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Edited Transcript of SOUTHBANK.NSE earnings conference call or presentation 26-Jul-19 5:00am GMT

Q1 2020 South Indian Bank Ltd Earnings Call

Aug 10, 2019 (Thomson StreetEvents) -- Edited Transcript of South Indian Bank Ltd earnings conference call or presentation Friday, July 26, 2019 at 5:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Joseph K. Thomas

The South Indian Bank Limited - EVP of Operations

* V. G. Mathew

The South Indian Bank Limited - MD, CEO & Director

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Conference Call Participants

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* Amit Kumar Singh

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

* Jai Mundhra

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

* Kunal Shah

Edelweiss Securities Ltd., Research Division - Associate Director

* Nitin Kumar Aggarwal

Motilal Oswal Securities Limited, Research Division - Research Analyst

* Pranav Gupta

Aditya Birla Sun Life Insurance Company Limited - Research Analyst of Banking & Financial Services

* Pritesh Bumb

Prabhudas Lilladher Pvt Ltd., Research Division - Equity Research Analyst

* Rakesh Kumar

Elara Securities (India) Private Limited, Research Division - VP and Analyst

* Rohan Mandora

Equirus Securities Private Limited, Research Division - Analyst

* Rusmik Oza

Kotak Securities (Institutional Equities) - Head of Fundamental Research & Senior VP of Fundamental Research

* Sachin Kasera

Lucky Investment Managers Private Limited - Analyst

* Sapna Laha;Bajaj Holdings & Investment Ltd.;Research Analyst

* Sharvari Joshi;Trivikram Consultants;Equity Research Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Q1 FY '20 Results Earnings Conference Call of South Indian Bank, hosted by Prabhudas Lilladher Pvt. Ltd. (Operator Instructions)

Please note that this conference is being recorded. I now hand the conference over to Mr. Pritesh Bumb from Prabhudas Lilladher Pvt. Ltd. Thank you, and over to you, sir.

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Pritesh Bumb, Prabhudas Lilladher Pvt Ltd., Research Division - Equity Research Analyst [2]

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Hi, everyone. Thanks for joining in today. I will like to welcome the management of South Indian Bank for discussing their Q1 FY '20 performance and outlook of the bank. Without further ado, I would like to hand the call to the management for their opening remarks, followed by Q&A. Thanks. Over to you, sir.

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [3]

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Thank you. A very good morning to all, and thank you for joining us for our Q1 FY '20 Earnings Conference call. We are joined by Mr. Thomas Joseph, EVP Operations; Mr. G. Shivakumar, EVP, Credit; Mr. K. Raghunathan, EVP, Treasury; as well as CFO, Ms. Chithra.

Let me take you through the key highlights of the operational and financial performance for this quarter. I am delighted to announce that the profit after tax rose from INR 23 crores in Q1 FY '19 to INR 73 crores in Q1 FY '20.

As mentioned in our previous investor interactions, we remain committed to our strategy of expansion in the retail, MSME and Agri business segments, increase the share of other income and a superior asset quality. As on June 30, 2019, the total business of the bank stands at INR 145,374 crores, an increase of 13%. Advances grew by 13% to INR 63,651 crores, driven by continued robust growth in retail, MSME and Agri bond segments, while corporate segment registered marginal growth of 3%.

Return on growth of 25% was primarily driven by mortgages, auto loans and gold loans. Our data mining and analytics initiatives have rendered very encouraging results, with encouraging products per customer. We hired experienced employees in the last financial year to work with initiatives, resulting in overall growth in various focused segments.

The share of corporate loans declined from 36% as on June 2018 to 32% as on June 2019, and we expect moderate growth in this segment going forward. The profit grew by 13% to INR 81,723 crores.

CASA deposits increased by 10% to INR 19,719 crores. CASA ratio remained stable at 24% of the total deposits. Our investment book rose by 10% to INR 20,692 crores of which HTM category contributed INR 16,467 crores, while AFS contributed INR 4,213 crores and HFT was INR 12 crores.

Gross NPA ratio stood at 4.96% as on June 30, 2019, as against 4.92% as of March 2019, a marginal increase of 4 basis points. Net NPA ratio stood at 3.41% and it was improvement of 4 basis points as against March 2019.

Net interest income for the quarter stood at INR 536 crores rupees, registering a growth of 8%. Net interest margin was 2.53% in the current quarter as against 2.46% in Q4 FY '19.

Other income for the quarter increased by 25% to INR 182 crores. Our core transaction fees rose by 10% to INR 65 crores, while ForEx income increased by 46% to INR 13 crores.

We have already entered into multiple distribution tie-ups with leading insurance companies and are seeing strong traction in third-party sales.

As we continue to expand the retail and MSME verticals, we expect better momentum in the transaction fee and third-party income in the coming quarters.

Operating profit for the quarter was INR 318 crores, up against INR 270 crores in Q1 FY '19, an increase of 18%, driven by higher income and better cost efficiencies. In Q1 FY '20, the business per employee rose by 12%, while business per branch rose by 11%. The cost-to-income ratio improved from 57.9% to 55.7% Y-o-Y. We expect the improvement in the OpEx ratio to continue as we gain from operating leverage from our centralized operations, higher fee income and increasing productivity from existing branches.

All of our provisions declined from INR 232 crores to INR 205 crores in Q1 FY '20. These provisions included loan-loss provisions of INR 184 crores. Including write-offs, the provision coverage ratio stood at 45.1% as of June 2019, vis-à-vis 42.5% as of March 2019.

Annualized recurring cost for the quarter stood at 123 basis points, a decline of 8 basis points as against Q4 FY '19. We expect FY '20 credit cost to be in the range of 1% to 1.1%. Our overall capital adequacy stands at 12.2%, while the core CRAR is at 9.7%. The bank has a wide geographical presence with 870 branches, 53 extension counters and over 1,400 ATMs.

To summarize, the bank continues its steady progress towards strong business growth, favorable loan mix and improved asset quality. We expect that these measures will enable us to deliver higher profits in the coming quarters.

With this, we open the floor for questions.

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Questions and Answers

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Operator [1]

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Thank you very much. We will now begin the question-and-answer session. (Operator Instructions)

The first question is from the line of Nitin Aggarwal from Motilal Oswal Securities.

