Ladies and gentlemen, good day, and welcome to Bandhan Bank Limited Q2 FY 2022 earnings conference call. As a reminder, all participant lines will be in 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. Hiren Shah, Head, Investor Relations. Thank you, and over to you, sir. Thank you, Aman. Good evening, everyone, and thanks for joining the conference call. We are glad to welcome you all to discuss Bandhan Bank's business and financial performance for the quarter ending September 2021. We will take this opportunity to update you on the recent developments in the industry and Bandhan Bank during this quarter as well. To discuss all this in detail, I've got with me our Founder, Managing Director and CEO, Mr. Chandra Shekhar Ghosh, our Chief Financial Officer, Mr. Sunil Samdani, Housing Finance Head, Mr. Suresh Iyer, and myself, Hiren Shah, Head of Investor Relations. Now, I'd like to request our Founder, MD, and CEO, Mr. Chandra Shekhar Ghosh, to brief you all about the bank's operational and financial performance, along with the development for the quarter ending September 2021. Over to you, sir. Good evening to all of you. Welcome to our conference call. Thank you so much for attending today. Hope you are taking care and safe. Hope you all had a nice Durga Puja and Dussehra. I would like to extend my best wishes to you and your loved ones for Diwali and the rest of the festival season. It is heartening to know that the situation in India with regard to the pandemic is looking much better than it was before. Number of COVID-19 cases have considerably reduced. The pace of vaccination has gathered speed, which has reached 100 crore doses. 50% of people have a single dose, 30% of people have received the double doses. This is a very comfort for our country. Lockdown restrictions have been removed in most parts of the country, and businesses are gradually coming back to normal. The improvement situation reflects in our credit growth in the last quarter and collection efficiency number, which have shown considerable growth in the last quarter. Credit growth disbursement and collection efficiency are all on their way to returning to the pre-pandemic level. During the quarter, Bandhan Bank had continued to grow stronger as a robust and granular liability franchise. During the quarter, our deposit growth has come 24% year-on-year, which is amount-wise INR 81,898 crores. CASA deposit growth has come 45%, ratio is 44.6%. As usual, in our focus of the retail deposit, which is that the out of total deposit is raised on that 84%. Earlier it was in a 82%. Growth in loans and advances for the bank in this quarter was 7% year-on-year, which stands at INR 81,661 crore. We have seen good demand for credit ahead of the festival season, which started in September. Collection efficiency in the bank has come to 94%, which is the non-NPA customers. If I come to the sector-wide now, EEB collection efficiency has considerably improved by 16% from June to September. The bank reached in the collection efficiency 93% from 77% in June. Collection efficiency with NPA has reached 86% from 72% in June with arrears. Given the comfort on that is 129% collection efficiency from 83% in June. Yes. If I go to this, our major portfolio in Assam, there has been significant improvement in collection efficiency from 49% to 82% from June to September, which is increased 33% from June to September. Due to such provisioning. If I come to this West Bengal, of course we like to mention it here, the collection efficiency has risen from 73% to 92% in the same period, which is increased 19% improvement from June to September month. There is an also normally microcredit customer are paying installment as a full installment. But it's because of this COVID situation, there the customer has allow now partial installment also. For that reason, we are finding out that the no-paying customer, earlier it was 9% in June, it has been improved to 4% in September. Partial payment was in at 29% in June, and September has come 17%. Full paying has become very big change. 79% of our customer paying full installment, which was the June COVID given 62% only. Altogether, we see that the other than EEB portfolio, our collection efficiency 98%, excluding NPA and 97%, including NPA. All these together, we find out on that collection efficiency month-on-month basis improving good way. We remain hopeful that if things continue to improve in the country from here on, we may be able to go back to the level of pre-COVID situation from today. It is very critical quarter, exceptional situation for all of us, but not just for us. Everyone is undergoing the same. More or less, the situation is over. To recognize this reality and strengthening our balance sheet to be prepared for the future period, we have taken one-time additional provision of INR 2,100 crores on our standard asset. Another one thousand five hundred crores we have taken for NPA. This takes our total provision in this quarter INR 5,578 crores, and total provision of the bank is at INR 10,642 crores. Due to such provisioning, bank has reported a loss of INR 3,000 crores in this quarter, and the six months loss is at INR 2,636 crores. This loss is not the actual real loss. We believe that this provisioning should be sufficient to take care of any previous asset quality issue on account of the pandemic, as well as protect the bank against the disruption caused by any potential third wave. Even after provision, the bank capital adequacy ratio tier one stood at 20%, which is double the regulatory requirement. PCR, we have raised, improved from the 61% to 74%. LCR is 139% in bank. We do not foresee the need of undertaking any more similar provisioning in the near future. Whatever needed, we