Ladies and gentlemen, good day and Welcome to the AU Small Finance Bank Q3 FY23 Earnings C onference 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, please signal an operator by pressing star and then zero on your touchtone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Aseem Pant from IR team. Thank you, and over to you, sir. Thank you. Thank you, Insiya. Good day to everyone, and Welcome to AU Bank's Earnings Call for The Third Quarter of FY 2023. We thank you all for joining the call, and we hope you are well. As usual, for approximately the first 20-25 minutes of the call, we will have brief remarks by a few members of our senior management team, followed by 30-45 minutes of Q&A. Firstly, we will have our MD & CEO, Mr. Sanjay Agarwal, share his thoughts on the overall performance and outlook for the bank. He will then be followed by our ED, Mr. Uttam Tibrewal, who will share his thoughts on the operating highlights for the quarter. Besides them, we also have a few other members of our senior management to answer any other 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 will request our MD & CEO, Mr. Sanjay Agarwal, to share his thoughts. Thank you, Aseem. Good evening, everyone. Namaskar. Thank you for joining in. Hope you are doing well and had a fantastic start to 2023. The quarter gone by was the 23rd quarter in our banking journey and another quarter where we have demonstrated consistent performance, and the team has delivered a strong set of numbers on all the fronts. We are on the course of laying a robust foundation for building a sustainable and a scalable bank. In terms of micro, we all know that global economic activity has been slowing down due to the adverse impact of geopolitical tensions, tightening global financial conditions, persistently high inflation, and sharper-than-expected monetary tightening by central banks globally. Consequently, India continues to face intense side pressures due to the global interest rates, weakening global demand, and high volatility in portfolio flows. Specifically, the tighter liquidity and the strong credit growth has led to the increased demand for deposits and rise in deposit rates all across in the last quarter. Despite these headwinds, India emerges as a bright spot, with GDP expected to grow north of 6.8% this fiscal as per the latest RBI forecast. The effect of series of rate hikes by RBI will help in bringing down inflation while maintaining the growth-inflation dynamics in balance and keep bond yields in check. India's favorable demographic, stable democratic setup, and increasing impact of technological innovations like India Stack, coupled with deep structural reforms implemented in the last five years, are helping us emerge as a knowledge and technology leader in the world. The governance structure of, and compliance culture in the country is also going through a positive change. It will have equalizers for growth. Coming to AU, the last quarter was amongst the most consistent and a stable quarter for us. I'm happy to share that we not only delivered the ever highest net profit of INR 392 crores, Also performed well across all parameters. In line with our expansion strategy, we opened 42 new touchpoints, crossing the milestone of 1,000 touchpoints with a presence in 21 states and three UTs of India. We went into two new states, Andhra Pradesh and Kerala, in last quarter. Our deposits grew by 30% on yearly basis and 5% on quarterly basis, led by an increase in Retail Term Deposits. Our overall CASA + Retail Term Deposits is around 70%. As the system credit growth continues to be strong, the competition for deposit has intensified with the rise in deposit rates for all commercial banking group, quarter three. We also raised our term deposit rates and our savings deposit rates in certain buckets. The overall reception was quite strong in the retail segment, with a clear preference for term deposits, thereby locking long-term interest rates and deposits. In the last quarter, our overall CASA moderated to 38% from 42%, but I strongly believe that it's still in the zone. Our cost of funds saw a 7 basis points increase for the quarter as compared to last quarter. As the systemic liquidity continues to be tight, interest rates remains a key variable, and our ability to optimize cost of funds remain a key priority. At the same time, our yearly cost of money continues to be in line with our earlier forecast at around 5.84%. We remain on course to deliver our margins for our current financial year in the line with FY22. I strongly believe that cautious stance adopted by us around growth of neither aggressively building assets nor raising more money at higher rates over the last six months has served us well, and any impact of elevated cost or margin of next year remains a key monitorable. The credit market remains strong, with strong demand coming across all our asset SBUs, be it Wheels, SVL, Housing and Commercial Banking. Asset business saw disbursement of north of INR 10,000 crores, growing 22% year-on-year with a disbursement ease remaining stable. Our non-fund business also saw sanctions of around INR 500 crores. Our asset quality, which is our, one of our core strength, has remained resilient across cycles, and we are committed to maintaining 50 asset quality. Moreover, we are seeing an increased awareness around customers to repay their dues on time, and there is also a strong momentum in this business resulting in improved collection across the consumer products. Our collection efficiency for the quarter was around 107%, resulting in a gross NPA of 1.8% and an NPA around 0.51%. In fact, asset quality post-pandemic book is even better. 81% of our book was originated post-pandemic, with NPAs around 0.6%. The restructured book also seems healthy recovery and now stands around 1.4% of the advances. Our balance sheet has now crossed INR 80,000 crore. The bank remains well capitalized with capital efficiency around 22%. ROA and ROE for the quarter was around 2% and 13.2% respectively. More will be shared by our team. Around customers, we welcome around INR 3.3 lakh customers last quarter. With a view to serve our customers holistically, we also expanded our third-party offerings by entering a partnership with SBI Life and ICICI Lombard for the insurance. We continue to invest and make progress in our technology journey. We went live with our upgraded CBS a few days back, which has been in the works for last 10-12 months and will provide us greater scalability and resilience as well as new functionalities. Our automation efforts also have started yielding results with more than 150 processes automated, which will go a long way in cutting our costs. We're also progressing well in implementation of our data platform, which will go live in phases starting in Q4 and improve our data analytics capabilities. On the digital side, we continue to scale up and improve our various initiatives, be it our own app, AU 0101, video banking, and credit cards. We have around INR 16 lakh digital customers now, and we have around INR 4 lakh credit card customers, and our monthly issuance is around now 35,000 cards per month. For our progress, we have awarded the best technology bank and best bank in a digital engagement by the IBA. Of course, it was in small finance category. Throughout the last year, the leadership team of our nine SBU presented their business model and strategy at various AU Insights sessions. I hope you'd have chance to interact with our senior leadership and their department to get a deeper sense around the SBU sustainability and profitability. Our