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Nitin Kumar Aggarwal, Motilal Oswal Securities Limited, Research Division - Research Analyst [2]

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Sir, a few questions. Firstly, like, in the earlier calls, you have talked about improving provisional coverage ratio to closer to 60%. Now most of the slippages have been in control. So how do you see the outlook for the slippages and as well the coverage ratio during FY '20?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [3]

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Yes. On a Y-o-Y basis, the provision coverage ratio has improved from 39% to 45%, if I remember correctly, yes. So obviously, at least a similar improvement should be there going forward, I mean, by the end of the year. So our target definitely is 65%. But we have mentioned that the credit cost is something like INR 200 crores every quarter. So that continues to be the position. And we also hope that the resolution of some of the IBC claims would happen. And we hope that our recovery targets -- we definitely believe that our recovery targets we'll be able to achieve also, around INR 600 crores, although we are saying INR 500 crores of the target, we should be able to do around INR 600 crores at least by the end of the year. So with all this, the provision coverage ratio will definitely show improvement.

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Nitin Kumar Aggarwal, Motilal Oswal Securities Limited, Research Division - Research Analyst [4]

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All right. And secondly, on the deposit concentration of that, concentration ratio has increased for FY '19, and the growth in bulk deposits remains especially higher than what it has been in the retail. So what is the differential in pricing between the 2 segments? And what steps are we taking to improve the retail deposit's growth?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [5]

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All the branches are today focusing also on retail deposits along with CASA and retail credit. Maybe for some time because of relatively muted growth on the asset side, we have not been forcing the branches to pursue the retail deposits so aggressively, but already that effort has started and there is significant traction on the ground for that. And I'm sure going forward for the...

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Unidentified Company Representative, [6]

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June quarter.

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [7]

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June quarter, the..

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Unidentified Company Representative, [8]

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As somebody was mentioning, there has been some change that has happened in the proportion of bulk depository within the quarter. In the current quarter, the Q1 of the current year compared to the Q4 of last year, the bulk deposit totally has come down by around 3%. So we are in the right direction.

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Nitin Kumar Aggarwal, Motilal Oswal Securities Limited, Research Division - Research Analyst [9]

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Okay. And, sir, the other is also on the treasury side, now this quarter we've reported a healthier treasury performance. And -- so how much are the pending MTM losses that we can reverse for the second quarter and have we transferred any securities to this segment this year?

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Unidentified Company Representative, [10]

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The AFS segment securities transfer has happened in the first quarter itself. And relatively, presently, there is no MTM losses, which on the present -- from the bond side, it is there. But on the government as well as security side there is no provision we are provided in this quarter. And we have already returned back INR 1 crore during this quarter. And going forward, as we go, the (inaudible) bond portfolio, rates are likely to come down, accordingly, the reverse can happen.

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Nitin Kumar Aggarwal, Motilal Oswal Securities Limited, Research Division - Research Analyst [11]

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But can you give the number of like outstanding MTM losses, within which we can look to reverse in the second quarter?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [12]

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The exact amount, at the moment, I can not give. We'll do it separately.

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Operator [13]

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(Operator Instructions) The next question is from the line of [Saket Kapoor] from [Kapoor and Company].

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Unidentified Analyst, [14]

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Sir, firstly, if you could give me a breakup of investment under the 3 categories: AFS, HT -- HFT and HTM?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [15]

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HTM is for INR 16,467 crores. The AFS is INR 12,213 crores. And HFT is INR 12 crores.

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Unidentified Analyst, [16]

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All right, sir. And, sir, for us to see the improvement in NIM, sir, what are the things that are needed to be done? And what should be the -- what should we be the way forward for the remaining part of this fiscal year? How well are we geared up to meet the same? And what are you guiding us for that?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [17]

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Are we talking mainly about the pressuring or other areas?

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Unidentified Analyst, [18]

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No. I'm talking about the NIM, sir. Could you also tell if you could give some light because the bond is (inaudible) with it. So how are we positioned in the market? What is your outlook, sir?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [19]

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Yes. So NIMs have shown a definite improvement during this quarter over the previous quarter. And going forward, what we are trying to do is to ensure that there is a slightly better pricing on the asset side. As far as the liability side is concerned, yes, there is a great focus on CASA, but I'm not trying to say that the CASA ratio is going to change dramatically over the remaining part of the year, but it is quite impossible for us to commit the right pricing on the asset side. We are making a lot of efforts about it. And they have centralized the process to make it geared towards that. We are not easily succumbing to customer pressure on reduction of interest rates on the asset side. And if [you look at] changes that we have implemented so far because that happens over a period of 1 year sometimes because of the basic being 1 year in Kerala. So we believe that all these efforts should lead to an improvement of around 10 to 15 basis points going forward to the end of the year.

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Unidentified Analyst, [20]

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Sir, for this year average, we should expect 2.85% our NIMs? In that vicinity?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [21]

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No. Less than that. More like 2.7%. 2.70% to 2.75%.

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Unidentified Analyst, [22]

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And like what was the average for last year, sir, March '19?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [23]

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March 19, we ended at 2.58%.

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Unidentified Analyst, [24]

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2.58%. So we are -- you are looking for 2.75% to 2.8 for this year?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [25]

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No. 2.7% to 2.75% maximum.

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Unidentified Analyst, [26]

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Maximum for this year. Sir, looking at that, if you could give me the slippage and the recovery for this quarter, sir?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [27]

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Yes. We had INR 3,132 crores to open the quarter and the first slippage was INR 241 crores. Recoveries, cash and upgradation, that is INR 87 crores. Write-offs were 132 crores and, therefore, the total deduction is INR 219 crores. Therefore, we have INR 3,154 crores at the end of the year at the end -- at the end of the quarter.

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Unidentified Analyst, [28]

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I missed the last part there. But how much has been the recovery, sir? Total recovery?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [29]

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Recoveries -- recovery by way of upgradation and cash recoveries, INR 87 crores.

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Unidentified Analyst, [30]

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INR 87 crores only.

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [31]

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Yes. Write-offs are INR 132 crores.