have taken now. On the NPA front, our gross NPA for the July to September quarter stood at a little over 10%-10.8%, and net NPA has come 3%, excluding additional provision on standard asset. Majority of our customers are either part pay, part paying or full paying their dues, and we are confident that these are not loss given default. There is a very clear visibility on asset quality improving day by day. In the last month alone, we have seen that over 14,000 customers settled their overdue accounts every day. I firmly believe that the most difficult period with respect to COVID-19-related disruption and asset quality challenges are behind us, and we are now in a position to accelerate the next phase of our growth with a strong balance sheet. With economic growth coming back, eventually, as these recoveries come in, there is a strong possibility of a part of this provisioning getting written back. With credit growth rising, collection efficiency improving, recoveries gathering pace, we are confident as a bank that our NPA levels will reduce substantially in the next few months. I have spoken to you earlier about our vision of 2025. As per which the bank wants to become a bank for all Indians, wherever they may decide, whatever financial products they make, and whichever channel they prefer, physical or digital. As a part of this transformation, we also want to build a strong asset book with a healthy mix of secured and unsecured asset. I am very happy to report that our non-EEB retail business has shown impressive growth in the last quarter. Our housing loan business has shown good growth with the disbursement rising 93% quarter-on-quarter. This is an indication of potential future growth in this business going forward. Our gold loan business has grown 48% year-on-year and disbursement have been grown 50%. Our personal loan business has risen 144% year-on-year and the disbursement has been grown three times. Our two-wheeler loan business has grown 236% quarter on quarter and 30 times growth has come as a business at disbursement and all these products quality of the portfolio we are not compromising. It's a very good quality of the portfolio. Also, we had earlier mentioned our strategy of graduating our high vintage EEB group customers into individual borrowers who have the very good capacity to running the good business and cater to their evolving financial needs better. There has been a 155% year-on-year growth has come to this individual loan, which is quarter on quarter basis has come 23%. Individual loan customers now comprises around 14% of the EEB book from last year. Last quarter it was eleven percent. We have introduced a technology-based EEB loan disbursement and collection, which is going on well and in future it will help us to maintain the very good quality portfolio and assessment of the customer in a better way. The share of EEB group loans has fallen to 57% from 60% of the bank's overall portfolio, and we are targeting that by March EEB individual for 50% of the book, with the other half coming from verticals such as EEB individual, personal loan, gold loan, two-wheeler loan, SME loan and housing loan. We have been very strong in our SME lending business as well, which is reflective of the support we are providing to small and medium businesses as business sentiment and the economy revives. On a year-on-year basis, the SME lending business grown INR 4,418 crore in quarter two from last quarter. In the end, I would like to mention India's imminent economic revival will not be complete without the development and welfare of its micro, small and medium enterprises which we are focusing. Many strong, short-term and long-term measures taken by the government will help revive the sector and ensure its long-term wellbeing. This fact, along with the transformation journey that Bandhan has embarked on, will help the bank capitalize on the future business growth and secure its future from today. Thank you. Thank you, sir. Now I'd like to request our CFO, Mr. Sunil Samdani, to give you some more details on few financial parameters, including NPA provision coverages, et cetera. Over to you, Sunil. Thank you, Hiren. Good evening, everyone. I would want to take this opportunity to help everyone see how we look at this business and the key developments and the key areas which we have undertaken in this quarter. I would want to take you through key, a few of the slides which will help us be on the same page. Starting with the slide number five, which talks about the collection efficiency of the EEB vertical. As Mr. Ghosh mentioned, we have seen an improvement, a marked improvement in our collection efficiencies. We ended June with 72% including NPA and 77% excluding. That has gone up in September to 86% and 93% respectively. What is more important is to look at the including arrears collection efficiency for the month and for the quarter. For the month of September, our including arrears collection efficiency has been 129%, which means we are collecting more than the demand for the month. That's a healthy sign. Similarly, for the quarter, that number stands at 111%. This improvement we have seen across all geographies and more so in our core geographies of Assam and West Bengal. Our West Bengal collection efficiency, which was 73% in June, is now 92%. Assam improved substantially from 49% to 82% and rest of India at 94%. Next, I would want to take your attention on the DPD movement. We would call this quarter as a turnaround quarter. The reason we say this is that this quarter we have seen the increase in disbursement, we have seen increase in collection, and we've also seen improvement in our DPD position and the asset quality position. While on the face of it will look like