senior team as of now is quite stable, well-balanced, and driving the business with a lot of passion, purpose, and pace. We are building the culture of these three Ps in our organization. Recently we also were featured among the top 50 companies with great managers, and out of that, three leaders made our top 100 across the industry. I'm also delighted to share with you that AU Bank has been judged as great place to work four years in a row. We continue to introduce progressive HR practices which are best in industry with an intent to build this bank where our people not only develop their career, but also retire from here. Our recent introduction of menstrual leave for women colleagues and AU Forever Pass, enabling our employees to join us anytime, are probably among the first in the banking industry, inspired from our philosophy of Badlaav Humse Hai. Policies like leaves for special occasions, paid sabbatical leaves, educational assistance, subsidized PL and home loan are some of the key initiatives so far. I'm happy to share that we've also been awarded as a certificate of recognition for excellence in corporate governance by National Awards of Company Secretary Institute in the medium-sized listed corporates. To make our governance more robust, I'm also delighted to welcome Madam Malini on our board as an independent director. She joined in today's board meeting only. We look forward to her guidance in building our bank and take her input in the area of her specialization, like sustainability and CSR. With Malini Madam addition, the total strength of the board has now reached nine directors, with nine being independent. With a heavy heart, I need to also say a good night to our two, our veteran board members, Rafiq Sir and Joshi Madam, who are due for retirement in this quarter by March 31st. After a great long, fruitful, and very impactful tenure at AU, which we are very deeply grateful, I have lot of gratitude for them and will miss them. Last year, we also begin our sustainability reporting journey, and I am very happy to present the first sustainability report of our bank, taking you through our journey of care, of taking banking to all, and of being a catalyst in bringing positive changes to lives of our communities we work with. The report is Global Reporting Initiative based and is externally assured by PwC. I would request you to please go through it and share your feedback with us. We are nearing six years in our exceptional journey of emerging as a best-in-class, highly sustainable retail bank of India. Each year continues to bring new growth and milestones. We welcome 2023 with great enthusiasm and energy. This year too, we'll continue to leverage the India story and further our retail business by three Fs. Standardized, scalable, and sustainable. The bank is well-positioned in terms of balance sheet strength, distribution, and digital properties, stable leadership, and offers a compelling value proposition for customers on both the deposits and the loan side. As we also move ahead, we'll continue to strengthen our governance framework, maintain our underwriting and asset quality, invest in our retail liability, franchise, and digital output, build a strong brand, attract and nurture talent, and provide one of the best-in-class experience to our customers. We are also committed to learn and grow every day. Thank you so much for this patience in listening to me. I hand over to Uttam for the operational highlights for this quarter. Thank you, sir. Namaskar. Thank you, Sanjay. Namaskar. Good evening. I'm wishing you a very purposeful and cheerful year 2023. Hope you all are in the best of health. The strength of our foundation and the resilience of our business model is getting reaffirmed every day. I'm happy to report that we are experiencing the same momentum in the current quarter as well, with all our businesses delivering a very strong and stable performance across all parameters. To reiterate, we started the fiscal year with a strong performance in Q1, which probably in my experience was one of the best first quarters in the last five years. This was followed by a good Q2, helped by an early onset of the festive season. The festivities continued in current quarter as well. Throughout the first nine months of FY 2023, we have consistently excelled across all aspects of our businesses, from deposit growth to CASA growth to improved granularity and stable spreads to strong disbursements and collections. We have maintained a steady course, navigated the ever-changing landscape while preserving our margins and capitalizing on new opportunities, ensuring that our market position remains unchanged. We will continue to push ourselves to reach new heights and stay ahead of the curve. In the last quarter, we reached 1,000 touchpoints with a branch in Indiranagar, Bengaluru. In total, we opened 40 new touchpoints in Q3, taking the total to 1,015 touchpoints including entering two new states, namely Andhra and Kerala. With this, we have now established a pan-India presence barring North Eastern region with presence across 21 states and three Union Territories out of 28 states and eight Union Territories, covering a total of 709 unique locations. I will now take you through some key operational highlights for this quarter. Starting off with liabilities performance in this quarter. Our total deposits have now reached INR 61,101 crores, maintaining the momentum from Q2. We increased our deposit book by 5% despite tighter liquidity in the market. Q3 FY 2023 witnessed an increase in deposit rates across all banks. We have maintained competitiveness, increasing our deposit rates too. This gave us higher traction in terms of power switch against saving deposits. Our CASA ratio for the quarter closed 38% with overall CASA at INR 23,471 crores, a year-on-year growth of 35%. One of the key target areas for us has been becoming the primary account for our customers and we continue to design, innovate, and launch savings and current account products to make this transition natural for our customers. For customers acquiring Q3 for our Royale and Platinum Savings accounts constituted 24% of total new savings account customers excluding BSBD accounts. Similarly, acquisition in our higher variant current accounts stood at 47% of total current accounts that we opened in Q3 FY23, up from 37% in the previous quarter. In October 2022, we launched our AU Platinum Business Current Account designed for retail merchants on the back of merchant-specific input solutions such as QR, POS, and Sandbox. We have been able to onboard 1,195 Platinum Business Current accounts till December 2022. We are on the verge of launching another premium savings product, which in my mind will be among the best in the industry. This program is especially designed to provide comprehensive banking and lifestyle experience and will give us a strong foothold and market share in the fast-growing HNI segment. With our cross-sell efforts, we dispersed 13,000+ life and health insurance policies, registered 13,000 new SIPs, and opened 6,500 premium savings accounts during the last quarter. To further increase in the bank's third party insurance offerings, we have partnered with HDFC Life Insurance and ICICI Lombard General Insurance this quarter. Asset cross-sell has also been an important focus area for us to deepen the engagement with our customer base and in Q3, we dispersed INR 589 crore to our branch banking customers across loans, SVL, home loans, business banking and AG loans. With all these initiatives, we are steadily improving product mix to increase