Ladies and gentlemen, good day and welcome to AU Small Finance Bank Q3 FY 2022 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Aseem Pant, VP, Investor Relations. Thank you and over to you, Mr. Pant. Thank you, Neeraj. Good day to everyone, and welcome to AU Bank's earnings call for the third quarter of FY 2022. We thank you all for joining the call today, and we hope you and your dear ones are safe and well. For approximately the first 30 minutes of the call, we will have brief remarks by a few members of our senior management, followed by 30-45 minutes of Q&A. Firstly, we will have our MD and CEO, Mr. Sanjay Agarwal, share his thoughts on the performance and overall outlook for the bank. He will be followed by our ED, Mr. Uttam Tibrewal, who will share his thoughts on business outlook and asset strategy, and then by our Group Head Liabilities, Mr. Rishi Dhariwal, who will share his thoughts on liabilities outlook. Finally, we will have Mr. Vikrant Jethi, Head of Collections, who will discuss asset quality for the bank. Besides them, we also have a few other members of our senior management to answer any questions you might have. For the benefit of everyone, we would humbly request that the number of questions per participant be restricted to a maximum of two and to join back in the queue or mail us in case you have any further questions. With that, I'll request our MD and CEO, Mr. Sanjay Agarwal, to share his thoughts on the bank's performance and outlook. Yeah. Thank you, Aseem. Good evening, everyone. Namaskar. Thank you for joining in. We hope that you and your dear ones are doing well and keeping safe. While I want to say happy 2022, we all know that this year started with a bumpy ride. Unlike the previous years, the mortality rate of Omicron variant is low, so seems like that we are already on the road of recovery. In terms of business impact, there are small continuity issues. People, be it our employees or customers, are getting infected but are coming back with a shorter cycle of 5-7 days. That said, till now, for January, largely our business momentum around asset growth, its quality and other business parameters remain on course. To give you an overall sense of quarter three, we saw a near normal operating environment with improvement across all key parameters, aided by strong festive seasons and resilient customer sentiment. I hope you have seen our recently declared quarter two results. We have shown a strong performance in the last quarter from deposit to asset to payments to digital. Sharing key highlights as under. We launched 69 new touchpoints in this quarter. We hired 2,000+ people, taking the total workforce to 25,000. We have delivered the highest ever growth in deposits, that is 49% year-on-year. Continuing our focus on low-cost stable funds, we have reduced our cost of money by 89 basis points in this year. We have maintained ample liquidity throughout the quarter. We disbursed close to INR 8,000 crore of loans in the last quarter, the highest ever in the history of AU. Our balance sheet size grew by 26% year-on-year. Net worth grew by 32% year-on-year. Our capital adequacy ratio is 22%, including 9-month profit. We generated the highest ever profit, operating profit in this quarter. ROA stood at 2%+ and ROE at 17%+. Asset quality is getting back to pre-COVID level. GNPA reduced to 2.6% from 3.2% quarter-on-quarter. Net NPA is also reduced from 1.7% to 1.3%. An important RBI circular on provisioning norms has brought the NPA-based classification asset recognition on par with commercial banks. This will provide a level playing field for banks like us, which operate in similar customer segments. We can confirm categorically that the recent changes have no impact on AU Bank, as we have been following NPA recognition norms since 2017 and daily NPA tagging from since 2019. More on this will be covered by my colleagues. The very important update is that we have got our brand ambassadors appeal going on and the uniqueness for our products. We have seen extraordinary response for our digital bank, whether it is in terms of increasing brand awareness and the brand consideration score or increase in ETB and NTB registration on AU 0101 app. The key highlights are around this. All our digital properties have done phenomenally well, with one lakh plus credit card issued, out of which 53% credit card holders are first time credit card users. We also installed three lakh+ UPI QR. Initial trends from the video banking experience have been quite encouraging in terms of enhancing reach, acquisition and engagement. AU 0101 continue to see strong traction with 39% quarter-on-quarter growth in user registration. two lakh+ non-bank customers also got registered on AU 0101. I would like to congratulate the team and the customers for this achievement in this time. I also take this opportunity to welcome Sri H.R. Khan Saab, ex-RBI Deputy Governor on our board as an independent director. I believe the bank will immensely benefit from regulatory experience of Khan sir spanning for over four decades, and I personally look forward for his mentorship. I would also like to share that we have taken a step towards strengthening our business model by introducing 10 SBUs. Of which the details are shared in the presentation. Each business unit will have its own vertical structure supported by a common horizontal across bank support architecture. This will sharpen the focus, enhance the ownership, support with the bandwidth management, and lead to a development of new level leadership for the bank. In the coming times, we will arrange the calls with individual business unit to give you more color around their working and strategy. We plan to hold the first of this session on February 10th, 2022. The IR team will share more details in due course. The very foundation of AU Bank was laid for empowering the economically weaker sections by providing them better access to credit. We work on a unique formal Robin Hood model by garnering deposits from urban markets and dispersing in core markets. 76% of our liability are coming from urban market, and 65% of our lending happens in core market. Our purpose of being an SFB guides us and drives us every day. Continuing our legacy, we have exceeded the requirement of key assessing guidelines with 86% loan to the priority sector, 63% loans with ticket size less than 25 lakh, and 30% of touchpoints present at unbanked rural centers. Our commitment to financial and digital inclusion remains unwavering. We are working towards building a society where every individual has access to financial services irrespective of his or her socioeconomic background. Through our efforts in digital and digitization, we have been able to positively impact the environment by reducing our carbon footprints. Our digital customer onboarding journeys have led to a positive externality in terms of reducing paper and fuel usage. We have progressively approaching on our accepting diversity of all kinds, demographic, experiential. We have formed a committee on diversity and inclusion, and the committee is working towards making AU a more inclusive workplace. The strong governance