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Unidentified Analyst, [32]

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Okay. And what is our target, sir? What are we exactly looking for the end of the year in terms of both the recovery and the slippage as well? Where likely are we there to end?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [33]

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The slippage, as we have mentioned earlier also is that around INR 250 crores per quarter. It's what we have mentioned earlier, also. We hope to remain within that. I won't say that every quarter it will be precisely that number. It could vary here and there. But finally, finally, we should able to remain within the target of around INR 1,000 crores, which is around 50% of what used to be there in the last couple of years at least. So that is what we are looking at, and meanwhile, the recoveries should be at least INR 500 crores, INR 500 crores to INR 600 crores is what we are looking at

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Unidentified Analyst, [34]

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And sir, which categories do you think the recovery is likely to happen? And -- because, sir, what we are seeing there in the absence of any stimulus package from the government, how well will your targets will be realistic, sir. If things go the way they are today, how confident are you like in this scenario, the ones -- the targets which you have set out will be met?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [35]

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Yes. If you're talking about the slippage, we believe that we are reasonable in that. We have taken up -- that you know with the slippage levels it can come down by 50% as compared to last 2 years. That is what we are looking at, which seems to be moderate, considering that our last corporate issues are by and large over. And when you look at the recoveries, the recoveries because we've got a significant budget in place today, and we are not talking about the very large cases today or the resolutions we'll have to go through, maybe IBC process and processes like that. We are talking about recoveries in agriculture, recoveries in MSME, we are talking about recoveries in personal loan. So we have abundant [entity] which is available with us. Unlike earlier, when we had significantly sold out such portfolios to (inaudible) because of the requirement to manage the [NPA] position. So that is not the case today. We have a better [ability] and our recovery targets of INR 500 crores to INR 600 crores is definitely doable.

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Unidentified Analyst, [36]

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Sir, last question. In the segmental part, sir, you find this corporate and the wholesale banking reporting losses of INR 70 crores. So how would you explain which -- any particular account that has gone inc. Can you give us the detail of SMAs, how many since SMAs are we -- additions had been there for this quarter?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [37]

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Broadly the corporate loss has gone up because the base has come down because the growth is not there. In corporate, we are not growing. And the higher portions on account of the larger number of NPAs, which we had during the previous years that also has contributed to that. So now because of the reduced overall book size, the yield is also less, which disturbs the contribution, why the corporate side will show you the increasing loss. That is greatly compensated by the increase in profits in the retail segment because of the higher growth there, lesser portions and a better yield there.

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Unidentified Analyst, [38]

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What should be your outlook, sir, for the remaining part of the year? Is it going to worsen up because since -- or have we done with the provision and also, this is going to remain steady on quarter-over-quarter, how should we work out with a number in the corporate and the wholesale banking segments?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [39]

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So the corporate NPAs, I mean, that is -- the significant part of the NPA that we are holding today is coming from the corporate NPA. So obviously, those things -- the resolutions also will take some more time. That's the reason why we've said INR 200 crores would be the credit cost going forward every quarter. So there is no reduction. And again, the point that we must remember is that even with the improvement that has happened, even now, the provision coverage ratio is 45%. So we need to improve there also. So INR 200 crores of credit cost per quarter, we envisaged as we were always mentioning and it will continue.

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Unidentified Analyst, [40]

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For the total? I could not get your last point, sir. What should we factor in for the year? And last year it was, I think so, INR 127 crore in totality. This year, we have already done INR 70 crore loss. So what should be the ballpark figure for the full year, sir?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [41]

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The details we'll give you separatively. We will -- I will ask the CFO to furnish you those details separately. But overall, what we mentioned is the position, okay? INR 200 crores of credit cost every quarter going forward? Yes.

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Operator [42]

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(Operator Instructions) The next question is from the line of Sachin Kasera from Lucky Investment Managers.

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Sachin Kasera, Lucky Investment Managers Private Limited - Analyst [43]

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Congratulations for the improved numbers. My question was regarding the loan growth, what is the type of loan growth you think we can do? And do we have the capital to meet the aspiration that we are looking for the financial year '20?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [44]

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Yes. The first part of it, that is the loan growth is very strong in the retail and pretty decent in the MSME and agri levels. We're talking about overall 25 and 14 and 14. So these are comfortable levels. But on the corporate side, as we have always been mentioning, the growth will be muted. It grew Y-o-Y just about 3%. Going forward, also the current environment for us, the growth will be fairly muted. Overall therefore, the growth will be more like 15% to 18% for the year. Now the second part of the question, do we need capital? We might. And we have already taken the approval of the shareholders for a dilution of 30 crores per share, 30 crores number of shares and also for raising 500 crores of bonds. I'm sure these efforts are quite enough to meet any requirements of the capital for the growth support going forward.

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Sachin Kasera, Lucky Investment Managers Private Limited - Analyst [45]

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Yes. But sir, today, our stock prices at 40.4x the book value. So at this juncture, do you think it will not be dilutive to the existing shareholder basically who have to [raise their funds] 4x book value?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [46]

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Yes. We will look at all options, and we'll find out what is the best way of [planning] it. We have been able to maintain the growth. And also, year-end reasonable profit and also plow back a reasonable number over the last 2, 3 years -- 3, 4 years, and we believe we will continue to do that.

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Sachin Kasera, Lucky Investment Managers Private Limited - Analyst [47]

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Okay. And my next question is regarding the provision on those security receipts. What is the status on that? And does your credit cost of INR 200 crores per quarter include any more provisions we may have to do on our security receipts portfolio?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [48]

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No. It does not include. The INR 200 crores is the sum, in our view, more or less, is required for the credit cost assets because we do not know when a particular resolution happens under an IBC. It can happen suddenly, and if there is a write-down, which we expect to be there then we have to do that. So obviously, there is certain amount of uncertainty about the credit cost going forward. So we have put INR 200 crores as the normal one and that will be needed every quarter. And that does not cover the possible and probable incidence of provision coming out of any dilution in the net asset to value, yes.

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Sachin Kasera, Lucky Investment Managers Private Limited - Analyst [49]

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So, sir, what is your sense, how much more will we need to provide most likely for the 656 portfolio for a full year?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [50]

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In my view, basically, we are only talking about 1 particular tranche. Others are not giving any trouble at all. That particular tranche, which we sold out in March 2017 was INR 1,776 crores. With all the due tariffs more than 60% provision. And this is not as before, these accounts are only the last 4 pages, portfolio of 101 account, of which about 10, 11 are large and all the rest are good cases where significant amount of collateral security is available, maybe in some case, more than 100%. So obviously it all depends on how efficiently the collection happens and all those things and how the rating agencies look at it. So we have got one short-term provision coming out of that. With that, we are having now more than 50%. So we believe -- if you ask me, I would think that, that is good enough. But then again, this is a matter that is decided by the rating agencies and they review this portfolio every 6 months and, therefore, we are not able to say very precisely what will be the case. But we hope that doesn't happen.

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Operator [51]

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(Operator Instructions) The next question is from the line of Rohan Mandora from Equirus Securities.