our average balances. Our products per customer has been consistently rising and presently stands at 1.64 saving account customers and 1.99 for current account customers, excluding government and BSBD accounts. Our digital initiatives, AU Video Viewing app, internet banking, video banking, credit cards, UPI QR, and personal loans have played an important part in improving customer experience and engagement. Our monthly transacting customers have increased to 57% of our total active SAR customers, with average number of monthly transactions increasing to 33. Further, over 70% of the current account customers are regularly transacting with us with average monthly customer initiative transactions being 75. Through our digital proposition, we added INR 1.2 lakh new customers, which is nearly 36% of the total new customers onboarded by the bank in the quarter. Today, the aggregate balance is INR 2.4 lakh video banking accounts stands upwards of INR 1,000 crores, and we continue to acquire and manage high-quality retail savings accounts through video banking at almost half the cost of a physical channel. We are also happy with the growing digital adoption of AU 0101 app. We now have nearly 1.6 million customers registered on the AU 0101 app, and more than 60% of them were actively logging in December 2022. Our credit card positions continues to scale further with INR 3.9 lakh live cards and 35,000 monthly card issuance run rate. We have geared up our credit card acquisition through vKYC. In this quarter, we are happy to share that in month of December, we issued 13,000+ cards via vKYC channel. On the UPI QR front, we have installed INR 8.7 lakh UPI QR till Q3 fiscal 2023 and seeing a 33% growth quarter-on-quarter in the value of transactions. I'm also happy to share that this quarter we have dispersed personal loans worth INR 134 crores taking total disbursements to date to INR 664 crores, all of which has been dispersed fully digitally on the AU 0101 platform. Moving on to our asset businesses, let me start with these. This quarter, vehicle industry sold INR 51 lakh units, which is 9% growth year-on-year and 2% quarter-on-quarter. In keeping with the industry's upward trends, we disbursed the highest ever quarterly volume of INR 3,864 crores, 27% higher than same quarter last year, with an IRR of 14.38% and an increase of 9 basis points sequentially and an average disbursement ticket size of INR 4.9 lakhs during two-wheelers. As on December 31, 2022, the portfolio of these stood at INR 21,477 crores through INR 8.17 lakh live loans, which comprise 52% in new vehicles, 36% used and refinance, 10% tractors, and 2% two-wheelers. While personal segment contributed 44%, commercial segment contributed 46%, and tractors contributed 10% to the portfolio. Our average ticket size on the portfolio stood at INR 8.94 lakhs during two wheelers. The asset quality of our lease business continues to improve with gross NPA at 3.32%, and collection efficiency continues to remain north of 100%. Moving on to our XBL business. We dispersed a total of INR 1,678 crores in Q3 fiscal 23. In totality, we have dispersed INR 4,417 crores in nine months period at a weighted IRR of 14.4%. This is an increase of 63% over the same period last year. The asset quality of our XBL business continues to improve with gross NPA at 2.68%, and collection efficiency continues to remain north of 100%. In Q3, we added 6,000+ new-to-bank customers, taking the total to INR 1.81 lakh unique XBL customers. In the same period, our average loan ticket size stood at INR 11.67 lakhs with LTV of 24%. Talking about our home loan business. We financed 4,400 houses in the quarter dispersing INR 547 crores at a weighted IRR of 11%. The total home loan portfolio as on 3first December 2022 stood at INR 3,695 crores across 37,000 loans with an average ticket size of INR 11 lakhs and GNPA remaining stable at 0.40%. Currently, we are operating in main eight major states with home loans available across 2,000 branches. Being an affordable housing book, much of this book is also eligible for long-term refinance from NHB. Finally, on our commercial banking business. It comprises of four major divisions, namely business banking, agri banking, NBFC lending, and our construction finance business. Together, they have a portfolio of INR 11,179 crore at weighted IRR of 11%. Focused mainly on providing working capital solutions like CC/OD and term loans to MSMEs and small businesses. Thus, the portfolio IRR has benefited from the recent increase in the repo rate. The commercial banking lending business is dominated by business banking and agri banking, which together accounted for 59% of total disbursement volume of INR 2,895 crore during Q3 fiscal 2023. We also have a strong non-fund based business where we sanctioned limits of INR 498 crore during the quarter. More specifically, our business banking portfolio has reached INR 4,370 crores as on 3first December, grown 13% quarter-on-quarter with a disbursement of INR 1,033 crores in Q3. Agri banking business has now touched a INR 3,477 crores to INR 3,447 crores portfolio now, a recent growth of 14% quarter-on-quarter with a disbursement of INR 690 crores in Q3. Our growing footprints in new geographies, new product initiatives, and increased synergies with branch banking have been some of the key factors supporting these businesses. Asset quality for the commercial banking business remains stable with gross NPA at 0.00%. To sum up, post the 225 basis points increase in repo rate by RBI over the last three quarters and increased competition for deposits necessitated by the strong credit uptake, the system-wide deposit rates Saw significant pressure last quarter. We will continue to monitor and celebrate rates as per the market dynamic. Our focus remains on delivering genuine CASA deposits and our new product offerings like terminal business accounts and our premium star offering, which center on our existing CASA acquisition franchise. The business momentum on the ground has been strong. We expect the credit demand to be robust in the current quarter. We remain watchful and agile as we step forward with continued on-ground engagement with customers while relying on our strength and processes. I remain confident of our business model and e-execution capabilities and optimistic that we are well positioned and ready to deliver one of the best Q4. You would agree with me that despite the macroeconomic headwinds and the geopolitical challenges, India is known as a bright spot in the global arena. Similarly, within the banking landscape, I believe AU at this stage is at sweet spot, having laid a strong foundation with a well-capitalized balance sheet, sustainable business model, and with strong and stable leadership team, we continue to identify white spaces and position ourselves to take advantage of the opportunities therein. I look forward to share more with you in the coming quarters. Till then, stay healthy, stay safe, and keep banking with AU. Thank you and take good care. Ashwin, now over to you for Q&A session. Thank you, Uttam. Inda, we can now begin the Q&A. Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may enter star and one on their touchtone 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. Anyone who has a question may enter star and one. