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Amit Premchandani, UTI Asset Management Company Limited - Fund Manager [2]

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I hope all of you are doing fine. I just had a question on the moratorium. If you can just give us an absolute number of loans which are under moratorium, either in percentage terms. And also, how are you approaching the second moratorium?

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Rajnish Kumar, State Bank of India - Chairman of the Board [3]

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Setty, or should I -- so one is that from our side, we gave moratorium to 100%. And only thing what we did is that wherever there are standing instructions on mass mandate, we did check from the customers that what would they like to do with their mandate and which was, I think, the right thing to do. And if I look at the -- we are checking the numbers, not in terms of the portfolio size, 82% people have paid 2 EMIs in this moratorium period. And if I look at that second time when we went and checked from people about their mandate, there is no significant difference. So this 82%, maybe in September, it will improve. But right now, we are expecting that there may not be any major change in the period because now the unlocking has started happening and there will be more cash in the hands of the people.

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Amit Premchandani, UTI Asset Management Company Limited - Fund Manager [4]

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So sir, shall we assume that the second moratorium also is available for all the customer on a blanket basis?

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Rajnish Kumar, State Bank of India - Chairman of the Board [5]

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Yes, other than NBFCs, where we are doing case-to-case basis. And in case of NBFCs, only 16 out of 117 have so far opted for the moratorium.

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Amit Premchandani, UTI Asset Management Company Limited - Fund Manager [6]

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And the 16 account for what percentage of the NBFC book?

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Rajnish Kumar, State Bank of India - Chairman of the Board [7]

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Not more than 5%. It's not in year. Less than 5%.

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Amit Premchandani, UTI Asset Management Company Limited - Fund Manager [8]

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And sir, this 82% have paid this number as of April end or May end?

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Rajnish Kumar, State Bank of India - Chairman of the Board [9]

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May end.

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Amit Premchandani, UTI Asset Management Company Limited - Fund Manager [10]

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So basically we should assume that 18% of the portfolio is under moratorium as on May?

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Rajnish Kumar, State Bank of India - Chairman of the Board [11]

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From my side, 100% is under moratorium. But from customer side, it is 18%.

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Operator [12]

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We take the next question from the line of Deepak Agrawal from Axis AMC.

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Deepak Agrawal, [13]

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Sir, I wanted to understand on the recent Supreme Court hearing relating to waiver of interest during moratorium period, so wanted to understand your views, is it possible, not possible, how should we look about this?

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Rajnish Kumar, State Bank of India - Chairman of the Board [14]

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No, on a subjudice matter, it's not appropriate for me to make any comment. But only one statistics, which I shared on one of the channels also is that the State Bank has 2.5 crore borrowers and it has 49 crore depositors. Bank in its fiduciary capacity is what it does, take money from the depositors, give it to the borrowers, borrowers pay back, we pay back to the depositors. So wherever it has so happened that borrowers have not paid back, so those people found it difficult to give money back to their depositors. More than that, I won't say anything else.

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Deepak Agrawal, [15]

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Okay. Got it. Got it, sir. Sir, second question relating to moratorium. You did mention that about 18% of the people have asked, but when we look at other -- obviously, other state-owned banks are yet to report numbers, but even if you see for large private banks, those numbers are closer to 30%, 35% in many cases. So how should we understand, like is it -- why are the numbers much lower? It's a good thing, it's lower. But how do you reconcile it, sir?

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Rajnish Kumar, State Bank of India - Chairman of the Board [16]

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Because one simple thing that our segment from the beginning has been more towards the salaried class, and within the salaried class also, employed by the government or their undertakings, public sector undertakings. So the customer profile was always different. And we have always been very careful about the loan-to-value ratio as well as toward their capability to pay, which is EMI/NMI ratio. So we have not gone overboard in the last whenever we have just started building up our portfolio. And for the pre-approved personal loans or personal loans, again, it is all against salary. So the absence of what we call self-employed professionals or self-employed people, so that percentage in the State Bank's case is very low. And I think that is the only possible reason that why the number in case of State Bank of India is different than other banks.

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Deepak Agrawal, [17]

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Okay. Okay. Got it, sir. Sir, if you have to say further on this SME, because if you talk to others, we say SME almost 70%, 80% of people have availed moratorium, in at least other banks and NBFCs. So what would be a similar number because SME is a roughly INR 2,80,000 crore book for us...

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Rajnish Kumar, State Bank of India - Chairman of the Board [18]

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It is not INR 2,80,000 crore. It is INR 1,89,000 crore. And out of which performing will be about INR 165,000 crore or INR 170,000 crore.

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Challa Sreenivasulu Setty, State Bank of India - MD & Director [19]

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INR 57,000 crore was term loans.

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Rajnish Kumar, State Bank of India - Chairman of the Board [20]

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57,000 people?

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Challa Sreenivasulu Setty, State Bank of India - MD & Director [21]

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INR 57,000 crore.

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Rajnish Kumar, State Bank of India - Chairman of the Board [22]

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INR 57,000 crore. So that comes to about, I would say, this also number will come out to less than 25%.

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Challa Sreenivasulu Setty, State Bank of India - MD & Director [23]

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No, sir, in this MSME, we have about 47% of the people.

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Rajnish Kumar, State Bank of India - Chairman of the Board [24]

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In MSME, the number is higher and in line with other banks.

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Deepak Agrawal, [25]

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Got it. Got it. Okay, sir. And sir, just last one thing from my side, sir. Sir, your tenure with the bank is, I think, around September it is. Anything you are hearing from RBI because we keep on hearing that there could be extension this time around January for the sector?

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Rajnish Kumar, State Bank of India - Chairman of the Board [26]

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That you have to ask, I am not aware.

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Operator [27]

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We take the next question from the line of Mahrukh Adajania from Elara (sic) [IDFC].

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [28]

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Sir, I have a few questions. Firstly, just a clarification again on moratorium. If you were to include the moratorium offered on working capital, what would our moratorium number be against the 23% on just term loans?