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Rohan Mandora, Equirus Securities Private Limited, Research Division - Analyst [52]

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Can we see -- around your retail products, we are seeing a 5% to 6% sequential growth in the last 2, 3 quarters. So I just wanted to understand, like, how is the [liaising] power that we have across the segments? And secondly, if you could comment, within the SME (sic) [MSME] space, SME boys that who are -- we are having, how is the business environment and the liquidity situation. And then in geography -- South, as it is in non-South geographies?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [53]

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Yes. On the retail side, the growth is coming more -- I mean, our focus is also more on the home loans, mortgages and also, auto loans and gold. Now we have absolutely no difficulty, I mean, if gold grows significantly, and we are able to get a pricing in the range of around 10%. But we are not able to get that at the moment, it's the truth. We are short 10% when it comes to gold. And partially because this gold is also used for agri, subvention (inaudible), actually collateral for agri. So obviously, we are not getting a great pricing on that. As far as home loans and auto loans are concerned, as you may be knowing, they are not really highly supportive of NIM, but we are getting something very close to our MCLR. So we are -- a 1-year MCLR. So we are fairly comfortable there. The MSME is giving it around -- giving us around 10.25% and yes, that is the best segment at the moment, if you ask me.

But as you are asking the second part of the question, yes, MSMEs are also very cautious because of the overall liquidity strain in the market. We are also a little careful about it, but there are enough opportunities for us to work with our traditional customers in Kerala and in South India as well as in some of the geographies where we have been working for a very long time, like Ahmedabad or Mumbai or Kolkata or Delhi. So these are the areas in which we are trying to do, and we are cautious about it, careful about it, and we are also serious about collecting collateral security in most of the cases.

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Rohan Mandora, Equirus Securities Private Limited, Research Division - Analyst [54]

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And, sir, any watch list that we have on the corporate side right now, where we can -- [it could] be within the next 12 months?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [55]

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At the moment, we have not mentioned 1 or 2 accounts in which they are talking about us having stress as they are also trying to -- management is also trying to find resolutions, and we have been talking about those accounts. So that's about all. Otherwise, there is more specific watch list as such we are mentioning now.

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Operator [56]

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The next question is from the line of Sapna Laha from Bajaj Holdings. Please go ahead.

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Sapna Laha;Bajaj Holdings & Investment Ltd.;Research Analyst, [57]

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Sir, you are guiding NIM's improvement to 2.27% to 2.75%. What will be the levers for the same?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [58]

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Basically, we need to achieve superior pricing on the loan side. That is the only thing. There is no other major levers because I do not expect the CASA ratio to change immediately.

And of course, one more advantage is, going forward, we hope that we don't have the kind of write-downs in the interest income that kept on happening in the last several quarters.

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Sapna Laha;Bajaj Holdings & Investment Ltd.;Research Analyst, [59]

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Sir, when do you plan to raise equity?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [60]

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We would definitely need to do it during this year, maybe in the second half. So we have not decided precisely what we would do. We have all the options available to us. The shareholders have given us approval for equity as well as Tier 2 bonds, et cetera. So we will evaluate what's the best way of doing it.

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Sapna Laha;Bajaj Holdings & Investment Ltd.;Research Analyst, [61]

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Sir, Tier 2 bonds INR 500 crore approval, you have already raised INR 250 crores, right?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [62]

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We raised INR 250 crores at that particular point of time. But the pricing was certainly not the very best, and so obviously, we did not raise the remaining part and that is already finished. But we have taken further approval this year for INR 500 crores.

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Sapna Laha;Bajaj Holdings & Investment Ltd.;Research Analyst, [63]

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Further for INR 500 crores?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [64]

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Yes. Yes. Right.

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Sapna Laha;Bajaj Holdings & Investment Ltd.;Research Analyst, [65]

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So it will be INR 500 crores plus INR 250 or only INR 500 crores?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [66]

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No, no. INR 250 crores is already lapsed because the AGM is already over now. So the previous one is already lapsed.

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Operator [67]

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The next question is from the line of Rakesh Kumar from Elara Capital.

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Rakesh Kumar, Elara Securities (India) Private Limited, Research Division - VP and Analyst [68]

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2 questions. Firstly, on this moratorium, which was given post Kerala flood, what is the status on the same right now? And secondly, how the retail loan is doing there? And how the remittance business is doing there?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [69]

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The moratorium is currently available up to December 31. And -- yes.

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Rakesh Kumar, Elara Securities (India) Private Limited, Research Division - VP and Analyst [70]

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And thereafter? Now, like, is there any request -- what is happening on the loan side? So is there any request for the extension of the same?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [71]

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No, that is not there at the moment. I mean the only thing is the recovery actions are all to be settled again until 31st December. That is also there. There is an informal request that up to 31st December no coercive action should be taken. So that's about all. But apart from that, there is no other implications for that. In terms of loan request, yes, it is coming up reasonably. We are also careful. As I mentioned, everything is under centralized environment. So obviously, sanctions are being exercised with great care. What was the third part?

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Rakesh Kumar, Elara Securities (India) Private Limited, Research Division - VP and Analyst [72]

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Sir, retail loan growth in the Kerala state and remittance.

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [73]

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Remittance, you would like to talk about? So fairly -- I mean there is a small moderation in that. But at the same time, the fact remains that our total portfolio, the total NRI deposits, they continue to be almost 27% of the total deposits, both are growing, deposits -- NRI deposits as well as regular deposits are growing steadily. And so, we are able to maintain the preponderance of NRI deposits in the same manner as earlier.

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Operator [74]

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

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [75]

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First question is, sir, you hinted about the weak accounts, some of them, which are being talked about in the media. Can you sort of quantify the exposure there?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [76]

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In housing finance company, I think we had indicated something like INR 150 crores kind of exposure, yes. That's about all.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [77]

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Okay. Then that is only one account, right?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [78]

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It is. Yes.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [79]

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Okay. Second question is, sir, on your annual report. So there are lot of details on the ESOPs, and there are lot of tranches also which varying pricing discounts of 10% to 45%. Can you provide some highlight as to what is the basis of this such high discount of, let's say, 45%? And second, there is a comment that RBI -- to the option granted to you was not considered by RBI. So can you just explain a little bit about that?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [80]

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Yes. The option granted to me by the Board was not -- I mean for the second term was not approved by RBI, and therefore, it is not there, that was, I think, 150,000 auction, that is not there for me. As far as the previous auctions are concerned, the discount -- to my understanding, the discount is only around 10% of the price at that particular point of time, and that's about all.