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take our first question from the line of Rohan Mandora from Equirus Securities. Please go ahead. Good evening, sir. Thanks for the opportunity and good set of comments and good set of numbers. The first question was, we have consumed contingent provisions during this quarter despite healthy asset quality trend and good profitability. Just want your understanding thought process of consuming the same and not building the buffers. That's one. Second is, in the last two quarters, we are seeing a reduction in employee base. What's happening there? Third is that currently what are the challenges in PSLC business? Also, why are we not taking IBPC route in terms of selling down excess cases? Hi Rohan, this is Uttam. Thank you so much. You know, around the first question around contingencies, like, as we have articulated earlier as well, that contingencies are precisely created for a particular purpose. In this case, as you are aware, that it was created for Covid and Covid-related contingencies. Of course, as things are getting normalized, we need to resolve those contingencies and we cannot keep on it forever. If you see in the first quarter, we did utilize part of it to create floating provisions. The balance, like whatever is around restructure, that getting used as and when the restructure cases are getting resolved. Either it is getting released to the P&L or getting created towards the NPA provision for the forward flow from the restructure book, right? As far as contingencies are concerned, very clearly, as I said, we will need to resolve it at some point in time, and we are in discussion with the board and auditors in terms of their view. And as per their solution, you know, whatever is required during the quarter, mainly, we are not taking any provisions to the P&L. What we have been doing is that if you see, we have increased our provision coverage ratios from what we used to maintain about 50% earlier to about 75% now, including technical write-off. That's where the utilization is. And whatever is left over at the end of the annual financial year, this is the guidance from the board, we'll take a call in terms of what do we intend to do with the remaining contingencies. Hi, Rohan. Yeah. On PSLC, you know that market is subdued, right? In last quarter also, though we tried, we sold around, means we issued INR 2,300 crore last quarter also, but premium was not there. We will try in next quarter also. On your question on IBPC, we balance ourselves between IBPC, PSLC and securitization. As we mentioned in Q2, we sold around INR 1,000 crore portfolio and this quarter also INR 1,200 crore. It's balanced between IBPC and securitization. It is kind of tool for our cost of fund also. We'll see in next quarter also. Sure. Just third one on the employee base. Yeah. On the women, sorry, on the overall employees and, you know, the hiring, it's purely routine. See, I think we had commented this earlier as well, that during the COVID period, you know, there was some amount of excess capacity or buffer capacity which was built in the system. More because, you know, people were going on leave and they were working and they were taking time to return and the counters had to be manned. To that extent, we had some extra hiring that we had done. As things are normalizing, you know, as per our own business plan, things are getting rationalized, so there's nothing more to read to it. Can there be further reduction in employee strength or are we towards the end of that? No, no. I mean, you know, we are also at a answering this side. In terms of HR, you know, people around. I think we already commented that, you know, we're really working on the productivity side. You know, we build a buffer, you know, as things come in here, but now things have become normalized. There'll not be any further reduction, rather we are hiring extensively. I think more hiring can be done for the basis of the next year business plan. Sure, sir. Thanks. Thank you. Thank you. We'll take our next question from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead. Yeah, hi. Thanks for the opportunity and congratulations on the very good results. Two questions I have. One, if you look at slide 14, the disbursement and the advances yield there in the past one year from three to FY 2022 to the current quarter. I understand that this can be because of this scaling of the housing business. Nitin, your voice is not very clear. Can you just repeat that part or maybe just come near to the mic? Nitin, if you are on a speaker or hands-free mode, switch it to handset and speak, please. Is it any better now? Management team. Yes. Much better. Much better. Much better. Thank you. Okay. Okay. Thanks. I was saying, like, if you look at slide 14, the disbursement and advances yield have hardly moved up over past one year. I understand that this can be because of this, we are scaling up the housing business. Given the extent of rate hike we have seen in the system, this still looks like a little surprising. If you can share some color on this and why the disbursement yield during the third quarter have gone down over the second quarter? Very marginal decline, but any reason behind that? The second question is on the collection efficiency. We have been reporting for many quarters in a row, we have been reporting collection efficiency of more than 100, this quarter being 107. How long to expect this and what is really driving it? Is it like the back book areas are higher, which is driving this? Or is it like a prepayments which are coming through to drive such high collection efficiencies? Any color on these questions, please. Nitin, I am on this side, so I'll answer the second one, right? You know, I would, I would say that, you know, the credit compliance or the culture, you know, I already commented in my speech that, this is one of the best, time for us as a lender. You know, people have become lot much conscious around even borrowing money. You know, the whole repaying the EMI on time has come to be, you know, some kind of discipline, some kind of... Culturally, people have become more, disciplined around it, right? This I am seeing across products, across geographies, across, buckets. That is why the recovery percentage or the collection is north of 100%. You know, and the kind of business momentum we are seeing and the kind of the exuberance in the customer we are seeing, I strongly believe that, you know, this year at least, you know, I'm seeing the next year, next financial year into 20-24, you know, I would be surprised that it drops. You know? That's my sense. I think you will see this kind of same asset quality really for long, long time now. You know, I can't comment or explain the long time, but the way after the COVID, we have seen our gross NPAs coming down and the collection efficiency remains so strong. I have more hope than a worrisome expert around it, right? That's on the collection. I hope I answered your question right. Yeah. Ali is around. He is the expert there. He can brief you. Hello. Management team, are you still connected? There seems to be no response from the management line. Ladies and gentlemen, we request you to please remain connected while we disconnect and rejoin the connection. Please hold the line. Ladies and gentlemen, thank you for your patience. We have reconnected the management now. Mr. Aggarwal, I've unmuted your line as well. Okay. Nitin, you're still there, boss? Yeah, yeah. I'm here. Please. Yeah. Sorry about that. If I understand clearly, your question on the first part had two parts, right? One was that the disbursement overall for on a year-on-year basis looks flattish. Right on the overall, given Yeah. Yields have not gone anywhere year-on-year and this quarter the yields have come down on disbursement. Yes. These two part. Yeah. Sorry. Yields have not