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Rajnish Kumar, State Bank of India - Chairman of the Board [29]

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We are not checking it that way. The way we are taking is that what is the interest amount on a monthly basis which we are setting aside and is not paid. So that number is coming to an average of INR 1,500 crores per month.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [30]

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Okay. And sir, correct me if I'm wrong, so what you said is that the people or the amount of loans under moratorium that you have disclosed is all those who have not paid 2 installments,

like that or...

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Rajnish Kumar, State Bank of India - Chairman of the Board [31]

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No, 82% have paid 2 or more installments.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [32]

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Okay. So when you say someone is under moratorium or 23% is under moratorium, it means that the person has paid 1 installment or 2 installments, or 2 installments?

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Rajnish Kumar, State Bank of India - Chairman of the Board [33]

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No. We are very clear. We are not taking 1 installment payment. When we say that 2 or more installments out of 3, this number is 82%. One installment, you add another 10%. So that becomes 92%. Those who have not paid any installment, that is 8%.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [34]

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Okay. So the moratorium is...

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Rajnish Kumar, State Bank of India - Chairman of the Board [35]

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From my side 100% people, we have given moratorium as per RBI guidelines. It is your choice. I have given to you. You don't want to pay, don't pay. But if you want to pay, I'm not stopping you from paying.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [36]

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But 23% includes those who have not paid 1 and those who have paid 2 also, right?

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Rajnish Kumar, State Bank of India - Chairman of the Board [37]

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23% includes, again, I am saying, right? 23% -- you say, 8% who have not paid any installment.

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Challa Sreenivasulu Setty, State Bank of India - MD & Director [38]

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9%.

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Rajnish Kumar, State Bank of India - Chairman of the Board [39]

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9%.

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Challa Sreenivasulu Setty, State Bank of India - MD & Director [40]

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7% is 1 EMI.

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Rajnish Kumar, State Bank of India - Chairman of the Board [41]

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7% is?

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Challa Sreenivasulu Setty, State Bank of India - MD & Director [42]

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One EMI.

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Rajnish Kumar, State Bank of India - Chairman of the Board [43]

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One EMI and rest all upgrade, put decimals over difference happen. So ultimately, it is coming to 17% or so. So that way like one is that even if those who have not paid, it is not a pointer to the fact that they will default. So that is one. In housing loans because the portfolio quality is such, loan-to-value ratios are so good, I have seen in the past that even if there is some delay or arrear condition, but over a period of time, it gets adjusted because 92% of our own loan is to those people who live in those offices, so they don't easily default.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [44]

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Got it, sir. Sir, and my other question is on your margin. So there has been a decline in yield in the quarter on a sequential basis. That's driven by what? It's agri reversals or...

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Rajnish Kumar, State Bank of India - Chairman of the Board [45]

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Interest reversal on agri NPL and Essar Steel.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [46]

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Correct, but this agri NPL, it is just during the quarter, there has been some change in policy.

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Rajnish Kumar, State Bank of India - Chairman of the Board [47]

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During the quarter.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [48]

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So whatever became NPL during the quarter, reversal on that, right? Not any change in policy or any such thing?

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Rajnish Kumar, State Bank of India - Chairman of the Board [49]

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No. Because you have to go back 3 years.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [50]

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Okay, okay. So it is a 3-year reversal.

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Rajnish Kumar, State Bank of India - Chairman of the Board [51]

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So INR 5,000 crore fresh slippage in agri. So obviously, there's a reversal of interest on just INR 5,000 crores, that itself will be fairly substantial amount, almost 20%, 30%.

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Operator [52]

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And so we'll take the next question from the line of Roshan Chutkey from ICICI Prudential Mutual Funds.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [53]

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Sure. So sir, I wanted to understand the thought process behind how you go about doing the deposit rate cut. While we did cut rates last month, 5.5 on TD, just wanted to understand, is there any quant approach that we follow? Just your thoughts on this.

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Rajnish Kumar, State Bank of India - Chairman of the Board [54]

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The thought is that we should protect our NIM. And if RBI cuts rate, so we also cut the rate. But now the issue is that when RBI cuts the rate, transmission has to happen. So we have to pass on the rate cut benefit to the borrowers. And I can't do that without doing the transmission on the liability side. So we do transmission on both sides.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [55]

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So in January, you were at around 6.1%. Now you are at around 5.5%. In the interim, RBI has cut a lot more than that and...

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Rajnish Kumar, State Bank of India - Chairman of the Board [56]

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But that is only ALM function. So on asset side also, it is not that completely we have passed on. There is something called external benchmark linked loan. So there, we pass on the full. But MCLR, it doesn't happen in full because the formula in MCLR is different. So ultimately, as I said, that...

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [57]

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MCLR is linked to the deposits, right -- MCLR is linked to the deposit rates, like, margin deposit rate, right?

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Rajnish Kumar, State Bank of India - Chairman of the Board [58]

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Yes, yes, MCLR. Marginal cost of lending rate, that is linked to your cost of funding. Your external benchmark linked rates, it is not linked to your cost of funding. It is straightaway linked to your repo rate movement.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [59]

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That's right. My point is when you are borrowing that 5.5% and parking in RBI, at RBI's reversed repo window...

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Rajnish Kumar, State Bank of India - Chairman of the Board [60]

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I am getting money at 2.7% also. I'm getting money at 2.9%. So it is not entire 5.5%. And we have to take care of our retail franchise and in what maturity it is. So again, this is a temporary phenomenon. It is not a permanent phenomenon. So I can't cut to the interest rate on fixed deposits beyond a point. There are several considerations in the whole exercise. But as far as repo linked deposits are concerned, so we take care by cutting down the interest rate that our NII or -- sorry, not NII, NIM remains perfect.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [61]

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Sure. And just one other question on the moratorium. I was not very clear when we you answered Mahrukh, if you can just repeat yourself there? Sir, 23% is the moratorium that is considered based on how that approach that you follow, you said?