has been the backbone of our growth since the start of our journey, which has been validated time and again by markets, regulatory, and rating agencies. I'm happy to share that CRISIL Ratings have revised our credit rating outlook from stable to positive during the quarter. This is a strong validation of our banking franchise and asset quality despite the pandemic-induced challenges. Q3 FY 2022 marks the completion of 19th quarter as a bank. What a roller coaster ride, full of excitement, sustainable growth and resilience. The last eight quarters remain under the weather due to the pandemic. Very grateful to the government of India and RBI for their wholehearted support in terms of relief, reforms and packages. We will continue to invest in our 10 strategic business units and shall always be promising a likable franchise to be joined by people. Today, we are serving 23 lakh+ customers as the largest small finance bank, offering over 30+ products at 880+ banking touchpoints across 15 states and two union territories with a team of 25,000+ employees. While our journey as a small finance bank was fraught with the headwinds like demonetization, NBFC crisis, bank crisis and the pandemic, we believe that whenever things normalize, then this country, this economy, this platform and this team will do wonders. We remain optimistic with cautious approach while continuously working towards our purpose of developing the largest retail franchise. This marks the end of my narration. Thank you and stay safe. Handing over to Uttam for his business outlook and strategic asset strategy. Thank you. Thank you, Sanjay. Namaskar. Good evening, everyone. Hope you all are healthy and happy. As Sanjay mentioned, our performance in Q3 FY 2022 has been consistent and stronger. I personally see it as a reflection of continuous efforts of our team to reposition the bank since the onset of COVID. seven quarters ago, we took the challenge to take COVID as an opportunity to further strengthen our foundations by redefining our distribution strategy to gain reach through branch banking and density through digital. Continuous engagement with the customers as solution providers reinforced and restitched the team to focus and effectively build a more retail and granular bank. As we have shared in the past 2 quarters, by gauging the situation early on, deliberating and tweaking our strategy and displaying agility, we have managed to track the market and deliver performance on all business and financial metrics. Our efforts on building a strong retail tech-led franchise had started to deliver results on all the parameters. Be it our focus on CASA ratios, CD ratios, our brand visibility, video banking, our digital bank AU 0101, our credit cards or expansion of our leadership capacity. Aided by good festive season and strong demand across Wheels, home loans and business banking, we recorded our highest ever quarterly disbursement for the quarter at INR 8,152 crore, up by 33% year-on-year. In line with our narrative in Q1, Q2, we got the benefit of working on the ground and our customer connect, and were able to further reduce our gross NPA to 2.6% and net NPA at 1.3% from 3.2% and 1.7% respectively. Wheels business financed 80,000+ vehicles during Q3 FY 2022, amounting to a total disbursement of INR 3,045 crore, registering a growth of 14% year-on-year and 60% quarter-on-quarter. Personal segment contributed 46% of disbursement, of which 20% were farmers. Tractor contributed 10% of Wheels disbursement in Q3. Total AUM of Wheels is now INR 15,525 crore across 6.7 lakh vehicles and 5.8 lakh customers, registering a growth of 15% year-on-year and 9% quarter-on-quarter. At AUM level, 60% of the financing is for new vehicles, 25% is used vehicle, 13% is Cash on Wheels, and 2% is two-wheelers. Limited supply of semiconductors continue to constrain the growth for new passenger vehicles despite strong demand order backlog. However, underlying demand remains robust and used vehicle segment continue to be direct beneficiary of supply shortage in new vehicles. Long waiting periods in new cars, affordability, and discontinuation of diesel vehicles by major OEMs will keep used vehicle demand buoyant in coming months. In SBL business, demand is still to reach the pre-COVID levels. In Q3, the business saw a year-on-year disbursement growth of 10% with disbursement of INR 1,629 crores to 15,546 MSME businesses. Total AUM of SBL business has now reached to INR 15,283 crores across 1.8 lakh MSMEs, registering a growth of 19% year-on-year and 6% on a quarter-on-quarter basis. Our housing business currently operates out of 241 branches across eight states and financed 4,500+ houses during Q3 FY 2022, amounting to a total disbursement of INR 473 crore, registering a growth of 55% year-on-year and 26% quarter-on-quarter. Total AUM of housing business is now INR 2,099 crore across 22,000 dwelling units, registering a growth of 113% year-on-year and 24% on quarter-on-quarter basis. At AUM levels, the average ticket size is INR 10 lakh and average LTV is 50% at the end of Q3 FY 2022. The bank has been able to help 9,000+ customers to avail subsidy under PM Awas Yojana, wherein 4,600+ EWS, LIG, MIG customers have already availed subsidy of INR 100 crore. Our commercial banking business comprises of four business segments, namely business banking, agri banking, NBFC lending, and construction financing. Together, these businesses account for 15% of our AUM and primarily balance sheet-driven lending, where we extend working capital financing to MSMEs and SMEs. In Q3 FY 2022, commercial banking business saw disbursement of INR 2,215 crore, a year-on-year growth of 139%, with strong growth coming in from business banking and agri banking, which saw year-on-year increase in disbursement by 76% and 136% respectively. We issued more than 50,000 credit cards in Q3 and have achieved a run rate of 20,000 cards per month, taking us closer to top 10 credit card issuers in the country in terms of new card issues per month. I'm happy to share that 31% of all savings accounts opened in Q3 have been sourced digitally via AU 0101 by our video banking channel. Video banking is emerging as an alternative distribution channel with 35% of accounts acquired from non-AU Bank locations and 78% customers are urban with 49% salaried profile. In terms of servicing, video banking channel can provide 400+ different services and is now handling 750 calls per day. Similarly, AU 0101 continues to see strong traction with 39% quarter-on-quarter growth in user registration and active customers measured as monthly active users have gone up by 38% over quarter 2. Our strategy to build a banking ecosystem around merchants and traders by using UPI QR code as an entry strategy, opening their current accounts and using transaction data to develop analytics-based lending is progressing well. Our QR codes are now deployed at 300,000+ merchant points. Apart from providing visibility to our brand, this has also helped us to retain merchants' accounts, and we have already seen INR 1,300 crores of throughput via these accounts. Our special focus on asset side has been automation, digitization