Today also, I wouldn't give any specific names, I cannot do that. But a typical case would be, maybe today it is, say, 21.65%, et cetera, that would be the level at which someone has to buy. And we are doing that, people are interested, very much interested in buying that. Yes. And there are -- I'm not aware of a 45% discount, et cetera.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [81]

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Sir, it is there is. It is at around INR 12.93, there are more than INR 1 lakh, INR 2 lakh kind of a ..

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [82]

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These are all options relating to -- I mean, very, very old days and those -- some people may (inaudible) they will be continuing, et cetera. We will give you the details separately. But as far as the options, I mean, the largest options are concerned for the senior management, I'm very sure the price is something like 21.65%.

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Operator [83]

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The next question is from the line of Kunal Shah from Edelweiss Securities.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [84]

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So on the corporate book, when we look at BBB and less than BBB, that's sort of like 27% plus. So how do we see the behavior of that in terms of these hindered advances? Do we see any risk out there because that proportion is quite higher? So -- and if any color if you can give in terms of which sectors would this be concentrated in?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [85]

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Sure, we think we can do that. I think it's around 8% is what I recollect that is less than BBB. And the more important thing about that is none of those accounts, there is no account which is above INR 100 crores, which is in either SMA-1 or SMA-2.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [86]

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Okay. But in terms of the sectors, if you can say at least for our...

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [87]

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Sectors, the sectors are typically one, of course, is an NBFC -- is an HFC, one. Maybe others are textile then -- yes, I will just checkup. One moment.

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Unidentified Company Representative, [88]

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And it's manufacturing.

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [89]

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Manufacturing, basically.

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Unidentified Company Representative, [90]

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Hospitality.

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [91]

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And hospitality. Yes, these are the areas.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [92]

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And the other 20%, which is there in BBB?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [93]

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BBB, again, as I mentioned, the INR 100 crores and above, we don't have a single issue about those cases. And we -- I can also give you some details about, okay, the BB external rating accounts, I think, it is a diversified industry, another one is an airport, the third one is in the hospitality. None of these cases, we expect any problems at all. And others are, as I mentioned, yes, there is one HFC. I think they are trying to resolve the problem. And others are, as you mentioned, the textile and other sectors. So as far as the BBB is concerned again at the same position because we don't have -- above INR 100 crores, we don't have even a single account which is in SMA-1 or 2 even.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [94]

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Okay. And sorry, if -- I don't know if that was answered. But what's the SMA-2 portfolio as of now? What is the proportion in SMA-2?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [95]

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Yes, I think it is -- that increased slightly as compared to last year, hiking from 1.7%, it has gone to 2.65%.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [96]

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2.65% is the SMA-2, overall.

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [97]

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SMA-2, overall SMA-2.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [98]

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Okay. And in terms of retail, when I look at it, it's like LAP which has grown from almost INR 3,000-odd crores to INR 4,100 crores in 1 year. But at the same point in time, maybe the business loans are slightly off. Now so this entire LAP, so what is the profile of the customers. I think on the business side, you highlighted on the SME, we are slightly maybe conservative, but the LAP is growing by more than 50-odd percent. So what would be the...

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [99]

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Yes, our understanding was, but again, these LAPs are significantly sourced from existing customers, number one. Number two, the entire sourcing is done by our own staff, our outsourced arrangement for nonsourcing. That is in a very, very preliminary stage, and we are extremely careful about the business that is coming through the DSA. That's very, very limited assets today and the rejection rates are also very high in that area. We have are still experimenting with this. And on an exploratory mode, it will continue for some more time. But our branch network is being used for sourcing both LAP as well as home loans. So we believe that the quality will be quite fine, but at the same time, we were always, in particular, that once the home loans and LAPs reach the same level, the growth will be, again, an integrated growth, same level, not LAP growing significantly and home loans growing less, that is not the plan. So going forward, it will be a balanced, integrated growth in the [bare] mortgage portfolio.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [100]

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But in terms of the profile of the customer, sir, what would be the average ticket size in LAP? And what would be the average ticket size in business loans?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [101]

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Yes, ticket size in the housing loan, which is around INR 25 lakhs. LAP is around INR 38 lakhs. Okay.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [102]

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Okay. And business loans would be?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [103]

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Business loans is INR 37 lakhs.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [104]

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Okay. Okay. And this business loans would be more or less unsecured?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [105]

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No, there is nothing unsecured with us. Everything is secured. And only thing is the level of collateral, we may not insist, like this is more on a parameterized basis and therefore, only if certain cash flows are definitely displayed in very authentic documentation, they are eligible for a business loan. But the collateral security requirement is not, I mean, entirely avoided. The only thing is we may not be insisting on a 100% collateral security or even a 80% collateral security in this case, which otherwise typically we are looking for.

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Operator [106]

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The next question is from the line of Pranav Gupta from Birla Sun Life.

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Pranav Gupta, Aditya Birla Sun Life Insurance Company Limited - Research Analyst of Banking & Financial Services [107]

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Yes. So most of my questions have already been answered. But if we -- so last quarter, I remember, you highlighted there were 4 major accounts in the BB and below book. So could you give us some color on how these are performing and what does the -- what are you seeing there in that book?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [108]

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Yes, they are performing in the sense like, if you look at the conducted account that is as of now there are no issues. But definitely, we have an issue with one housing finance company. And I believe there are resolutions, which are being considered by the management, et cetera. And in other cases, typically, we are still awaiting what is the development. But some of these cases, which I mentioned earlier, we don't find any problem at all. For example, the diversified industry, [there are 4], the hospitality, we don't expect any problems of any variety at all. Other places, we are very carefully watching the situation.

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Pranav Gupta, Aditya Birla Sun Life Insurance Company Limited - Research Analyst of Banking & Financial Services [109]

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Okay. And any other turnkey accounts, around even if INR 40 crores, INR 50 crores kind of exposures in the BB and below book that you would like to highlight?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [110]

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Yes. I mean INR 50 crores, I can't give in detail accounts as such, but we are careful about the whole environment today. We are carefully watching all of them. We have an early warning system that is running. We are carefully looking at all the details, trying to engage with the promoters, try to figure out if there are any problems and how to resolve it. So that is the position as of now.

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Pranav Gupta, Aditya Birla Sun Life Insurance Company Limited - Research Analyst of Banking & Financial Services [111]

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So -- and just to go back to previous participant's question. So on other (inaudible) obviously you've highlighted some kind of stress which you're seeing in retail loans because of the dispensation, which is there in Kerala. And we haven't seen any such spike in slippages. So I mean, what -- I mean, if you could just highlight what is happening on the ground there? How is the borrower behavior?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [112]

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Yes, there is some difficulty. For example, last quarter, in the Agri, we found peak in the slippages. And sometime back, we had faced the significant slippage in the cashew industry. Now what has happened is, agri, we have been able to more or less contain. As far as the cashew sector is concerned, almost 40% of our accounts became NPA, and we are very, very careful that we don't get into that unless the particular company is exceptionally good. So that is what we are trying to do there. And we don't expect any significant spike coming out of that.