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Rajnish Kumar, State Bank of India - Chairman of the Board [62]

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We are taking the approaches that we have provided moratorium from our side to 100% of the people other than NBFC. And what we are finding that 83% people, they have paid 2 or more installments.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [63]

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83% of this 24% pool.

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Rajnish Kumar, State Bank of India - Chairman of the Board [64]

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No, no, total. Total.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [65]

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Yes, just to give some broad numbers, if you take our term loan customers, it is about 94 point...

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Rajnish Kumar, State Bank of India - Chairman of the Board [66]

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94 lakh term loan accounts. And out of which the people who have not paid 0 installment -- who have not paid even a single installment is 9 lakhs.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [67]

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And 7 lakh people have paid 1 installment.

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Rajnish Kumar, State Bank of India - Chairman of the Board [68]

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And 7 lakh people have paid 1 installment. The rest all have paid 2 installments or more. Many of them have paid even more than 3 installments.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [69]

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Okay. And so what is 24% then?

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Rajnish Kumar, State Bank of India - Chairman of the Board [70]

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It's some 24%, 23% instead of 17%. 17%.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [71]

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We said that on average.

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Rajnish Kumar, State Bank of India - Chairman of the Board [72]

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The people who have paid 0 or 1 installment, that number is 17%.

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Operator [73]

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We'll take the next question from the line of Manish Karwa from Axis Capital.

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Manish J. Karwa, Axis Capital Limited, Research Division - Executive Director of BFSI [74]

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Yes. Sir, just on the cost front, I wanted to check, what are the levers that we have to cut down on cost? Can we say that next year, which is fiscal '21, our absolute cost will be lower than F '20?

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Rajnish Kumar, State Bank of India - Chairman of the Board [75]

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It is not lower, but our plan is that it will be in absolute number other than the cost on account of retirement benefit, that would all depend upon how the yields play out. But if you exclude that, then our aim as of now is that there should not be any increase.

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Manish J. Karwa, Axis Capital Limited, Research Division - Executive Director of BFSI [76]

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Okay. And where do you see you will have some savings coming in? Like most of the private sector banks have cut down significantly on rental, work from home is helping them reduce costs. Are we also working on many such initiatives?

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Rajnish Kumar, State Bank of India - Chairman of the Board [77]

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Yes, we are. And that's where I said that our FIMM vertical initiative is a big initiative to cut down the costs because they take 38% of our branch network and contribute 10% of the business. So that is one. We are cutting down from administrative offices. So there will be savings. There's a fairly big savings possible. And then we are making it a flexi SBI, that is also very much on the agenda.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [78]

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Yes, like there is savings on accounts of lower travels, around training.

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Rajnish Kumar, State Bank of India - Chairman of the Board [79]

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Yes, travels, training. There a lot of things which are happening. So overall, staff costs, all are expected to come down.

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Manish J. Karwa, Axis Capital Limited, Research Division - Executive Director of BFSI [80]

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Okay. And if I may ask, many of the private banks are also not giving any pay raise this year, no bonus this year. Can, as a public sector entity, we can do that? As in, can we...

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Rajnish Kumar, State Bank of India - Chairman of the Board [81]

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(foreign language).

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Manish J. Karwa, Axis Capital Limited, Research Division - Executive Director of BFSI [82]

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Okay sir. And sir, second question is, on the second round of moratorium, how are we doing? Are we -- will we give it to all our customers? Or do we approach -- do we have a different approach this time?

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Rajnish Kumar, State Bank of India - Chairman of the Board [83]

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No, same approach and same trend.

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Operator [84]

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(Operator Instructions) We take the next question from the line of Kunal Shah from Edelweiss Securities.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [85]

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Yes. Sir, firstly on NBFCs, we are now 8% to 9% of the book, so how comfortable we would be further lending to the NBFC as a sector? And even within the corporate, are we seeing that more funding is done to the existing relationship from the undrawn line? And that could be one of the reasons where in the moratorium is still on the lower side.

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Rajnish Kumar, State Bank of India - Chairman of the Board [86]

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Arijit?

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Arijit Basu, State Bank of India - MD of Commercial Clients Group & IT and Director [87]

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Yes. No, that is also not the case. So just to give you a sense, in the COVID line, which you are aware that State Bank has given, that additional 20% -- additional 10% initially. In that, about INR 5,000 crores, we were able to sanction and the drawing is only INR 2,000 crores, so they have taken sanction, but they are not drawing. Because as of now, as of March 31, most of our corporate had sufficient cash before COVID. And going forward, as the lockdown unfolds, they will then take a call and go forward. I think it is a reflection also of the quality of the book that we had before COVID has set in. So while there is a little bit of uncertainty about the impact of COVID, it is the quality of the overall asset book which is holding on for State Bank. And that is why you see that these numbers are significantly lower.

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Rajnish Kumar, State Bank of India - Chairman of the Board [88]

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And NBFC, we are doing it on a case-to-case basis. And whatever is our share in the lending. And we have since borrow from multiple sources. And that requirements so far which has come is not huge. They are all smaller exposures. They're also -- we are making use and we'll make use of partial credit guarantee scheme, which government is giving. And we will be able to support the sector. There is no doubt about it. But we'll be able to manage the risk also.

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Operator [89]

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

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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 [90]

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Sir, just on the agri slippages, you indicated this quarter, of the funds, we could see now a reversal of (inaudible) of interest income. If I had to look at -- for the full year as a whole, if we had INR 15,000 crores slippages from the agri, would that be fair to say almost 20% to 30% of interest reversal would have happened on this?

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Rajnish Kumar, State Bank of India - Chairman of the Board [91]

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Yes, 30%, give and take, because if we apply 9%, 9 x 3, 27%, so fee of interest will come to around 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 [92]

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Okay. So effectively, 4%, 4.5% sort of interest reversal could have happened this year?

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Rajnish Kumar, State Bank of India - Chairman of the Board [93]

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In agriculture, yes.