of processes so we can reduce TAT and improve productivity. We have piloted end-to-end onboarding solutions in SBL and BLs business and solutions are being developed for other business verticals. Our objective to digitize the entire onboard journey of the customer from sourcing to disbursement and maximize the use of digital in servicing the customer. We remain committed to increase our product per customer and are strengthening our products, processes and channels for achieving greater cross-sell using data analytics. All in all, I remain excited, optimistic and look forward to sharing more with you in coming quarters. With this now, I invite my colleague, Rishi Dhariwal, to share his views on the liability side of the businesses. Thank you. Stay healthy, stay safe. Thank you, Uttam, and good evening, everyone. I sincerely wish you good health as we navigate these unprecedented times. I will speak about our liabilities. Branch banking and product initiatives are being built to make a long-term sustainable retail business. We continue to execute our strategy of boosting the retail mix of our overall portfolio and strengthening the deposit base while achieving an optimal CASA mix. This has been made feasible by enhanced efficiency in the branch banking channel and constant digital innovations which have made banking with us convenient for our customers. We are driven to build a predictable, stable and scalable liability franchise. We have made targeted efforts to build a high-quality retail CASA book. To provide some context, our monthly Royale and Platinum account acquisition, our premium savings account offerings, has increased 89% over six months from June 2021 to December 2021, while our monthly current account acquisitions have increased 38% during the period. 60% of the savings account customers acquired in the year are active on our AU 0101 app, and over 76% of the current account customers acquired in the year are active on internet and mobile banking. While expanding our liabilities book, we have been prudent in staffing our branches based on the potential of the geography, thereby optimizing our frontline sales team. While doing this, we have been extremely focused on increasing productivity expectations from every single resource, which has taken our productivity to 6.2 RPC per employee in December 2021, as we like to abbreviate Royale Platinum and Current accounts in the bank, from 3.5 RPC in June 2021. In the quarter, 1.8 lakh unique debit card holders made over 11 lakh transactions amounting to INR 320 crore, reflecting an increasing trend of customers using our bank card for making their purchases and thereby transitioning to use of AU Bank account as the primary account of the customer. Our customers bought close to 25,000 insurance policies through our partnership with ICICI Prudential, Future Generali for life insurance, and Aditya Birla Health Insurance, Tata and Chola for general and health insurance. We have more than 51,000 cumulative three-in-one trading accounts through our partnership with Motilal Oswal Financial Services. The AUM of our mutual fund investments done by our customers has grown by 13% during the quarter. Number of transactions being done by customers with us is a clear measure of the engagement as well as indicator of potential to buy further products from us. We have 68% and 52% of our CA and SA customers respectively, regularly transacting with us, with 60 and 23 average customer-initiated transactions for Ca and Sa accounts respectively for the transacting customers. To ensure that the customers are fully embedded with us, we provide them with full range of payment, investment and insurance solutions, namely debit card, eCom and POS activation, UPI, bill payments, and FASTag, SIP, three-in-one asset products, life and health insurance. We have 59% of our current account and 36% of our savings account customers use two or more of our products. PPC has risen to 1.93 in December 2021 from 1.34 in March 2021 for CA customers and to 1.5 from 1.37 for savings account customers. Of the 9.6 lakh registered users on the AU 0101 super app as of December 2021, over 6.9 lakh-plus customers are liabilities customers. We recorded over 37 lakh transactions in Q3, a 30% increase from Q2. We launched the AU Shopping Dhamaka campaign in October 2021. Over 1.2 lakh customers participated and made 6.85 lakh transactions, spending close to INR 260 crore. We observed significant improvements in customer balances during the campaign and thereafter as well. We have initiated our expansion to geographies where our presence was lower previously, so that we can cater to customers across more and more geographies and serve them with our 21st century banking services. We will provide you more update in the coming quarters on the same. Next, my colleague Vikrant will provide an update on asset quality. Thank you. Thank you, Rishi. Good evening, everyone. I will be giving a brief perspective on asset quality. Most of the businesses saw increased activity during the quarter, which resulted in better customer cash flows. We saw collection efficiencies north of 100% during the entire quarter. In quarter three, we saw a conducive environment, and all restrictions imposed by various state high courts were lifted, and this aided in faster implementation of legal recourse. Average collection efficiency in quarter three was 106% compared with 109% in quarter two. Customer activation improved to 91% in quarter three compared to 90% in quarter two. Our gross NPA reduced by 57 basis points from 3.2% in quarter two to 2.6% in quarter three. In absolute value, there was net reduction of INR 94 crore from INR 1,151 crore in quarter two to INR 1,058 crore in quarter three. Net NPA reduced by 1.7% in quarter two to 1.3% in quarter three. We saw gross reduction of INR 343 crore in quarter three from quarter two closing NPA of INR 1,151 crore, resulting in 30% resolution during the quarter, wherein 70% resolution happened through repayment, about 20% resolution happened on account of security disposals, and 10% was on account of technical write-off. If we further introspect the current NPA pool of INR 1,058 crore, we have enforced security on approx 10% pool and asset is in bank's possession. As on date, we have initiated legal recourse, either Section 18 or Section 17 arbitration on 84% pool. On balance 5% pool, we will be initiating legal recourse soon. In a nutshell, all the underlying loans are granular and secure, and we expect recoveries or security enforcement in due course of time. As we had communicated in our Q2 commentary, based on ground feedback, we have identified non-workable pool, wherein all collection efforts have been exhausted and bank has done technical write-off of INR 39 crore. Here, collection efforts are being abandoned and future recovery may happen through ongoing legal proceedings. We shall continue to evaluate such non-workable pool in future as well and take appropriate measures. Out of total gross advances of INR 40,700 crore as of December 31st, 61% of book was originated after March 2020. I reiterate that 61% of the gross advances have originated post