gone upward year-on-year? Yeah. From 12.7%-13%. This quarter just moved from 13.1%-13%. Little actually for this quarter, this was festive quarter, right? In October, it was Diwali festive. Because of that, in that particular month you get business. Yield was slightly lesser than last quarter Q2. Very marginal. I mean, the decline is only 5 basis points and that's also partly because the mix of the commercial banking has increased slightly. Our yields otherwise have held up, if you talk about the retail. Right. Can I assume that we have been able to pass on the rate hikes that we are seeing in the system to the customers at incremental level? Because the yields otherwise are staying flat otherwise. I mean, on the vehicle side, very clearly there has been a pass on. As, I think Uttamji also articulated in his speech, you know, there has been a 9 basis points of sequential increase in terms of live, as yields disbursements. Of course, our banking book, if you see the overall yields have jumped up significantly given that they are floating rate and repo linked. In terms of SBL, it is broadly flattish. Again, you'd agree with me that that book is already at a slightly higher yield. I think, not really worried too much in terms of passing on the incremental cost. Right. If you see the slide number 13, our NII almost same in last four, five quarters. Yeah. I think that's it. Yeah. Just a follow-up on the other question that I had around collection efficiency. With collection efficiency being more than 100%, does it imply that we are recovering from the back dues or we are having prepayments? Or can there be any other reason? It's across buckets and we check in our continuity. It's also on, you know, loans which are way past due, where we have been able to recover now because business activity has sustained and. Our collection efficiencies don't include prepayments within as we have disclosed. This is primarily and I think we have also articulated that what we saw this quarter was some very strong collections both across buckets as well as across products. That in some way signifies that the underlying cash flows in the underlying businesses has been very, very strong. Right. Okay. Got it. Thank you so much. I wish you all the best. Thank you. We'll take our next question from the line of Mahrukh Adajania from Nomura. Please go ahead. Yeah, hi. My question was around the cost of funds. You have obviously made detailed disclosures on incremental and outstanding cost of funds. They've not moved much if you compare it to most other banks that have reported. More importantly, if you just calculate some balance sheet averages and cost of funds have risen much less than even what you've disclosed, obviously, because you disclose, on, you know, daily balances. How is it that relative to the system, you've done fair much, much better on cost of funds despite hiking CD? What is the outlook for fourth quarter and longer term? Just in terms of cost of funds or cost of deposits. That's my first question. Mahrukh, first of all, we haven't done any CD, right? In this quarter, as we have disclosed. Our CDs have in fact been coming down. As far as the overall cost of funds is concerned, our cost of funds were quite high when we started the bank. It was around 5.95%, unlike some of the larger peers that you are comparing us with. We have benefited from some of the repricing on that book. Of course, if you look at the incremental cost of funds, I think that has, as we have disclosed, it's about 23 basis points up in this quarter, and that is in line with the broader industry. I don't think there's too much to read there. Okay. Thank you. Secondly, it was mix of our funding rates, like we did securitization and we raised low-cost refinance also, which helped in our cost of funds, overall cost of funds. In terms of Q4, I think, as we mentioned that we should be within range what it was last year, overall year. It was around 5.95. We expect that we should be in that range only. For next year, very difficult. We are also reading the market. As we mentioned in our commentary also that this is key monis eleven for us and we'll see with the time. Got it. That's helpful. My next question is on the ECL circular. Also, have you been filing mock runs with the RBI? Obviously your provision, you've given a detailed slide on your provision to AUM, so it's in excess of 2%. Given that, do you see any major impact from IFRS on your books? I mean, any comment that you can give on the IFRS circular? Yeah. Sanjay this side. you know, again, this is just a papering. It just recently came, right? It's difficult to comment as of now because once the overall scheme of things are settled down. Of course, we are filing with RBI and by that, you know, we have a positive impact than a negative one. I strongly believe that once this is implemented, it will have a neutral to positive impact on us. Sure. Why is that so? Because of early provisions on certain markets or what is it? Like, if you could just... Yeah. You, you know about that. You know, we provision so much and our net credit loss is very less. Okay. Secure book, right? Yeah, of course, of course. That's why we have MCLR is less, right? I think you're absolutely right because we provision more than what it requires, but just to make our balances stronger and stronger. But in MCLR, you have to just estimate, right? It has a neutral to positive impact. Okay. Thank you so much. Okay. Thank you. Thank you. Our next question is from the line of Ashlesh Sonje from Kotak Securities. Please go ahead. Thank you. Congratulations. Just a couple of questions from my side. Firstly, a follow-up to one of the previous questions. Mr. Sonje, I'm sorry to interrupt. If you're on a speaker mode or hands-free, please switch to handset and speak. Hi. Is this better? Yes. Thank you. Hi. Hi, team. Congratulations. Firstly, a follow-up on one of the previous questions. On the cost of funds front, has there been any rundown of any older higher cost borrowings on our book? If yes, how long do you expect that to continue? No. We don't have any grandfathered borrowing, right? Right. That has already been closed. This is now six years running. Three, four years we had those grandfathered borrowing. This is a normal course of our business, yes. Okay. Perfect. Sure. Secondly, on the TD front, on the term deposits, there has been a decent traction on the retail as well as bulk TDs. They are up by 10%-15% quarter-on-quarter. Can you share the blended cost of deposits on the bulk TD books? Rishi, can you answer this? Yeah. What's the question? We need a blended cost of? Of the TD, bulk TD books. My bulk TD cost is around 6.4% in nine months for this year. Means overall TD cost, I am telling you, is deposit cost. This includes both the retail as well as bulk TD? Retail and bulk both. Okay. Is it possible to bring out the bulk TD cost separately? Ashlesh, I think we have commented earlier as well that typically we don't prefer, you know, bulk TD. I think we have been articulating that there has been a internal drive to go more granular, more retail. What we are measuring right now is CASA + CDTD index, which you would see is now about 70%. Honestly, you know, on the wholesale side, we generally prefer to give lesser rate as compared to retail. On the retail side, we generally have a slightly higher markup. While we don't disclose this number independently, but if you ask me, it should broadly be similar or slightly lesser. Okay. Perfect. Thanks. Just one last data-keeping question. Have we hiked the interest rates on new loans in the SBL book