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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 [94]

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Okay. And sir, do you still believe, sir, since now agriculture favor is behind as agricultural slippage has come down, do you see -- where do you see this number for FY '21?

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Rajnish Kumar, State Bank of India - Chairman of the Board [95]

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Normal, which was like whatever was '19 or '18 number. So our slippage would be net rate. Only in 2020, it was elevated. So I think we had additional NPA of about INR 9,000 crore to -- INR 8,000 crore. It just doubled

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [96]

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INR 8,978 crore to INR 15,000 crore.

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Rajnish Kumar, State Bank of India - Chairman of the Board [97]

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And this year, like the crops have been good. Rabi is good. Kharif sowing, I am told, is going to be good. So that way, like even in COVID-19, agriculture is one segment, which has less impact.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [98]

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And in those states where debt relief is there, sir, like Maharashtra. Now down, we were...

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Rajnish Kumar, State Bank of India - Chairman of the Board [99]

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So that was like in '20, and that's what I said that when we are doing all of our, this, stressed asset analysis, the INR 7,000 crore, INR 8,000 crore, which we did extra in agri that we are not expecting that will be there. So the other sectors can contribute like your housing or personal loan or SME. So we have that cushion in agri.

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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 [100]

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So in agri -- sir, your focus is also changing in agri gold loan?

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Rajnish Kumar, State Bank of India - Chairman of the Board [101]

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Yes, in agri gold loan, there is a big component.

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Operator [102]

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We take the next question from the line of Dhaval Gada from DSP Investment.

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Dhaval Gada, DSP Investment Managers Pvt. Ltd. - Assistant VP of Investments & Equity Analyst for Financials [103]

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Just a couple of questions. First is on the fee income. Sir, how are you thinking of fee growth next year? And the second bit is in terms of the profit from the sale of subsidiaries of about INR 6,000 crore plus in FY '20. How do you sort of intend to monetize those stakes in FY '21 in terms of any thought process on that front? Those are 2 questions.

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Rajnish Kumar, State Bank of India - Chairman of the Board [104]

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So FY '21, SBI Life, [2.5%] we will necessarily do and we have time for that. And other than that, we had AMC on the radar. But in current situation, I don't think that we can -- as on date, I can make any definitive statement. We will think. But otherwise, about the other income, so including all this income from sale of investments and everything, we are at INR 450 billion. There may be like -- it will be difficult because one is strategic investment sale is here, then some pressure on Forex income. And they are saying so -- that is what I said that there will be some pressure on the other income this year, but compensating would come from the NIM.

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Operator [105]

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Thank you. We take the next question from the line of Jai Mundhra from the B&K Securities.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [106]

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Sir, once again on moratorium, if you can share what is the loans under term loan? So you have given 23% by value on term loan component. What is the total term loan of the bank?

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Rajnish Kumar, State Bank of India - Chairman of the Board [107]

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No, we have not giving it by value. We have given it by number. So we said that 94 lakh terminal accounts are there, 9 lakh...

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [108]

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9 lakh have not paid.

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Rajnish Kumar, State Bank of India - Chairman of the Board [109]

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9 lakh have not played any installment, and 7 lakh have paid 1 installment, and rest all have paid 2 installments or more.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [110]

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So I think, sir, you mentioned in your presentation that 23% of the term loans are about...

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [111]

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(inaudible) numbers will likely...

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Rajnish Kumar, State Bank of India - Chairman of the Board [112]

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It is not about numbers. It's not about the value anyway.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [113]

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Okay, so by value, what is the loans under moratorium, sir, for the entire bank?

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Rajnish Kumar, State Bank of India - Chairman of the Board [114]

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It will be -- we have not done that analysis. But it will be lower because it will be the smaller value loans, where people will find it difficult to survey. But that analysis also, I think, we can do.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [115]

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We can do, but currently we have not done.

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Rajnish Kumar, State Bank of India - Chairman of the Board [116]

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Currently, we have not.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [117]

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We have an estimate in the corporate book...

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [118]

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Corporate book, we have -- it's hardly 7% to 8% in terms of value.

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Rajnish Kumar, State Bank of India - Chairman of the Board [119]

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And in terms of number, it is 13%. So corporate book, we have that number. For the retail, we have not done. But what happens that these are generally the small value accounts where there is this situation. The mid-value, high-value, they don't afford with the pay.

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Operator [120]

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Thank you. We take the next question from the line of Prakhar Sharma from Jefferies.

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Prakhar Sharma, Jefferies LLC, Research Division - Equity Analyst [121]

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Sir, could you clarify, like on the working capital side, you mentioned that about INR 1,500 crores of interest income only has taken moratorium per month basis. So at the bank level, what is the size of working capital loans, out of like the INR 23 lakh crore...

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Rajnish Kumar, State Bank of India - Chairman of the Board [122]

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Forget about the IBG book. So domestic book is INR 20.5 lakh crore and I think it would be about INR 9 lakh crore.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [123]

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INR 4 lakh crore to INR 5 lakh crore in corporate.

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Rajnish Kumar, State Bank of India - Chairman of the Board [124]

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I'll just tell you what is our working capital outstanding. That's the tally number, but it will be about...

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [125]

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INR 9 lakh crore.

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Rajnish Kumar, State Bank of India - Chairman of the Board [126]

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INR 9 lakh crore.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [127]

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There could be some deposits and all these things.

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Rajnish Kumar, State Bank of India - Chairman of the Board [128]

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No, whatever, all type of working capital loan, our total book is INR 9 lakh crore.

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Prakhar Sharma, Jefferies LLC, Research Division - Equity Analyst [129]

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Right. So sir, basically, if I...

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Rajnish Kumar, State Bank of India - Chairman of the Board [130]

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That number would come to same, even if you take an average yield of 9% on INR 9 lakh crore, so it is INR 81,000 crore means INR 7,500 crore or so, that would be the interest applied to these accounts. Again, it will come to the same 15% to 20%.