onset of pandemic, and 92% of this book is current and contributes only 0.44% of our GNPA. The resilience of this book has validated our approach of underwriting and customer segment we cater. As of December 31, standstill COVID restructured book stood at INR 160 crore, which is 3.1% of our gross advances. Lending has started on 92% of the restructured book and 9% of this book is NPA as of December 31. Asset quality performance in the build pool has been within expectations. ECLGS gross advances as of December 31 stood at INR 873 crore. On the provisioning coverage, bank is carrying provision of INR 537 crore against gross NPA of INR 1,058 crore with TCR of 51%. Additionally, there is provision of INR 205 crore against standard restructured book. Furthermore, bank continues to carry contingency provision of INR 300 crore, which stands at 75 basis points of our advances. This further strengthens balance sheet and makes us better prepared for any unforeseen events. Keeping NPA resolution trend of first three quarters, where 65% of NPA resolution has happened through normalization with no core loss incurred, and only on remaining 35% pool security enforcement or one-time settlement was done, wherein there was core loss of 32%. Therefore, we feel confident that TCR of 51% is quite likely to be more than sufficient to cover any credit loss arising from this portfolio. Over and above this, bank is also carrying contingency provision for any unforeseen slippages and specific provision against standard restructured asset. However, we continue to remain cautiously optimistic as there is still little uncertainty on the situations which might emerge post COVID. Thank you. Neeraj, we can open for questions now. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Bhavik Dave from Nippon India Mutual Fund. Please go ahead. Yeah, hi. Good evening, sir. Thanks for the opportunity. There are two questions. One is on the margins. I see the incremental spreads are a little lower than what we were reporting in the last quarter. Just want to understand how the margins have been at a 6.3% range for like three quarters now. Just wanted to understand incrementally with cost of funds benefit. Now it seems that incremental cost of funds are flattening out at 5.3, and with rate environment being like on the other side, what is the margin or spread that we will be comfortable working around? So is it 6%-6.3% or what is the kind of margin that we will be happy to. Sorry, Bhavik Dave. My friend here, your line is not very clear. Okay. Sorry. Am I audible now? Yeah. Yeah. Sorry. My question was regarding the incremental spread that we see that it has come off by 20 basis points during the quarter. However, the margins have remained flat-ish at the 6.3% mark. Wanted to understand what is the sweet spot that we look forward, considering the cost of funds incrementally have normalized at 5.3 or so% incrementally. What should be a comfortable margin run rate that we would be happy to work with? Like is it 6%-6.3%, or will it be okay to work at a lower margin as well? Just wanted to understand that. Bhavik, Sanjay here, right? You know, this time, I think, because of our cost of money going down and investment also getting moderated, we got an upside around NIM, right? I don't think that 6.3% is a sustainable NIM for us. You know, we want to target around 6%, 5.8%-6% in the longer run. We also have to see that how the interest rate cycles also moves from here, right? Correct. There is a risk on it. You know, we have the ability to lend on a higher rate too, because we are into retail assets. I hope that, you know, you can manage his NIMs around 5.8%-6% range in the long run. Perfect. That helps. Second question is regarding the cost, the operating cost. The slide 21 is very useful, wherein the INR 157 crore that we are doing for investment for future. Just wanted to understand, and some part of the 50% of it seems to be towards the newer businesses that you are incubating. So that might sustain for maybe few more years because that's a growing business. But out of this INR 150 crore, this might be like INR 180-INR 200 crore for the year. How do we think about it for the future? I mean, like FY 2023 or, you know, going ahead. Should this number be around INR 150-INR 200 crore or this will relatively increase with our investments because the businesses that we are trying to grow? I just want to understand that. Yeah. You know, Bhavik, I completely understand. As an executive, you know, we need to take many decisions around our metrics, right? As already commented in my earlier statement, you know, we are looking to hire names, you know, reducing our cost, building a retail deposit. This one OpEx, you know, we are not so much focusing as of now because we were going through a pandemic and quarter one was completely washed out. There was a capacity built up in the organization which was not used. We also want to try many things around digital because if you don't do digital initiatives, you know, we might not be there after 10 years, right? Correct. I strongly believe that AU needs to invest in more in tech, more in distribution, more in other digital initiatives and of course building the brand. I presume that on the scale this amount will go up, you know. Correct. Maybe around, like, you know, this year is around INR 150 crores. Maybe next year is around INR 200 crores-INR 250 crores. We want to keep this investment going on because ultimately this will make AU the journey forever. Sure. That helps me. Thank you. Yeah. I'm not too worried about the cost and income here. Perfect. That's helpful, sir. Thank you. Yeah. Yeah, Bhavik, thanks so much. Thank you. Participants, you may press star and one to ask a question. The next question is from the line of Amarnath from Ministry of Finance. Please go ahead. Hi, Mr. Agarwal. Just need to understand if the rapid speed of increasing of this credit card issuance. Last quarter you say around 50,000 cards have been issued. We all know this credit card is an unsecured business. AU, while fundamentally is a generally targeting the secured kind of business. Just try to understand what the business strategy of increasing this credit card, which is mostly unsecured in a highly populated area where not many big banks and other institutions are there. What is the strategy there? That's my question. Yeah. No, a good question. I think the detailed presentation is being done on 10th of February on our strategy around credit card. I'll give you some brief highlight around it. Like for us, for me personally, credit card is one of the most important digital payment method, right? If you don't have a credit card in system, then many people don't like you as a bank, you know. We witnessed it in first three to four years of our journey. It was kind of compulsory for us to launch credit card to make people believe that, you know, we want to really become a digital bank in that sense. Second, this is more of an acquisition strategy for us, right? Because lots many customers don't want to bank with SFBs, you know. Credit card gives us that advantage that, you know, we can offer them a better credit