this year so far? Sorry. Come again? On the SBL book, have we hiked interest rates on new loans during this year so far? Not much. Well, it's still a not very higher rate of interest book. It's a very long-term book. Yeah, We don't want to push that rate on a higher side, you know. Perfect, sir. Thanks a lot. Yeah. Thank you. Our next question is from the line of Renish Bhuva from ICICI Securities. Please go ahead. Yeah. Hi, sir. Congrats on a good set of numbers. Sir, my first question is on yields on the business banking side, you know, which has been up by almost 100 basis- Sorry to interrupt. Could you please switch on, handset mode? Yeah, I'm on handset only. Is it better now? Yeah. Thank you. Yeah. Sir, my first question is on the business banking yields. You know, the yields on the business banking side has been up by 100 basis points. I understand that it's a floating rate book, but if you can help me with the reset period and what is driving this, you know, hike. I mean, are we able to pass on the hike or there is, let's say, different set of customers we cater to wherein large banks are not there? This is Vivek here. The entire business banking book is linked to, you know, the repo rate and it's a quarterly reset. It, you know, any rate hike which is there is passed on in the next quarter. Every 90 days there is a reset for each contract. Okay. In presentation, what we disclose is the business bank yields or it's the blended yield? No, I'm saying the portfolio yields have gone up because it was the entire book is linked to the repo rate. Even in case of incremental business what we are doing, we are sourcing at an incremental higher rate, right? Because the overall regime has changed. Even the competition has increased rate, but obviously not to the extent that what repo rate has been increased, but there is a significant rate hike on the new acquisition. Okay, got it. Sir, okay, my next two question is on the bit of clarification side. One is on the AT1 license. I mean, I know we have applied, but would you like to comment on the status of that? Number two is on the RBI divergence report. I mean, does the audit had concluded and what the outcome of that is, if any? I think so, on the divergence side, because we haven't published anything, so that should be taken that, you know, the audit report is in very in place and is in the shape. Okay. Your other one, the AT1 license, we have to be applied in the month December, and we are waiting for that. Of course, the regulator has to decide, but we have applied for that. Okay. Any timeline, I mean, historically, any evidence, within what time we can expect? Sorry. We can't comment on that. It generally takes maybe around five to six months, generally takes, right. It's in general statement not specific to us. And we're filing in December. Got it. No, this is helpful, sir. Thank you very much. Thank you. Our next question is from the line of Nidhesh Jain from Investec. Please go ahead. Thanks for the opportunity, sir. Last quarter you sounded a bit cautious on growth front, citing that deposit cost has gone up. What is our stance on outlook on growth now? Going into FY2024, what is our outlook on growth? No. In the last time also people took, read more into that. If you have seen our growth in quarter three, it is absolutely in line what I commented. Because, it's not about only an asset growth, we need to see how deposit is being built, at what cost, at what tenure, at what rate, you know. I think we want to play a very balanced role because we really want to build a very sustainable bank, without any noise in any quarter. I strongly believe that quarter four is always better than quarter three, right? We are absolutely on track. What I commented or promised, as in team from quarter one, you know, we are supposed to deliver that. I would say, we are on track because our property is growing north of around 27%, 28%. Our asset is growing north of 27%, 28%. Deposit we are playing a very calibrated game where we don't want to borrow at higher rates, so we want to be mix of them. Our digital properties are doing well. You know, reviews are performing well. We are building our governance structure. Asset quality remains strong. I think overall we are very happy the way we are building ourselves, from last nine months. It remains very tough because, you know, the kind of interest rate cycles has gone up, we still managed to manage our cost of money at around 5.85, you know. In that sense, you know, and now what, another 75 days for this year. You know, you will see the result by, you know, April first or second. Overall I would say I'm very happy that, you know, the team has come together, has navigated its challenges with the flying colors, you know. Very optimistic about future, but need to take call every quarter, and because it's a very balancing game, right? You can't comment or you can't be over aggressive or, you know, you can't be just look for a growth at any cost, right? We have learned hard way. Want to remain very cautious but very optimistic. Sure. Sure, sir. Secondly, sir, our share of unsecured has increased to 7% of the book, which was quite negligible three, four years back. We have always focused on secured segment. What is our strategy on the unsecured? At what% we'll be comfortable with? I see that the large part of unsecured has been driven by credit card book. If you can also share some comments on the asset quality and credit cost in that part of the book, we are the largest- We, you know, absolutely. Unsecured book has three, four, you know, linkages where we do from credit card, we do straight to our existing depositors, and we also want to build something around the commercial customer for QR, right? Everybody is building their business. It's we are in very initial stage, you know. Overall, we don't have any significant numbers around it. I would want to wait for maybe two, three quarters to really comment on the quality of asset, on the, on the size we want to pursue around it. It's very early for us to comment on anything, to be very honest. Give us some time in maybe two, three quarters to really spell out our strategy around the unsecured. I think as an organizer, we are happy that, you know, we are driving all those opportunities, whether it's through QR code, through credit card, through your data analytics on your existing depositors. It's we are not running that program on FOS. It is more through digital data-driven kind of story. Give us some time then we'll comment more on this. Thank you, sir. Thank you. This is Prince here. Just to add and on that specific 7% number, you know, not all of it, I mean, while it's classified as unsecured- Bulk of it, you know, like on credit card, again, as the portfolio is growing, it's mostly the out-of-pocket that we have at any point in time, depending on the spends in that particular month, right? Not all of it is actually a loan, so to speak, right? I mean, it doesn't revolve. On the second part, there is a decent chunk of SBL book there in that 7%, where, you know, for various reasons, the collateral might be imperfect, or in the process of getting perfected. And because of that, it's classified as unsecured. If you look at the core business-wise, it's not really unsecured. Yeah. The INR 1,000 crore number that you disclosed in the credit card, is that a revolver or? Sorry. The INR 1,000 crore is the out-of-pocket, not the revolver. Out-of-pocket. Not the revolver. Okay. Got it. Got it. Okay. Thank you. Thank you then. Thank you. Thank you. Our next question is from the line of Hiral Desai from