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Prakhar Sharma, Jefferies LLC, Research Division - Equity Analyst [131]

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Sir, would it be fair to assume that -- just the reverse calculation, as you rightly said, that INR 1,500 crores on a full year basis works out to whatever INR 18,000 crore? I know it's not a full year adjustment, I'm just basically looking at it and...

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Rajnish Kumar, State Bank of India - Chairman of the Board [132]

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In 6 months period, you will have INR 9,000 crores of interest to be recovered this 7 installments starting from September. That's all.

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Prakhar Sharma, Jefferies LLC, Research Division - Equity Analyst [133]

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So broadly by value, would it be fair to assume that right now, approximately 20% of the working capital borrowers are also taking moratorium from interest servicing?

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Rajnish Kumar, State Bank of India - Chairman of the Board [134]

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Maybe, yes.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [135]

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INR 7,71,000 crore.

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Operator [136]

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We take the next question from the line of [Gaurav Oza] from GEPL Capital.

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Unidentified Analyst, [137]

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Yes, I just wanted some color on advances going forward, especially to the MSME sector given the guarantee under the new scheme. So how are we seeing that pan out? And can you throw some color on that?

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Rajnish Kumar, State Bank of India - Chairman of the Board [138]

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So GCL, we have 8 lakh eligible borrowers and INR 29,000 crore. That is what it comes out to be 20%, 20%, right? So multiply by 5x, so INR 1,50,000 crore worth of portfolio is eligible. And then we have given offer to everyone. And let us see that how many people avail that offer. But we are open to giving it to everyone.

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Unidentified Analyst, [139]

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So what has been the response so far from the...

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Rajnish Kumar, State Bank of India - Chairman of the Board [140]

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So far good, about 10%, we have in terms of number and 30% or 35% in value. So that is already done.

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Operator [141]

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We take the next question from the line of from Rahul from Goldman Sachs.

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Rahul M. Jain, Goldman Sachs Group Inc., Research Division - Executive Director [142]

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Sir, just one clarification. So the moratorium number that you have disclosed, just wanted to check does it cover all the portfolios including agriculture, et cetera?

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Rajnish Kumar, State Bank of India - Chairman of the Board [143]

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It is your P, housing, (inaudible). Agri, we have not given (inaudible).

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [144]

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(inaudible) corporate also.

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Rajnish Kumar, State Bank of India - Chairman of the Board [145]

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P, agri and corporate. Agri, the government has given time up to 31st August. In any case, agri, because it is aligned to the crop season, so there is no relevance of monthly moratorium or EMI. This is all crop season. I think, May and November. So in any case, the payments would have become due in 31st May, so which will get extended by 90 days, too. It is aligned to Kharif season.

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Rahul M. Jain, Goldman Sachs Group Inc., Research Division - Executive Director [146]

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Makes sense. And so basically, outside of these sectors, it covers all the category or...

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [147]

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Everybody.

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Rajnish Kumar, State Bank of India - Chairman of the Board [148]

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Other than agri, everything.

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Rahul M. Jain, Goldman Sachs Group Inc., Research Division - Executive Director [149]

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Yes. Yes. Just one small clarification further. So is it possible to get some color as to the customers who have paid no installments which is 9 lakhs, and those who have paid 1 installment that is 7 lakhs. Can you give us some split or some color as to which sector, which segment is, or which category is this?

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [150]

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We are still analyzing.

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Rajnish Kumar, State Bank of India - Chairman of the Board [151]

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That analysis we will do. So -- but as I said, that there would be smaller accounts, not the bigger ones.

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Rahul M. Jain, Goldman Sachs Group Inc., Research Division - Executive Director [152]

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Yes. Because the worry, sir, in 7 months, how easy it would be to cover the rest of the installment?

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Rajnish Kumar, State Bank of India - Chairman of the Board [153]

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A large chunk of it would be housing loans. And housing loans, as I said, that it is a function of 2 things. One is that even if there is some arrear conditions, but we will pay. And why do we pay because 92% of them live in those houses. That's why the recovery percentage, I am not worried about, either in housing or P segment.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [154]

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Even P segment, sir, unsecured personal loan, these are the 20% in an overall...

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Rajnish Kumar, State Bank of India - Chairman of the Board [155]

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Overall.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [156]

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But if you take only the unsecured personal loan, the people who have availed moratorium is 5%.

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Rajnish Kumar, State Bank of India - Chairman of the Board [157]

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Yes. And SME because of all these leverages, which have been given by RBI, so that's why we will be able to manage. So we are not overtly worried about what will happen in September. And let me tell you that our soft calls, not the recovery call, but our customer engagement during this period has increased because many people are working from employer home. So all of them, they have been told to do soft calls on the customers.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [158]

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And explained the implications.

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Rajnish Kumar, State Bank of India - Chairman of the Board [159]

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And explained the implications of all that. So -- but that is going in a very soft manner, I would say.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [160]

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And many of the customers have said they are -- in P segment and home loans, they are not paying because they just want to conserve cash for the time being. If not, as soon as possible, they will pay.

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Operator [161]

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We take the next question from the line of Anand Laddha.

We take the next question from the line of Mahrukh Adajania from Elara (sic) [IDFC].

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [162]

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Sir, I just wanted to check on NBFC. Sir, in April, May, how much would you have fresh loans or fresh debt would you have extended to NBFCs and HFCs collectively in April, May? Because there was the LTRO, a lot of NBFCs have said on call that they have borrowed from PSUs, including SBI?

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Rajnish Kumar, State Bank of India - Chairman of the Board [163]

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So sanctions, we are working on about 50 proposals, most of them are to the smaller companies, the smaller NBFCs. And roughly, it would be totally around INR 15,000 crore to INR 18,000 crore of proposals, of which, I think, by now, 20% would have been sanctioned, but disbursals will now happen. As you rightly said, it is a mixture of investment and loans. So -- and in no case, just to give a color, in no case, have they asked for anything more than maybe 15%. The average is around 15% to 20% of their existing exposure.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [164]

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Okay, sir. And how much of this is under TLTRO 1 and 2?