card and then they become our customer and then we can become their primary banker, right? Third, you know, your understanding of the subject that we can't handle unsecured, you know. Somehow, someday we need to start that, right? Credit card is relatively a better product to start unsecured because here, you know, maybe only five to ten customers of your outstanding book becomes an EMI book, right? Otherwise customers generally pay on time and we charge around 36% if customer revolves the line, right? So there is enough cushion available for to us in case any default comes. As of now, in last six months onwards, our data says that we are absolutely on track. One more data point, like, you know, we are issuing around 70% card to our ETB customer, right? Who has a travel card or who has some data point with us. Thirty percent is only around the NTB, right? One more data point for you that, you know, 70% cards are issued into the semi-urban and rural areas where there is more leverage. Sorry. I think- v oice is cutting in between, sorry. I'm sorry. I know 70% credit cards are given in the core markets of us, you know. Where we have a lot more collection efficiency, right? I think these are data points which makes us more comfortable and we really want to invest more and more in this credit card because as we move forward, you know, we also have seen that people generally want to use credit card over the debit cards. Because debit cards open up their risk on the cyber, where the credit card has a limited risk on their hand, right? We are more, you know, bullish on this subject. It is being built by one of the finest professional in AU Bank, who's our ex-CRO, Mayank Markanday. He's handling, he's building the team very beautifully. I hope that this will become one of the most important business in times to come. Thank you. The second question, sir. See, as we all know that the entire world and of course India will now move towards the higher interest rate regime. Today or tomorrow RBI will have to increase the rate. One good thing AU has done that in the last few months and quarters they built up a very huge CASA franchise. I'm sure they are more of a permanent customer. Now, what's your thought process? As the interest rates increase, our lending side, the yield probably will increase, whereas my cost of borrowing, if it is mostly coming from CASA, especially the old CASA up to December 2021, my net yield supposed to increase, going forward, provided that the interest rate cycle really takes off, sometime in this 2022-2023. So what's your thought process here? J ust to add on this. Am I to say whether this deposit base, CASA base will also be having the increase in interest cost if the interest cost will be increased? Net-net, how the bank is going to get benefit? I think that's a lot many questions in one question. I would say that, you know, everybody is predicting that there will be an upside in our interest rate cycles, you know. You will appreciate that AU is in the markets of lending where generally we have the ability to pass on the interest rate upside to the customer, right? You know, we actually have reduced our lending rate by close to 150 basis points in last three-four years because we were getting the advantage around interest rate, right? These generally markets are being dealt by NBFCs, right? We lend them at a higher rate. That's the whole advantage with us that in case interest rate cycles move up, you know, we have that possibility to transform the rate to the customer and make ourself on a similar NIM number, you know. You know, further you will see that our interest rates still we are offering around 7% on our bracket of INR 25 lakh to INR one crore. That can also be, you know, adjusted to really make your cost of money lesser, cheaper. Of course, at a scale, you know, because this may happen in next two years, the scale will also help you in managing your operating expense. I think these are three, four reasons where we believe that, you know, AU still is protected around any interest rate cycle upside. Thank you. Thank you very much. Maybe I will take one last small question. Absolute both our GNPA percentage has been reduced, but the absolute value of the GNPA has reduced from 1,151 to 1,058, that is INR 94 crore reversal only. If I take the last quarter, the GNPA was reduced sequentially by 345 crores. Compared to that in this quarter it is reduced by only INR 94 crore in absolute value. Now, what does it indicate in terms of the recovery from those GNPA? No, no. I think you will appreciate that last quarter, the quarter two and quarter three. Quarter two, you know, we commented in our call that it has a lag effect of good six quarters. You know, we started doing the enforcement of security last quarter itself and people were coming up and paying up. That was a phenomenal quarter for us in terms of reduction in NPA. But you'll appreciate that our assets are around 14%. Our retail assets are around 14% yield. And we also in the similar customer segment where other player also operate. If you compare our NPAs to them, you know, you will see that, you know, how better we are doing in terms of our asset quality, right? Slowly, you know, our, in a pre-COVID level also our NPA was around, gross NPA was around say 1.6-1.7%, right? We are now just away, you know, in terms of that number, just 1% away, right? In my opinion, next two quarters, if everything remain good, you know, we'll be touching that number again, right? I think just slowly we are getting at that level, you know, and that is good enough for us to remain happy and see how well we are progressing in that terms. Are you happy with this net PCR of 55% or- Of course. Do you want to target that provision coverage by more? Or are you happy with this? No. You will appreciate that if you really see our net credit loss historically, it remain around 15%-20% of our gross NPA, right? We are keeping around 55%, sorry, 50%, north of 50% in GNPA. Plus we have a contingent reserve around INR 300 crore for any unforeseen. We are very well comfortable in keeping PCR around this number. Okay. Thank you. Thank you very much for answering the question. Thank you. I request all the participants, please restrict to two questions per participant. The next question is from the line of Errol Desai from Manvit Portfolio. Please go ahead. Hi, Sanjay. Congrats on the quarter. You know, like Bhavik, I appreciate the information on operating expense in slide number 21. Thank you for that. Errol, sorry to interrupt you. May I request you to speak little louder, please? Is it better now? Yes. Yeah, yeah. Yeah, Sanjay. Yeah, congrats on the quarter. Thank you for slide number 21 and, you know, additional disclosures on operating expense. Appreciate that. I had a couple of questions. One was, you know, fees net of the processing fees. If I look at the non-interest income net of the processing fees, how should one look at that number over next couple of years? Because, you know, we've now started issuing credit cards. We've scaled up distribution partnership on insurance, MF, Demat. And the franchise is obviously expanding. How should