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Pranav Gupta, Aditya Birla Sun Life Insurance Company Limited - Research Analyst of Banking & Financial Services [113]

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So fair to assume that we're not seeing any incremental stress in the agri because of the dispensation?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [114]

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Yes. I mean...

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Pranav Gupta, Aditya Birla Sun Life Insurance Company Limited - Research Analyst of Banking & Financial Services [115]

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In your retail, rather retail loans, no specific borrower behavior issues.

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [116]

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We do expect -- I mean overall, like, we are not saying that we environment is the very best at the moment. There are -- I mean, indications of stress in various areas, and therefore, we are very careful, and we are carefully watching the space also. And we only hope that we are able to remain within that INR 250 crores guidance, that is INR 1,000 crores in a year, that is in this particular year. We want to bring down our fresh slippages to INR 1,000 crores in this year from something like INR 1,800 crores to INR 1,900 crores which was there earlier. So that is all what we are trying to do, and we believe with the kind of stress that we are seeing, both in the retail and corporate book, we should be able to remain within that. That is what we are trying to say.

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Pranav Gupta, Aditya Birla Sun Life Insurance Company Limited - Research Analyst of Banking & Financial Services [117]

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Right. Right. And sir, just last -- one last question, if you could give some color as to what has led to the increase in SMA, whether it's coming from corporate, retail, SME, what segment?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [118]

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Yes, I can give some breakup, I can tell you which areas have come up, which -- yes. So SMA-2 has increased from 1.71% to 2.65%. And say SMA-2 less than INR 5 crores. That is around 4,762 accounts that is contributing around INR 400 crores in that decline and more than that is -- above INR 5 crores, SMA-2 above INR 5 crores is INR 200 crores that is how the INR 600 crores increase has happened. So it is -- but if you ask me, more than INR 100 crores, there is no change. It was not there last quarter also, it not there in this quarter also. INR 50 to 100 crores, just about 1 account, and I think that is a road project that I think that is getting resolved is my understanding. So that is where it is significantly. And -- but it is like, as I mentioned, it is more -- less than INR 5 crores, that is 640 -- 4,752 accounts, contributing to INR 1,042 crores, that is around INR 400 crores higher than what was there last quarter.

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Operator [119]

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The next question is from the line of Rusmik Oza from Kotak Securities.

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Rusmik Oza, Kotak Securities (Institutional Equities) - Head of Fundamental Research & Senior VP of Fundamental Research [120]

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Sir, in terms of absolute amount, can you just quantify what is the amount required in terms of equity to fund the future growth of the company or the bank?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [121]

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So we are growing at -- I mean 15% to 18%. And -- and if the kind of credit cost that we are talking about is not there, there is no requirement of capital. But we know-- I mean, INR 200 crores of credit cost is there every quarter. And so the drawback would be typically what used to be the case. I mean if you see historically, we have been putting around INR 200 crores back into the business. We thought something similar might happen in this year also. Then we will definitely have the opportunity of placing Tier 2 if it is good enough. And then, we will also look at Tier 1, if the position improves a little bit. And we will look at all options.

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Rusmik Oza, Kotak Securities (Institutional Equities) - Head of Fundamental Research & Senior VP of Fundamental Research [122]

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Okay, okay. And the second question, sir, you said you have this 1 housing finance company under the BB and lower category. What could be the exposure to this housing finance company, sir?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [123]

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I mentioned about INR 150 crores.

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Rusmik Oza, Kotak Securities (Institutional Equities) - Head of Fundamental Research & Senior VP of Fundamental Research [124]

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INR 150 crores. Okay. Okay. And lastly, sir, you have certain loans which are under moratorium in Kerala that are living in the moratorium until 31st December. Can you quantify the size of these loans in terms of actual amount -- absolute amount?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [125]

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Yes, restructured book I can give you. One second. Yes, the standard restructured general that is all normal, that is not related to the natural calamity, et cetera, that is -- it was INR 57 crores on 31/3/2018 and INR 21 crores last quarter. It is remaining as INR 21 crores. Natural calamity, we had INR 164 crores last quarter. It has become INR 164 crores. Then MSME dispensation, what was INR 32 crores has become INR 107 crores, and therefore, yes, so the total restructure is INR 292 crores. So your question is more about the calamity dispensation that is INR 164 crores is the number.

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Rusmik Oza, Kotak Securities (Institutional Equities) - Head of Fundamental Research & Senior VP of Fundamental Research [126]

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Okay. Okay. Okay. And lastly, sir, I know this housing finance company said you had exposure to INR 150 crores. Have you provided any dynamic provisioning till date for this INR 150 crores. It is in service. It is regular. We have, so far, no issues on that. Especially, it's a little less than that.

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Operator [127]

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The next question is from the line of Sachin Kasera from Lucky Investment Managers.

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Sachin Kasera, Lucky Investment Managers Private Limited - Analyst [128]

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Sir, regarding that security receipts, you mentioned that every 6 months the rating agencies do a review. So when was the last review done and when it is due next time?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [129]

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It was done. It was done in June and December. Do you agree?

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Unidentified Company Representative, [130]

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June and December.

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [131]

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So June is over. Now the next review should happen in...

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Unidentified Company Representative, [132]

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June is going on.

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [133]

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Sorry, June it is still back. Yes.

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Sachin Kasera, Lucky Investment Managers Private Limited - Analyst [134]

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Okay. So when you go for the next quarter, we'll come to know what was the update from this current rating review in the month of June?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [135]

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Absolutely. Absolutely. We are also, I mean, very keenly following up that, yes.

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Sachin Kasera, Lucky Investment Managers Private Limited - Analyst [136]

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Okay. Secondly, you mentioned, sir, a couple of accounts in the corporates also which are under stress. So this guidance of INR 1,000 crores slippage builds into possible stress that could come from this 2, 3 accounts in corporate or that is not building in that?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [137]

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No, it was not intended to be built because we had seen a scenario in which the corporate book was almost completely clean and in fact, therefore, we were not even looking at this when we said INR 1,000 crores. But then you always thought, I mean INR 1,000 crores is a conservative kind of number so that in case there is a problem in any of these unexpected corners, may it be credit or mid-corporate, we should be able to cover within that. That was our understanding at all times internally. And we still hope we should be able to remain within that.