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [165]

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TLTRO 1 and 2, we will have to split the NBFC. But TLTRO 2 was only for NBFC (technical difficulty).

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [166]

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Sorry? Sorry, sir?

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [167]

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INR 1,000 crore, we have already given to NBFCs.

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Rajnish Kumar, State Bank of India - Chairman of the Board [168]

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TLTRO 2 was for NBFC. So 3,000 crore is what we took from RBI. our of which INR 1,000 crore is already given. And the remaining INR 2,000 crore is also lined up.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [169]

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Yes. Yes, INR 2,000 crore also should be happening very soon.

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Operator [170]

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We take the next question from the line of Nilanjan Karfa from IDFC Securities (sic) [Jefferies].

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Nilanjan Karfa, Jefferies LLC, Research Division - Equity Analyst [171]

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Going back to the SME question, I mean, I couldn't follow what you explained about the GSCL, which is INR 29,000 crore. Could you explain that please?

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Rajnish Kumar, State Bank of India - Chairman of the Board [172]

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GSCL is 20% -- should?

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [173]

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Yes, total eligible amount for this GSCL loan is INR 1,50,000 crore. So 20% of that would be, around INR 30,000 crores, it can be disbursed to 8 lakh -- 8.1 lakh SME borrowers.

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Nilanjan Karfa, Jefferies LLC, Research Division - Equity Analyst [174]

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Right. And it like a blanket approval for all of them? Is that what...

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [175]

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We have given offer letter to everyone who is eligible. So the people are -- people have to opt in. That means if they want, they have to come and sign off. If they don't want, they don't have to come. So, so far, around 60,000 approvals we have given, aggregating to around INR 10,000 crores. So 1/3 by value and around 10% by number so far have been given the sanctions. They may take money over a period of time because we have allowed the disbursement total in 3 to 4 tranches.

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Nilanjan Karfa, Jefferies LLC, Research Division - Equity Analyst [176]

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Right. And just on the same question, sir, are you doing a fresh underwriting, when you are giving this extra money irrespective of -- in spite of this being a guarantee?

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [177]

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As you said, this is a guaranteed loan, and it is also a pre-approved loan. So as long as the customer is fulfilling the requirements of the guarantee requirement, we're offering to everyone. There is no additional assessment involved in this and the guarantee guidelines also says that there is no additional assessment required.

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Nilanjan Karfa, Jefferies LLC, Research Division - Equity Analyst [178]

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So related question, sir, what is the outstanding ICA that we are sitting on at this point?

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [179]

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Creditor agreement?

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Nilanjan Karfa, Jefferies LLC, Research Division - Equity Analyst [180]

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Yes.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [181]

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Number or amount?

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Nilanjan Karfa, Jefferies LLC, Research Division - Equity Analyst [182]

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Amount.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [183]

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I don't have it. We can provide it you separately.

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Operator [184]

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We take the next slide from the line of Srinath from Bellwether Capital.

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Srinath V., Bellwether, Inc. - Equity Research Analyst [185]

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Sir, just want to know what is the home loan moratorium, sir?

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Rajnish Kumar, State Bank of India - Chairman of the Board [186]

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Home loan is around 20%. 20% of our customers of home loans have availed the moratorium.

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Srinath V., Bellwether, Inc. - Equity Research Analyst [187]

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At this trend, value-wise, sir, how much would that be?

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Rajnish Kumar, State Bank of India - Chairman of the Board [188]

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We don't have the value wise because we have not done that kind of analysis. We actually went by the number of accounts, number of customers who are taking it.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [189]

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And in unsecured, it's just 5% of the customers have taken moratorium.

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Rajnish Kumar, State Bank of India - Chairman of the Board [190]

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So when we are actually saying who has availed moratorium, in these 3 months, if they paid 2 and more installments, we consider that they have not availed the moratorium. So by that standard, it is 5.1% in the unsecured personal loan and 20% in the home loan.

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Operator [191]

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We take the next question from the line of Bhavik Dave from Nippon India.

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Bhavik Dave, [192]

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A couple of questions. One, just to continue the previous participant, what would be the number of home loan customers that we have?

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Rajnish Kumar, State Bank of India - Chairman of the Board [193]

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We have a total 38 lakh home loan customers.

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Bhavik Dave, [194]

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Okay. And out of which 20% of roughly getting moratorium, right?

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Rajnish Kumar, State Bank of India - Chairman of the Board [195]

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That's right.

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Bhavik Dave, [196]

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Yes, and secondly, sir, on the IBC front where we were expecting a lot of resolution and unfortunately, due to COVID lockdown, with IBC being suspended for a year, how does the recovery pipeline, especially in the wind type power project and some of the ICAs that we have signed. How do you see recovery on the corporate side for FY '21?

That is my question.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [197]

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I think Chairman has also mentioned on earlier occasion, the suspension, we have to await the ordinance anyway, but the suspension will not be applicable to the earlier defaults. So many of our power assets are under that category. And we have -- wherever it is required, we have initiated the IBC process. Wherever -- I mean, I think 90% of our power assets is under IBC. In 2, 3 cases where we were negotiating outside the IBC, we are hopeful that, that will get done in the Q2, that is quarter in July.

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Bhavik Dave, [198]

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In that quarter, quantum was like around INR 70,000 crores, if am not wrong, correct?

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [199]

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The total -- our remaining power portfolio is around INR 24,000 crores. So out of that INR 24,000 crore, I think, it is only 4 cases which are outside IBC.

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Bhavik Dave, [200]

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And what will the quantum be like for these 4 cases?

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [201]

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I can give you a little later. Is it okay.

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Bhavik Dave, [202]

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Okay, no problem.

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Rajnish Kumar, State Bank of India - Chairman of the Board [203]

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We can give you that number. We can share it. But ITP, our exposure now, whatever left is nothing significant.

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Bhavik Dave, [204]

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Now incremental resolution will happen outside IBC right? Like it is...