we look at that number? Because obviously the loan processing fees. Sorry? Sorry, go ahead. No, I'm saying the loan processing will obviously pick up with the disbursement, but, net of that, just wanted your thoughts on all the other pieces. Yeah. You know, we are building a franchise around now cross-sell around insurance, investment. You will appreciate that, two quarters back, we got, our merchants again classifying as, priority sector, and we got the PSLC income last quarter too, and, you know, before quarter that also. I think the PSLC income, the cross-selling around insurance, investment and trade, you know, these are the four, things which we are working on. Of course, there is still a issue of continuity around it because of pandemic. How much it will then go up, you know, we would love to only comment when things become normalized, right? As of now, in whatever quarter we get the opportunity, we want to use that. On a larger fraction that how much it can be a part of our total income, you know, we really want to go back to drawing board maybe in the month of April once the stability is there, right? Of course, loan processing and other income is directly related to the business, numbers, right? Right. That will go up if the business goes up. Fair enough. The other question that I had was, in the housing where you had INR 900 crore-odd disbursement in 9 months, what would be the split between new loans and balance transfers? Uttam, do you have a number of this? This is very specific. Yeah. Balance transfer is very marginal, around 7%-8% only. Because the new franchise, it's largely NTB customers or cross-sell to my existing customers. Balance transfer is not too much here in this. What will be the percentage of existing AU customers within this? Let's say your Wheels and SBL/MSME customers who have been given housing loans. No, largely, as I said, it's NTB. Again, ETB would be around 15% only. Largely to NTB only. Got it. Got it. That's since a new franchise, new team. Yeah. Just that one request, you know, since you are sharing so much of information on the liability side, if you could, you know, sort of put it in the PPT. It's, you know, difficult to keep track on a call. Just add that one request. All the best for it. We'll manage. Yeah. Sure. Thank you. Thank you. The next question is from Amit Nanavati from Nomura. Please go ahead. Yeah, hi. Question on credit cost outlook, right? Nine months basically in these three quarters, and this is way pre-impact. Ten years we kind of averaged around 60-70 basis points of credit cost, right? Provision cover of upwards of 50% versus 15%-20% kind of NPAs that you experience, right? To that extent, and now NPA is also back to near normalized level, where do you think credit cost has it bottomed out here, maybe 50, 60 basis point or you can see some reversals also at least for the next one year? Difficult to answer, brother, because still we are going through COVID-3. You know, if you ask me that, if there was no COVID-3, I would have said that we would have bottomed out, you know, in terms of gross NPA and the kind of losses we have, you know, which is around 0.3%-0.4%. You know, you're talking about 0.5%, but ideally it would have been 0.3%-0.4%. You know, in the pandemic it has could have reached not more than 0.5%. So, I would say let's wait for this quarter more, you know, to have more clarity that how can we, you know, next year in terms of NCL. Otherwise I'm very hopeful that we have largely covered our any kind of risk in asset by creating a lot more contingent provisions buffers and by providing any kind of losses we are debiting to P&L, right? We're not using provisions. Largely we are covering ourselves in a way that, you know, no unforeseen circumstances should challenge us. But I would say around 0.4-0.5 is the amount I'm looking for. That's the net credit loss, Amit. I think from credit cost perspective, that would be in line with our historical range of 70-90 basis. Got it. Yeah. Secondly, if you can just point out the new customer additions in Wheels and SBL portfolio in the last one and a half years, that would be helpful. Was your question the new customer additions in the Wheels and SBL portfolio? Yes. I think Uttamji's speech covered that. You know, broadly, given that there has been a pandemic and business has been muted. I think the growth in customers could be in line with the growth of, you know, we don't have that specific number as yet, in terms of growth, but the number of customers is already articulated by Uttamji. I think around 5.5 lakh customers, 5.8 lakh customers on the Wheels business and around 1.8 lakh merchants on the SME, SBL business. Basically, I just wanted to understand of the incremental business that we have done in the last 1.5, 2 years now, right? 61% is newly originated in the pandemic era. How much of that would be existing customer? How much of that would be new customers base? Broadly it will be NTB. Sorry, Amit. Regarding question, if you can write to us, we can respond back to you if there's anything specific. I'll do that. No problem. Thank you. Thank you. The next question is from the line of Arvind from Kotak Mahindra Bank. Please go ahead. My question is on the next triggers for ROE now that we are in the mid-17s, high teens, and given that we already kind of north of the targeted NIM range is up 5% to 8% to 6%, the cost to income is not going to moderate in medium term at least, and credit costs over the last couple of quarters have been broadly in range. Where do you see the ROE going from here? Have we achieved where we want it to be or, are there other triggers that we can't predict yet? Arvind, your question. I mean, you're not very audible, but if I understand your question correctly, what you're saying is that we have reached a ROE of 17% in this quarter and where do we expect it to be in terms of a long-term average? Is that the question? Yeah. Given that your three triggers for an upward rerating, NIMs, cost to income, and credit costs are broadly, you know, in the stable territory. We wait for one more quarter. Arvind, we have to wait for one more quarter because as we are commenting that this quarter has one or two exceptional items because of lagged effect, you know, and we need to have a normal quarter in terms of our investment book, in terms of our credit costs, in terms of our productivity, you know. I think let's get this COVID threat also over from our side, you know, and then only we can comment because very, very uncertain environment with very unpredictable metrics around us. Please bear with us and we'll come back by April to figure out what is the right ROA and ROE for us. Understood. My second question was on the credit to deposit ratio and the liquidity coverage, the high liquidity coverage ratio that you're sitting on. Given these comforts and the fact that you yourself pointed that you have headroom to reduce the cost of deposit in some buckets, can you guide us to some glide path on the rate of interest or the, you know, the cost of funds going forward? We understand that there's an external environment of increasing interest rates. Keeping