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Sachin Kasera, Lucky Investment Managers Private Limited - Analyst [138]

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So you are saying that if things go the way you actually planned, INR 1,000 crores number actually could be a little lower also, unlikely that very rare scenario you are going to cross this INR 1,000 crores sitting today.

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [139]

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Of course, what we are looking at is a reduction of 50% from the run rate. And therefore, it is more reasonable to assume that we would be more or less in that range rather than assuming to be any better.

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Sachin Kasera, Lucky Investment Managers Private Limited - Analyst [140]

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Sure. And sir, second question was regarding the cost-to-income ratio. How much improvement -- you mentioned that it should improve going forward. So next 2, 3 quarters, what is the type of improvement we can see in the cost-to-income ratio?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [141]

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On the cost side, we are well controlled. In fact, even on pure bank basis also, if you compare, you would find that our cost per employee or [the books of] employee, et cetera is not an issue. The problem is about the income side. So 2 components are there. One, of course, I mean, the net interest margin itself -- I'm not trying to say that CASA will improve significantly, immediately, and therefore, it will improve. That is a fairly long-term process. What would otherwise decide is the quarter-to-quarter movement or the yearly movement would be the other core fee income and also the treasury income. So treasury, I hope, going forward, in the current environment, the treasury should be able to give us a reasonable return. And more importantly, that should not give us any surprises on the negative side in terms of the provisioning. So these are the 2 things that we are looking at. If that happens, we can move towards a number closer to, say, at least 200 basis points, we should be able to bring it down.

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Sachin Kasera, Lucky Investment Managers Private Limited - Analyst [142]

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From where we are today? Sir secondly, on this transaction fees, we saw continuous trend improving from INR 60 crores to INR 85 crores. This quarter, it has become INR 65 crores. Anything too specific in update why sudden drop of INR 20 crores this quarter?

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Unidentified Company Representative, [143]

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See, transaction fee is basically the processing fee and the related charges we collect on the loan side. So loans normally, the growth in the Q1 is a little moderated. Normally how it happens is the Q1 does reasonable growth; Q2, growth picks up; Q3, it picks up really; and Q4, it picks up and it peaks into Q4. So again, the next year it comes down. So the decrease is only because of that. If you look at the investor presentation of last year, you find the same packet of growth from Q1, Q2, Q3, Q4, and it is in Q1 again. So there's nothing unusual. It's only a normal entity.

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Sachin Kasera, Lucky Investment Managers Private Limited - Analyst [144]

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Okay. And sir, this 65% target for PCR, you hope to achieve in next 8 quarters -- 7 to 8 quarters?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [145]

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Yes. I think, yes. Definitely, that's the best way to say and I hope. It all depends on how some of the resolutions would happen and how the NPAs can come down, the denominator is also a very important factor. Because the other opportunities for sell-out and all those things are very, very limited today.

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Sachin Kasera, Lucky Investment Managers Private Limited - Analyst [146]

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Okay. Sir, just one last question regarding our expressions on ROA and ROE. You mentioned that the NIMs can only improve slightly because of pricing and not much scope for because of cost of fund reduction, CASA is a long-term strategy. So in that case, how do we start, at least achieving a 1% ROA and 11%, 12% ROE over the next 5 to 6 quarters? Does it mean that we need to then improve the NIMs further, say, to around 3.2% to 3.3%.? Can you just give a little bit of [more data] from a medium-term perspective?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [147]

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You are absolutely right about your view on that. Only thing is we thought we should talk about those things a little later because after demonstrating that we are achieving some milestones, so let us say -- let us achieve the [72.75] which I believe is quite doable, looking at the kind of control that we are exercising today. And also, we have achieved a certain amount of loan wings, which was very critical to the bank. If you want to maintain a credit cost of say, INR 200 crores per quarter, you need to have income from that. So INR 60,000 crores, INR 65,000 crores of loan book was a very critical number. So we have achieved that level today. So therefore, we expect that we can be a little bit more strict about the pricing going forward. And of course, there are other areas also like that. Now today, we are fully centralized in terms of credit sanction. And therefore, we can relax the emphasis on collateral security, which we have been maintaining for a very long time, but then the pricing can be superior slightly. So these are all avenues which are available. And we will roll it out in a very calibrated and careful manner because the environment also we need to take into factor. That is what we are trying to do today.

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Sachin Kasera, Lucky Investment Managers Private Limited - Analyst [148]

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And sir, for the full year, at least, we will see what 100 basis point improvement in CASA ratio or even that looks challenging?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [149]

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It looks a little challenging, the 100 basis points is a little challenging for the year because the deposit also we would like to grow significantly this year. Our focus is also on lot of retail deposits rather than depending on the treasury going forward.

So the base also changes. That is what I was trying to say, the ratio becomes -- even if we grow, you have to grow much faster to reach that level.

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Operator [150]

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The next question is from the line of Amith Singh from B&K Securities.

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Amit Kumar Singh, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [151]

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Sir, in the last call, we had mentioned about a Kolkata-based multidivisional company. But some of the banks have indicated that they have downgraded a Kolkata-based multi-division company. So where is this [account now sir]?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [152]

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We don't have a downgrade at all. And the account that we are talking about is likely to get further improvement in the rating in a very short while because the financials have improved. And some of the other important initiatives, which they were planning to roll out, they are all progressing quite well with good, demonstrable milestones achieved.

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Amit Kumar Singh, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [153]

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Okay. Sir, is it in the P2 battery business, this account, which you are mentioning.

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [154]

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Not at all. Not at all.

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Amit Kumar Singh, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [155]

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Okay. Okay. Perfect. And sir, secondly, sir, on the restructuring part, how much are we expecting to slip from the Kerala floods as well as MSME dispensation. So how much of that we are expecting is going to slip in the coming quarters?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [156]

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I think say -- I mean, we were also internally debating because we can't put a number on that because if you look at the overall credit quality in Kerala, it was always pretty good, barring 1 incident or 1 fraud that happened in a large account, we never had a serious problem in Kerala. And also, the cashew was one exceptional case. So we are assuming that maybe around 30% would slip because we are not able to precisely put a number on that. Going by the earlier experience, we should not really see this problem at all. But we are assuming that in the changed environment, maybe around, say, 30% would slip.