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Rajnish Kumar, State Bank of India - Chairman of the Board [205]

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Some of them are -- they are already in process. And that should -- in any case, we were not planning to take them to NCLT. The issue is that whatever were the cases which were in June, July when we revised resolution framework came. So all those cases, either they have been referred to NCLT or whatever was remaining, 6 cases, so there we had no plans to take them to NCLT. We would have either provided 100%. If it is not 100%, we would have provided whatever RBI says in terms of 7th June circular. So those accounts have been taken care of, and it really doesn't matter that now we can't take them to IBC because that was not the plan.

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [206]

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And we have 73% PCR on the power assets.

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Rajnish Kumar, State Bank of India - Chairman of the Board [207]

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Yes. And there is another piece of information that on power sector NPAs, 73% PCR.

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Operator [208]

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We take the next question from the line of Adarsh from CLSA.

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Adarsh Parasrampuria, CLSA Limited, Research Division - Research Analyst [209]

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Sir, I'll just repeat one of the questions we had on margins. Are our yields have off pretty sharply. One of the things that was mentioned was on the agri reversal. What was the other reason that you mentioned for...

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Rajnish Kumar, State Bank of India - Chairman of the Board [210]

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In December, we had Essar Steel resolution. Out of it, whatever came, part of it went to the interest income.

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Adarsh Parasrampuria, CLSA Limited, Research Division - Research Analyst [211]

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Right, sir, but I -- even if I track our NII, that I understand is a movement from 3Q to 4Q, right? That it's a drop. But even if I go and track our NII from 2Q and 1Q level, or even 4Q last year, in spite of the balance sheet growth, our NII is still down. So still not able -- because even last year, we would have had agri reversal. So our NII was down still Y-o-Y.

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Rajnish Kumar, State Bank of India - Chairman of the Board [212]

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No, not to this extent because agri, as I said that instead of INR 7,000 crores, if we have INR 15,000 crores, 30% to 35% would be NII reversal impact. So NII and quarter-to-quarter variation is all because of one account, which is Essar Steel. So over NII, we have -- overall, we have got INR 98,000 crore during the 4 quarters, which is up by 11%. So I think that is a fairly good number. And balance sheet growth, obviously, like more on the deposit side and loan growth has been 5%. So if you look at this analysis of how the interest income has grown and how the interest expenses have grown, there's one slide on that, that will explain the whole thing.

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Adarsh Parasrampuria, CLSA Limited, Research Division - Research Analyst [213]

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Sir, no, it is pretty clear that we've done a good job in the year, just that as you exit the year, right, which was the third quarter and then the fourth quarter performance, there seems to be some shave off in the margins if you exclude that Essar Steel, right? So it seems that there is some pressure. So if you can give...

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Rajnish Kumar, State Bank of India - Chairman of the Board [214]

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It will be like, as I said, this year, we are talking about '21. In last year, we had NII of INR 98,000 crore, right?

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Venkat Nageswar Chalasani, State Bank of India - Deputy MD of International Banking Group, Deputy MD & CFO [215]

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INR 98,000 crore.

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Challa Sreenivasulu Setty, State Bank of India - MD & Director [216]

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INR 98,000 crore. This year we will exceed [INR 1 trillion 8 lakh crore].

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Operator [217]

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

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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 [218]

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Sir, on the pension negotiation side, sir, if you can give some color on negotiation completed. At what level it's happening? And what sort of provision we have made? And on the pension side, if you can give some color like till what level rate of interest discount that we have taken? And next year onwards, sir, what should be the run rate for same provision?

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Rajnish Kumar, State Bank of India - Chairman of the Board [219]

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One is that, wage revision we have been providing at 10%. And this year, we have made a provision of INR 3,000 crores. Last year, we made a provision of INR 4,000 crores. And this year, the provision for wage revision, there are 2 components to wage revision, we have to understand: one is your normal, what we call the pay slip component. And second is, on account of pay slip component, the impact on the pension. So pension because we are now in the normal course, enhancing the escalation rate, both for the salary and pension escalation rate, which has gone up from 0.4% to 0.8% now. So that's why in the wage revision, your pension provision has come down. That is where we stand. And about the negotiation, I think, everybody was locked down, so were our union leaders. So now, I think talks should restart.

(inaudible) currently about this thing. And about the pension, as I said, that in pension when you do actuarial valuation, there are a couple of assumptions. So the yields have come down by 100 basis points almost, so that's why your pension liability has -- the provisions have gone up from INR 7,000 crore to INR 13,000 crore.

So that is the impact of, one, the yield has come down. Second, progressively we are increasing that what we call the pension escalation rate. And that will go on for 3 years more. We have to take it to 2%. That is our understanding with this as a Bank of India.

Pension, I think what I feel that we are more than adequately provided. We are a little bit overprovided, but that's all right. And wage revision, whatever is required, we can absorb. But in any case, a large chunk of it we are providing. Does it satisfy your question?

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Operator [220]

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We take the next question from the line of Abhishek Murarka from IIFL.

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Abhishek Murarka, IIFL Research - VP [221]

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Sir, my question has been answered.

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Operator [222]

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We take the next question from the line of Anirvan Sarkar from Principal AMP.

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Anirvan Sarkar, [223]

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Sir, just one question. I see a sharp increase in your exposure to commercial real estate and to petrochemical sector. So what is -- can you explain that?

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Rajnish Kumar, State Bank of India - Chairman of the Board [224]

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Commercial sector is all LRD, lease rental discounting, and that would be one. A lot of it is to the very large points which are operating in India and they have acquired some of the commercial real estate. So that is one. Qualitatively both the owners as well as the tenant. This is a very high-quality portfolio. And as far as petrochemical sector is concerned, it is mostly government-owned OMCs, and that is where our exposure is. So this is one of the best quality portfolio in our kitty.

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Anirvan Sarkar, [225]

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And sir, my next question is that regarding capital raise. So we already have an approval. So have we rethought the amount in the light of the recent event? Or...