that aside, do you have any targets for some kind of a sense on quarterly reduction in the SARs in particular? We actually decide every year, you know. You know, this is very unpredictable. You know, it's not in your hand. It has to be market-driven approach. I would say the team has reduced the cost by a good 90 basis points in one year, you know, and in total 18 months we would have reduced by 150-160 basis points. In that sense, we are absolutely on track because we had that high-cost money which got paid during the period. I would say if interest rate cycles don't go up, you know, you will see some sort of reduction. If interest rate cycles goes up, you know, we have to price our deposit again. You know, the best part in AU is this, that we have the ability to transform to the customer in the end customer because again, our customer are retail. Those are more in core markets, you know, and in those markets we compete with NBFCs rather than a formal banks. That is our advantage, right? Arvind, Yogesh here. One additional point that my incremental cost of fund is around 5.3 as of now, whereas my ALM cost is 6%, right? Still I have 70 basis point runway going forward, right? Where my ALM costs maybe medium to long term can be around my incremental cost. If we take incremental interest rate, so if we take that into picture, still I have some cushion in my cost of fund going forward. Understood. Okay. Thank you. Thank you. The next question is from the line of Nidhesh Jain from Investec. Please go ahead. Thanks for the opportunity. Firstly, are there any plans to raise capital given we have reached Tier one of around 18%? What is the threshold level of Tier one beyond which you want to raise capital? Yeah. We appreciate that this year's profit, you know, if we add on that, then our capital adequacy is around 22%. By April, you know, it will be hanging around 20%+, right, with largely supported by Tier one. You know, we will take the call at appropriate time because once we complete this quarter and we see how the environment is at that time, you know, how much we can grow next year and how much money we have. I think a larger call will be taken, you know, maybe around April, you know. As of now, we are absolutely very comfortable around our capital adequacy. Sure. Secondly, what are the plans to apply for universal bank license, and any timelines, indicative timelines? No, honestly, because we'll become eligible by next quarter, but I think it's more of a board and a shareholder decision, you know, and ultimately the regulator has to approve it. We are not in hurry. You know, we are taking quarter by quarter. Let's finish quarter four first and then think what we should do in coming years. Sure. On the growth, sir, the growth has been quite broad-based in this quarter. In the Wheels segment, what has driven this growth? Because if you look at the key segments where we operate, we have large share of passenger cars as a key segment. There, the industry has been showing low-weak numbers. What has drove the growth for us in this quarter? Probably if you can share some data around used vehicle financing that we have done in this quarter versus previous quarters. Is that the reason which drove the growth? Bhaskar Karkera is there? Our CFO is there. He must be there on the call. Yeah. Sorry, if you can just tell me the question. I had dropped out, so if you can just repeat the question, please, Arvind. Sure. Bhaskar, the question is. Question is around what has been driving the Wheels growth? In terms of segments of customers as well as the segment of cars. Essentially. In the context that new car sales have been weak from an industry perspective. Yeah. Essentially what has happened is, what has given us volumes is the personal segment, because that is where, you know, that was something where we had, in the past, we were not very strongly present in that segment. Obviously with the bank platform, you get that opportunity to get into the personal segment. With the kind of space that was available with the NBFCs being a little slow, that also does give you a little more headroom in the new car space. Number one. Number two, also the fact that, you know, there was some movement with Tatas, there was some movement with Mahindras. While, essentially in the past, if we were a little more focused on Maruti, the fact that we were able to move ourselves across manufacturers and across dealerships also gave us an additional room on the upside. On the used car, once again, because the distribution network being available, we were able to approach the organized channels a little more. The unorganized channels, we did a little more activation. All in all, it was a strategy where we actually expanded ourselves a little more horizontally so that we were able to reach out to more distribution points. From there, we managed to pick up a little more from whatever we were doing in terms of. Obviously we did a little more of tractors, we did a little more of used vehicles and all those, a combination of personal, commercial, tractor, used, all of that helped us get to our number. Just one last question. In terms of distribution expansion, which could be the key states that we are thinking about over the next two to three years to drive growth. I see that UP and Bihar are two large states which is very popular and probably the competitive environment also will be relatively benign. I don't hear any large player operating in that segment operating in our segment in those geographies. What are the plans to expand distribution over next two to three years? It is on the Wheels side already getting laid down. The plan is getting laid down. In fact, people are being interviewed and we are positioned to settle ourselves in the next year with the new states as well. We will definitely do whatever we have learned over the last 20 years in that business and expand it to those states. Obviously we have the patronage of the Mahindra, Maruti, Hyundai people also wanting to, you know, they will also support our going into those states because it just works for them as well. Nidhesh, if I can just add, as Sanjay announced, you know, we will be holding a separate, you know, each SBU will be coming and presenting to you and all the other investors and analysts. Maybe we can have a more detailed discussion around Wheels in that session. Sure. Thanks. Thanks. Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Renish Bhuva from ICICI Securities. Please go ahead. Hi, sir. I'm Congress. I'm a great set of members. My question is to Rishi, sir, about, you know, the PPC number, which you shared on the current account holder as well as savings account holder. Sir, basically, when we look at the PPC, how we look at, I mean, we look at asset to liability or we look at liability to liability? No, we are looking at all the products of the bank. Well, like what I said, you know, we are looking at customer using a PO, POS machine or a QR or, you know, SIP three-in-one asset products, life and health insurance. All of these products are included in the calculation of PPC. When you alluded to this, 1.9 PPC for the current account holder. Yes. What could be the major second product, sir, over here? I mean. A good number of customers would actually be using our QR and POS machine. Okay. On the savings side, sir? You said it's 1.35. This side is a mix of products. Many of them have loan from us or they would be investing through us. Like I said, we have more than 51,000 in 01 accounts. Some customers would be making their investments. Many of them would have insurance with us. All of that gets counted for the PPC for savings account customers. Oh, got it, sir. This is helpful, sir. Sir, my next question is on the credit card. If you can share some, you know, a customer profile, be it in terms of, let's say self-employed and more importantly, if it is self-employed, ETB, then the credit card is generally offered to the proprietor or it is offered to the other member of his household. Sorry, if you can repeat that question, Renish. Yes, sir. My question is on the customer profile for the credit card. First, I would like to know the breakup between salaried and self-employed. Within self-employed, if it is ETB, then generally what is the strategy? I mean, do we offer the credit card to the proprietor or owner of that unit? Or we try to sort of leverage that relationship by offering credit card to the one of the member of the ETB customer. Yeah. Sanjay here. I'll give you some data point around it. Like, you know, we are issuing 70% card to the ETB of bank. You know, and largely we are self-employed base customer bank, right? That means that majority of card are issued to the self-employed people. You know, and they, those guys are more of a proprietor of their own shops and own enterprises. You know, and 70% accounts, 70% credit card has been given to the core markets. That means the customers are not that much leveraged. And our card become one of the first card for them. You know, our average spend is around INR 17,000 per card per month. That is also showing up very well. The detailed discussion on this is on tenth of February, where Mayank Markanday, our ex-CRO, who is running this business, will showcase his whole deck on the subject. Got it, sir. Thank you very much, sir. This is very, very helpful, sir. Yeah. Renish, just that data point in terms of salaried and self-employed mix, that mix is 55-45. 65 or 35, right? 55, 45, approx. Okay. 55 self-employed, 45 salaried, okay. 55% salaried and 45% self-employed. Okay. Okay. Thank you. The next question is from the line of Himanshu Taluja from Infina Finance. Please go ahead. Yeah. Hi, sir. Thank you for the opportunity. Just, firstly, sir, one data-seeking question, if you can just repeat what is the Wheels breakup in terms of the new and used, if you can share that. That Uttam already covered in his speech. You know, almost 50% is new, 25% is used, 13% is Cash on Wheels. Sorry, 60% is new, 25% is used, and 13% is Cash on Wheels. Okay. Sure. Just secondly, what is your actual game plan on the credit card? Because if I look at this product, this product is more suitable, more a product of a metro or urban market. Whereas where most of the other top players are focusing on. Whereas if you look at our presence or our focus market is more sort of rural and semi-urban. So what is the actual plan on this? You just wanted to have this product more from a for a liability customer or how you want to leverage this product? No, no. I think you are, because, you know, we are commenting that, you know, on tenth of February you'll get the whole color around it. To give you some data point around is this that this is a very new product for us, so our focus is on our ETB base. You know, 70% cards are given to the ETB base and 30% are given to NTB. NTB generally are from the urban markets. ETBs are generally from core market. You know, 70% are given to the semi-urban and rural areas, so that card is their first credit card and the customer is not leveraged. Because of the advent of so many POS machines in those areas, our card is being used extensively now. Our strategy, you know, we evolve with the time, but as of now it's one of the product where we feel it's very important to become a digital bank, right? Credit card is one of the most important medium to do digital payments. We are pushing our, as of now on a very conservative note. As we move forward, you know, I believe this will be a acquisition strategy for us for very urbanized customers. Okay, sure, sir. Thank you. Thank you. Ladies and gentlemen, take the last question from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead. Yeah. Hi. Congratulations on good results. Sanjay, you mentioned in opening remarks about the change in retail recognition norm for NBFCs that will help in the level playing field. Just wanted to understand, like, are you already seeing the positive impact from this on the ground? Any qualitative comments around this? Nitin, you have to help me out to get me the other similar market operator numbers because, you know, what we are saying over the years that for us, 90+ DPD versus an NPA classification was a different trajectory, right? We managed this transition very well in last four years. We were tagging NPA on a daily basis. You know, our NPA rollback was not easy. We are seeing other companies now coming and building that similar kind of practice, which is actually helping us because previously, no NBFC, no HFC were looking to get the whole EMI as repayment right, at the time of default. Now it's a level playing field and we are very happy that, you know, our practices and other operators' practices are now similar. Customer is also helping us in all sense that this is the way to go forward, right? I think this is for us a level playing field. You know, you can compare now our asset quality to a similar customer segment operator asset qualities. Sure. Second is on the contingent provisions. I think we have stated that our restructured provisions are good enough, and we don't need to provide more there. Our recovery is continuing to remain very strong. We have, like, 15%-20% LGDs against a 51% coverage. What do we plan to do with contingents? Will we look to, like, hold them on the balance sheet or would we look to reverse them and increase coverage? What is the outlook that we can see there? Important question, Nitin, but I'm sorry, I'm not able to give you answer in this quarter because we were doing some calculation in this quarter, but suddenly this Omicron came, right? We really want to see how long this can be and, you know, God forbid, you know, no other unexpected COVID comes back, right? We really want to play safe here and we'll see how we comment on this in next quarter. Sure. Thank you so much. Sanjay, you all the best. Yeah, thanks, Nitin. Thank you very much. I now hand the conference over to Aseem Pant for closing comments. Thanks. Thanks, Nitin. Thanks, everyone. On behalf of the entire AU family, I would like to thank you for joining us in the call. Please reach out to the IR team if you have any further questions. Thank you. Thank you very much. Thank you so much. Thank you. On behalf of AU Small Finance Bank, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you. Thank you.