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Amit Kumar Singh, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [157]

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Okay. So sir, how much are we going to be and in how much are we expecting to get restructured in the next quarter?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [158]

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So see, what happens is some restructuring will happen. But at the same time, some of them will also get into NPA, the current ones, because we are also looking at the servicing. So net-net, there maybe not be any significant change because what has happened is -- let us see what has happened in, say, Q4 to Q1 from $161 million to $164 million, from -- I mean, so $32 million to $107 million MSME dispensation. So some of that, I mean, say, $107 million, some of them, let us assume, say, 30% of it trails really then some additions will happen. So it may not be anything very, very significant.

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Amit Kumar Singh, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [159]

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Okay. And sir, secondly, on our AFS duration, if we see it has gone up significantly, and it is now at 2.8%. Sir, what are our views there, sir, from the duration of AFS book?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [160]

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Yes, 2.84%.

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Unidentified Company Representative, [161]

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2.84% duration is not that really high considering the expected rate demand in the market. And generally, the global rates are moving downward and the economy growth needs to be looked into. If you look into all these things, we are expecting 1 or 2 more rate cuts during the year. So accordingly that AFS duration is slightly increased as per our calculations.

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [162]

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Okay. And sir, just going back to the previous question, again, sir, of that multi-divisional company in Kolkata. So sir, what kind business they are in exactly?

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Unidentified Company Representative, [163]

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They are into, I think, cement and tire and significant business. We are interested, significant business activity.

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Amit Kumar Singh, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [164]

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And sir, this last question sir, on the debit card side, sir, we've been seeing the downward trend in the number of active debit card users. So is the number correct, I mean...?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [165]

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Yes, there is a reason for that. EVP Operations will explain that, debit card.

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Joseph K. Thomas, The South Indian Bank Limited - EVP of Operations [166]

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Debit card, see. As per the recent guidelines, we have changed the system of charging our half yearly SMS charges to the customers. We stopped charging. We have been charging them half yearly, that we stopped. So now we are charging based on the actual number of messages we have sent. So suddenly, there's a dip in one half yearly collection this quarter, and that is compensated by active charges we collected.

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [167]

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Debit card numbers.

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Joseph K. Thomas, The South Indian Bank Limited - EVP of Operations [168]

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Yes. And overall, we have also done [recarding] of the cards because the maximum magstripe cards are to be replaced by the EMV cards, so that replacement also has happened. And the overall. There was lot of cards, which were not being used. So that is not being substituted by us. If you look at the national numbers also, there is somewhat 10% to 11% dip in the number, and there is almost same number of -- same level of dip in transactions of around 10% to 11%. So these are the basic reasons why this dip, but this dip will be compensated by the normal collection of charges based on actual usage going forward.

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Amit Kumar Singh, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [169]

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Okay, okay. Sir, and sir just the last question. Sir, the card has gone down by 3.8 million -- from 3.8 million to almost 2.7 million in this one quarter. So...

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Joseph K. Thomas, The South Indian Bank Limited - EVP of Operations [170]

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That is what I was mentioning, the same thing. We have replaced all our magstripe cards with EMV chip cards. So when we replace the cards, we also saw that in both accounts, which were not being operated briskly and those cards which are not being used, we have not replaced. So we are waiting for this clear -- getting this customer to either whether they need to have a card and whether they need to use those cards. So on a routine, we have not replaced these cards. So that replacement will happen over a period of time. That is why there's dip in the number of cards.

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Amit Kumar Singh, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [171]

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Okay. So Sir, you are seeing that this number is going to settle somewhere around the number which has come down around 2.7 million? Or there could be a further dip in this number?

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Joseph K. Thomas, The South Indian Bank Limited - EVP of Operations [172]

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So it will not dip further, it will improve actually, improve.

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [173]

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It will improve. But we continue to believe that some of these customers, possibly, our engagement also was not good enough. So we need to work on that. There's a process at the moment that is running in the Retail Banking division looking at all these things, very competently.

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Amit Kumar Singh, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [174]

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Okay. And sir, just last question. Sir, what is our total number of savings account customers.

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [175]

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Total customers are 6 million. But yes, more or less, let us assume that we have around 6 million, 6 million customers. Yes.

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Amit Kumar Singh, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [176]

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These are savings account customers?

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Unidentified Company Representative, [177]

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Obviously, I say.

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Operator [178]

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

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [179]

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Most of the questions have been answered. Just wanted to check, do we have some bond exposure as well to some of these troubled needs or we do not have any bond exposure, which is slightly risky?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [180]

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I think we have covered our conversation more or less that also? Yes. Otherwise, we don't have in many cases, we have very limited only. And I think more or less is that -- yes, it is covered in that. Yes.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [181]

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Sure, Sir. And any comment on the fee income, sir, which is also a bit of disappointing in this quarter. Your core fee income and except treasury?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [182]

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That is what [with treasury]..

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [183]

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You mentioned about the debit card and liability fee.

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [184]

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Yes, all those things, the transactions. The Q1 trended something like this. It is not very different. And definitely, we are improving on that also because the insurance statement and all those things will come as we go along in second quarter, and particularly in the last quarter.

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Joseph K. Thomas, The South Indian Bank Limited - EVP of Operations [185]

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In tandem with the growth in the credit portfolio. So (inaudible) portfolio, this will also grow.

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Operator [186]

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The next question is from the line of Sharvari Joshi from Trivikram Consultants.

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Sharvari Joshi;Trivikram Consultants;Equity Research Analyst, [187]

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My question is regarding the advance growth. So this quarter, it has been quite low if you compare it to last 5, 6 quarters. And also in the last call, we had spoken about some 18% to 20% growth in advances. So how should we look at that going forward?

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [188]

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Yes. Actually, we have grown in the areas of focus quite well actually. All the markets we have grown by 41%. And what is repaid including mortgages, we are at 25.46%. MSME, we have grown by 14% and agri by 14.5%. So these are all the most important growth segments for us. And on the corporate side, we have grown by only 3%. Corporate side is 32% of the book. So obviously, the overall growth is a little muted. So that is what we mentioned also, like going forward too in the current scenario, we believe that we will be focusing more on the retail, MSME and Agri and gold side. And therefore, the growth will be something like 15 to -- between 15% and 18%.

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Operator [189]

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

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V. G. Mathew, The South Indian Bank Limited - MD, CEO & Director [190]

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So thank you all for participating in this con call. And in case you need any further clarification on any points, you are always welcome to -- you are always welcome to raise those issues and our CFM department and Investor Relations department will be in touch with you for that. Thank you.

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Operator [191]

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Thank you. On behalf of Prabhudas Lilladher Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.