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Rajnish Kumar, State Bank of India - Chairman of the Board [226]

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As of now, I don't think we need to raise capital either from the government or from the market.

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Anirvan Sarkar, [227]

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.

So our CET1 is at 9.77%.

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Rajnish Kumar, State Bank of India - Chairman of the Board [228]

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9.77% is around CET1. So like our comfort level is around 10%. So it will happen in this year hopefully.

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Operator [229]

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We take the next question from the line of Kajal Gandhi from ICICI Securities.

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Kajal Gandhi, ICICIdirect.com, Research Division - Banking and Financial Services Research Analyst [230]

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Yes, sir. Sir, just wanted to know, you are seeing extremely high level of deposits growth because the flow is coming to aside. So what will be our strategy now on the liability side because we are sitting on excess liquidity?

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Rajnish Kumar, State Bank of India - Chairman of the Board [231]

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As I said you that, of course, we have the lowest interest rate in the market and the differential is anywhere between 30 to 100 basis points. But we have a huge customer base, 49 crore customers. Only thing is that we want to keep it, the cost, we have to keep under control, and that is what we have been able to do. And on the deployment side, we are looking for good opportunities. In 2 months, our high-quality bond portfolio has gone up by almost INR 1 trillion. And they all are AAAs. INR 32,000 crore we got from RBI. So everything is very high-quality deployment. So some expansion in the bond portfolio has happened, and we are hoping that going forward, the deposit growth may slow down. Because right now, what is happening that the money is flowing in and it is not going out as much. In savings bank, I am seeing that this rate of withdrawal on a monthly basis for last 2 months, it has come down because the opportunity to expand is not there. People are not traveling. People are not going to shopping malls, so for basic needs only people are using money. So I think this will change.

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Ravi Singh, HSBC, Research Division - Senior Analyst of Banks Research [232]

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Sir, while we wait for operator to reconnect. Sir, I have one question, given you have such large market share in terms of having corporate salary accounts, so what trends have you witnessed in terms of salaries being credited for employees of corporates across India for non-PSU. Are you seeing any trend in salaries being credited for non-PSU?

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Rajnish Kumar, State Bank of India - Chairman of the Board [233]

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Non-PSU Portfolio is not as huge as we government. But if I go -- we have not done that, honestly, the portfolio analysis in that sense, but most of the money comes to the savings bank account. And savings bank account, our YTD growth is almost INR 90,000 crore. The savings bank is INR 90,000 crore. Previous year was INR 15,000 crore, INR 16,000 crore. So it means that the salaries are being paid.

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Operator [234]

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We take the next question from the line of Pankaj Agarwal from AMBIT.

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Pankaj Agarwal, AMBIT Capital Private Limited, Research Division - VP of Research [235]

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Yes, sir in case of (inaudible) this year, what would be the (inaudible). Would you go to the market? Or you would sell stake in the subsidiary?

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Rajnish Kumar, State Bank of India - Chairman of the Board [236]

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What is it? Capital is, one is that our profit and earnings should be sufficient. So first is we are relying on our surplus from the earnings. And subsidiary, of course, there is only one compulsion, which is to sell 2.11% of SBI Life. That is what we have to legally do. Rest is all our choice and we will -- whenever the time is right, we will do it.

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Pankaj Agarwal, AMBIT Capital Private Limited, Research Division - VP of Research [237]

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But sir, what would be the choice given where the stock price is? Is it selling stake in subsidiaries or raising from the market rate cost subsidiary resolution?

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Rajnish Kumar, State Bank of India - Chairman of the Board [238]

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We will decide. We are not going by the price. We will just see that whenever the time is right for listing our AMC and the SBI General. So that is the call we will take. We are in no hurry I would say.

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Operator [239]

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We take the last question from the line of Rahul from Goldman Sachs.

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Rahul M. Jain, Goldman Sachs Group Inc., Research Division - Executive Director [240]

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And just the last question. There is a lot of talk about of possible restructuring of loan that could be allowed by the Reserve Bank of India. Should that be allowed given that the restructuring on approved loans? What do you think how much of the loan portfolio could potentially be restructured, just a rough guess, sir?

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Rajnish Kumar, State Bank of India - Chairman of the Board [241]

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So if you ask me that in my portfolio, it is not more than 0.5% or 0.75% of my loan book. One is that this 6-month moratorium on term loan installment, in a way, it is a mini restructuring. We are like this 6-month installment, one can choose to pay at the end of the term loan, whenever the term loan ends. Other than that, MSME, because there's a support available by way of this guaranteed emergency credit like banks own credit line and the dispensation given by RBI for reassessment of working capital. So there are tools available. Now the deep restructuring, if you ask me, would be required,only for those accounts or corporates which are really in deep trouble. So that we would know only when this unlocking happens and we come to know. But as of now, our discussion with all the midsized and large corporates, we don't have any requests on day for any restructuring. I think, and RBI would also, this is my view, would like to wait and recalibrate or calibrate their response depending upon how things unfold.

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Rahul M. Jain, Goldman Sachs Group Inc., Research Division - Executive Director [242]

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Okay. So essentially, it should not really lead to a large buildup of the restructuring pipeline that would be allowed?

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Rajnish Kumar, State Bank of India - Chairman of the Board [243]

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I don't think so.

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Operator [244]

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All right. I would now like to hand the conference back to the management for their closing comments. You may please give your closing comments, sir.

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Pawan Kedia, State Bank of India - General Manager of Performance Planning [245]

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Yes. Thank you very much to all analysts. We really enjoyed the question and answer question. We hope we have replied to all the questions. Whatever is left out, we will provide separately.

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Ravi Singh, HSBC, Research Division - Senior Analyst of Banks Research [246]

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Thank you. Thanks to management. And again, thank you, everyone.

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Rajnish Kumar, State Bank of India - Chairman of the Board [247]

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Thank you.

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Operator [248]

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Thank you. On behalf of HSBC that concludes todays conference. Thank you for joining us. You may now disconnect your lines.