Anived Portfolio Managers. Please go ahead. Hi, Sanjay. Good evening. Am I audible? Yes. Yeah, yeah. Yeah. If I just club, you know what Maru and Nithin asked earlier, just wanted to get your thoughts on margin, you know, over next, let's say, four to five quarters. Because if I see the incremental spread, they are about 70 basis points lower vs the back book. The deposits might continue to get repriced, at least for next two quarters. Wanted to get your thoughts on margin actually for next, probably year or so. Again, I would say it's difficult to fence now because again, it's a evolving story that, you know, what type of interest rate cycles we are all are expecting. You know, my sense is that we are nearing to an end to an higher interest rate regime, maybe one more or maybe more than, not more than two. Our inflation is in now control, you know, we are moving as an economy. And you know, as I already commented that, you know, bank is about balancing so many things. You know, it's not only about NIMs, you know. It's there are so many other things, right? Every year something plays out. Like this year there's no treasury, no PSLC, but you know. Right. We are still able to manage our NIMs and other incomes from other sources, right? I would rather want to comment on this by next call because then there will be lot much clarity on many tendencies around us and also how the whole year would be looking in terms of interest rate and, you know, all those things. You know, how we really play our quarter four also in terms of our de-risking need. I think it's a, it's more around evolving story as of now, so give us some time. As I, as I already commented that NIMs are just one part of the whole balancing right. As a bank- Okay. we remain very strong. We know from where the deposits should come. We know how to lend. We know how our assets are, they are behaving. We know how we are building our team, you know, how the fees are performing, you know. I think those things are more for me as an CEO are more important because, you know. Right. Interest rates are more transitory, right? You know, maybe one year we might have 1% less ROE, but as we always comment that, you know, AU is here for long term, forever kind of story, which is built on scalability and sustainability. For me, that is more important, right? I'm feeling very much confident as by passing every quarter that we are building more and more well foundation, good foundation for that, we're building on it. Fair enough. The other is on the core other income that you mentioned in the presentation. Is PSLC a part of the core other income or it is outside of the core other income? Yes, Hiral. PSLC is part of the core other income. treasury profits are not. Got it. Got it. Sanjay, this is the first time on the investor deck where you've spoken about, you know, granularity of the fee income. So just wanted to get your thoughts on that because, you know, credit card is obviously showing good traction. On the distribution side also we have tie-ups now on insurance, mutual fund and broking. I think most of the bases are covered. How should we look at the core fee income growth over next two or three years? No, no, my friend, still we are waiting for our AD Category-I license, which can be huge other income in next maybe three to five years. We are building wealth products, you know, which is at an infant stage. We haven't seen any kind of other income from there. You know, of course our insurance is performing well. You know, the cross-sell is performing well. Of course the credit card will become bigger and bigger, better and better. Our QR code is performing well. You know, as I commented now and what I've learned in last five and a half years is just that banks are not. It doesn't earn from one revenue stream, right? It's a pool of- Right. Many revenue stream. Right. Some years something doesn't work, may, and something works very well, right? We need to be very cautious and we should be very smart enough to figure out that what particular year, what kind of stream can work, right? Right. There is always a long-term stream like insurance, wealth product, credit card and all those things. I think the balancing a mix of so many things. I think we are arriving on our other income aspect which was not there three years back, right? Right. You will see better and better in terms of our cross-selling ability, in terms of building lot many hooks for our customers so that they just bank with us or just they deal with us, right? I'm very happy the way we have built our product. That is why, you know, our OpEx was also very high for so many years. Right. Right. I think you will see that result coming out, maybe from next year also. Next year onwards. Got it. Fair enough. Fair enough. Thank you, and all the best. Thank you. Our next question is from the line of Punit Bahlani from Nomura. Please go ahead. Yes. Am I audible? Yes. Hello? Yeah. Yeah. There's two questions from my side. Firstly, on the margins bit, like on the vehicle book, you mentioned, you know, that you have been able to pass on the rates. As I look at the last three quarter advance yields, they have only increased by, you know, around 10 basis points. You know, just on a, you know, on a disbursement base, if I see the total disbursements made in the past two quarters, they are around, you know, they're over 35% of your vehicle AUM. You know, just on a annual like, you know, basis, the repricing and basis, like, I think the yield impact will be more. Is it like the, you know, because of competition we are giving you know, fixed rates, we have not been able to pass like some color on that? The second thing on the credit cost bit. Punit, your audio is not clear at all. Uh- Your voice is coming muffled. I think, Is it clear now? Hello? Please speak for some time. Is it clear now? No. Punit, maybe we can check your connection. You can rejoin you to the question queue. In the meanwhile, we'll take our next question. That's from the line of Prabal from Ambit. Please go ahead. Yeah. Thank you. Congrats team on good numbers. Prabal, I'm sorry, we are not able to hear you clearly. Am I a bit better now? No, I think you're in a no network area or something. It's not very clear. Are you on a hands-free or AirPods? Please switch it to handset mode and speak. Is that better now? You can go ahead now. Congrats team. my question is, can you give the retail disbursements from last-? Sorry to interrupt. Yeah. Management team, are you able to hear Prabal clearly? No, unfortunately. Prabal, we'll check your connection and rejoin you to the question queue. We'll take the next question from Pallav Garg from Star Health. Please go ahead. Hello. Am I audible? Yeah. Hi, Pallav. Please go ahead. Yeah. Hi. Yeah, hi. My first question is on the shrinkage of the CASA ratio. While I understand that there was pressure on the rates, deposit rates. Have you seen any migration of these retail customers from CASA blocking the long-term rate in the term deposits or some other trend that you have spotted? Yeah. Hi, Pallav. Rishi Dhariwal here. I look after liabilities for AU Bank. you're right that, yes, as with other banks, there has been a trend, for some of the customers to move their deposits to some of their savings to deposits because I think when the rates came down in the last two years, that was really fast and, you know, now when the rates have come up, customers haven't seen these kinds of rates in the last three years and they sort of want to book their deposits at these kind of rates. If we talk about the CASA ratio, what I would say is that we sort of added to our branch network in the last couple of years and our acquisition continues to sort of grow. Therefore, you know, we are sort of comfortable to be, you know, having the CASA ratio in the range that we are in and we continue to build our retail portfolio, retail deposits as what Sanjay and Prince have mentioned earlier. You would see that, you know, the current account volumes have actually gone up for us since March and therefore, I mean, we continue to build on that traction. Okay. Under it, both for savings as well as current accounts. Sure. How should we look at that, look at this, going forward, let's say next two, three quarters at the time there's a pressure on, deposit rates particularly? That, I think, is something that one will only have to see how the industry plays because, I mean, all banks have really gone aggressive around their TD rates. We all know that, and we obviously have to keep pace with the rate hikes which have been done by, I mean, all the universal banks as well as, I mean, the PSUs as well as the private, large private sector banks. The only thing that I would mention is that maybe the spread between us and some of the large private sector players has actually come down, and our focus continues to remain on building the transacting book, what Uttam sort of mentioned in his speech. That I think is the most important part of what we have been doing. The savings number of customer, the transacting accounts at 57% and that has moved up in terms of number of transactions per transacting customer moving from 27- 33, right? A month. The same with the current account transactions moving to 75 from 69, you know, per month for almost 70% of our current account customers is what basically gives us the confidence that yes, the customers are basically using our account to do their transactions. Therefore, you know, this like what Sanjay also said is a transitory phase and you play it as it comes. Sure. Yeah, makes sense. Next question is on the% of refinancing that you are leveraging based on your housing finance book. If you can give some quantitative number on that. You said that the housing finance can be used for to avail an HPB finance. What's the question? Sorry, could you- Yeah. Just wanted to understand the quantum of it. Let's say from the whole borrowing section. Out of whole borrowing. The refinance as a% of the overall borrowing? Yes. Yes, yes. Most of it is refinance only. Okay. only the housing finance- You'll see that our CDV, you know, borrowings kind of forms about 9% of our overall liabilities. Right. Bulk of it will be refinance. Okay. We of course, have some tier two bonds and other things, but bulk of it is refinance. Sure. Which is through NABARD, SIDBI, MUDRA and NHB. Okay. Got it. Now, just moving back to the asset size of things. If you can give some color on the yields on the new vehicle, used vehicle, tractor and the two-wheeler. Maybe you can point me to a different person. Yeah. Sorry, Pallav, we don't, we haven't disclosed that number anywhere. Okay. In terms of various segments. we'd like to, Sure, no worries. Stick with the overall wheel business number, which is already disclosed. Yeah. Anything about any color on the growth in fees in these particular sub-segments? Sorry, I missed that part. Okay. The growth in fees for these sub-segments, like let's say the new vehicle, the used, the tractor and two-wheeler. Any color on that? Yeah, both. I mean, both the disbursements and the portfolio yield at a sub-segment level, we haven't disclosed. Sure. You know, we'll prefer, putting out the whole number. Got it. Got it. Got it. In the SML segment, SBL segment, if you can give some color of where the distribution of the INR 18,000 crores in terms of, let's say, either industry or geography wise. Any color on that. Basically, only ballpark numbers or any sense would be great. Sorry. The question is that in SBL business you want a geographic split? Just wanted to understand, how does that book look like. I don't know if you, yeah, Pallav, we just did a AU Insights on fourth of December. Sure. We'll check that. Which was on HBL business, right? Okay. Yeah, yeah. That presentation is there, and we have given a link in the presentation itself in the IR presentation as well for this quarter. Sure. You know, has all the details around, the sub-segments, the geographical split, the ratios and Right. Yeah. Will refer that one. All of that is available. Sure. That's all from my side. Thank you. Yeah. Thank you. Our next question is from the line of Punit Bahlani from Nomura. Please go ahead. Yeah. Hi, sir. First thing on the wheels business, you mentioned that, you know, you have been able to, you know, pass on the repricing, you know, to your customers. On the last three quarters, the incremental, the increase in yields that you have reported is around only 10 basis points. You know, just if I compare the disbursements of the last two quarters, they are around, you know, over 35% of your wheels AUM. What am I missing here? Like, because, you know, 10 basis points seems to be quite low. Is it because there is increased competition, so you have to do loans at lower rates, like, you know, which is common with the bank, like which is common with the commentary that other banks are reporting? One question on that. Secondly, on the credit cost, like, you know, when other banks have utilized their floating provisions, which even you seem to have done and accordingly the credit costs have reduced, what any color on this? Like where, like how much like do you plan to do this, you know, to, in the near term? What will be the extent of it, you know? Just on that. Yeah. Yeah. If the first question is on wheels, you know, what I understand is you're saying that in the last three quarters, the disbursement yields have only gone up by 10 basis points. Yeah. It's not really true. Punit, yeah, Bhaskar here. If you look over the year-over-year, we have gone up by about close to 60, 65 basis points there, and just over last quarter we have gone up by 10 basis points. What does happen is that by the time you, the new, the older rate and the new rate, the blending takes time, and that's all it is. There has been a clear transmission of rates starting from the beginning of this year itself, where every month-on-month we have been up barring the month of Diwali where it just takes a small blip out there. Otherwise via design, if you ask me, via design we are on the upward trajectory and via product mix we are able to handle that and we do not really see that getting greatly impacted. Just a matter of the older book, new book and by the time the rate impact gets to kick in. That's all. Okay. As far as the second part of the question is concerned, if I understand that correctly, what you're saying is we have created a floating provision and there is a bit of contingency that we still have on our, on the balance sheet which is related to COVID. As I commented earlier, you know, we'll see at the end of the financial year, depending on the guidance from the board, how to better utilize that. Okay. Okay. Yeah, yeah, that's it from my side. Yeah. Thanks. Thank you. Ladies and gentlemen, that was the last question. I now hand the conference back to Mr. Aseem Pant for closing comments. Thanks, Insiya, thank you everyone for joining us and for your support. On behalf of the entire AU team, we wish you a happy, healthy and prosperous 2023. Please reach out to the IR team for any further questions. Thank you. On behalf of AU Small Finance Bank, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.