a difficult quarter because NPAs have gone up. If you look at the overall stress pool, which is the overdue customers, that has come down substantially. On the whole, about INR 7,000 crores improvement has happened from the EEB portfolio between June and September of the overdue pool. Of course, this has been aided by restructuring, which is around INR 3,490 crores. The balance INR 3,500 crores is the actual recovery that we have made from the overdue customers over and above their demand for the quarter. Our DPD buckets, whether it's 1-30 days, 31-60 days, 61-90 days, have shown improvement. That gives us the confidence that the world's worst is over, and from here on, we will only see an improvement and near normalcy position going on. The customer is paying non-paying customers. NPA customers, two-thirds of them continue to pay despite being an NPA, and which has helped us improve our collection efficiency. The restructured customers, though they are under moratorium, and as per the agreement, they are not supposed to pay till thirty-first of March, but we still see two-thirds of these customers continue to pay us. That's a healthy sign. That gives us the confidence that these customers have come back to normalcy or are coming back to normalcy. What we have also done this quarter, as Mr. Ghosh mentioned, and you can see from the results, we have taken the accelerated provisioning to identify... We've identified stress, taken the provisioning to ensure that going forward, we need not worry about the COVID-related issues. We have, in fact, considered the entire NPA pool. You know, when we looked at the stress pool, we considered the entire NPA, the entire restructuring, despite two-thirds of the customers paying within those pools. We've also taken the 60-plus customers, which are the customers who are not able to pay their full installments. They are largely part-paying. In the second scenario, we have also considered the 30-plus customers to identify the level of overdue NPA and the restructured pool in the bank. In scenario one, where we don't consider the 30-plus, this pool stands at INR 156 billion, about INR 15,600 crores. In scenario two, including the 30+ customers, this pool amounts to INR 19,500 crores, about 195 billion. Now, how are we positioned against the coverage and the recovery that we wish to do from this pool, and the confidence how confident we are? We are very confident. We have already provided INR 9,520 crores of this pool by taking this additional provision. We also estimate the recovery from this pool, which I will explain to you in detail, how we have come to this estimate when we say that we will recover 1,000 crores from this pool in scenario two and about 4,500 crores in scenario one. We have the benefit of CGFMU guarantee that we have taken on this pool, and we expect a 3,000 crore recovery from that pool. Now, this recovery and the recovery that we will do are mutually exclusive, and there is no overlap here. In addition to this, we have the Assam Microfinance Relief Scheme going on, which will also help our customers and in turn the lenders to recover the stress pool from that state. The exact estimate today will be difficult to make, but we hope that there will be a substantial recovery from there, because as per the report, the pool for the Assam relief, the budget taken by the government is about INR 7,000 crores, and we have close to 60% market share there. Now, let's understand the key aspect of when we say that by 31st of March, we will be able to recover INR 6,000 crores. Why are we so confident and what gives us that confidence? Clearly, the confidence that we derive is from the collections that we have seen during the quarter and what we see in the month of October. As we have already seen, our including arrears collection efficiency has been at 130%. If that rate continues for next three months, I don't think we will have a challenge to recover the INR 6,000 crore. The other way to look at is the recoveries that we have actually made in the month of October from this stress pool, right? We have made close to INR 1,100 crore of recovery from this pool in the month of September. The trajectory of this recovery is only going up. The resolutions are only going up day by day. Even if we continue with this current run rate, we are very confident that we should be able to recover this amount from the customer. What this actually does, it takes care of the entire stress, possible stress, I would say, which includes the NPA, the restructuring, the 60-plus, and including the 30-plus. I would want to repeat, large part of these customers are part-paying customers. Whether we look at from the paying customers pool, which is two-thirds, or we look at from the collection efficiency point of view, excluding arrears, or we look at the actual collections made out of this pool in the month of October, all three indicators indicate that we should be able to recover this from by 31st of March 2022. What gave us this confidence, right? We looked at all parameters. We looked at the collections. That has improved substantially. We looked at disbursement and the demand from customers. Our disbursement this quarter is more than 2.2x of previous quarter. Our DPD positions in this portfolio, as I mentioned earlier, has also improved substantially. We believe this is the worst and we will only see improvement from here on, and that gives us the confidence to estimate the total stress in this pool, and which is what we have done. I would take a pause here. I am sure you will have a lot of questions. Happy to take those. Thank you. Thank you very much. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is on the line of Saurabh from JP Morgan. Please go ahead. Yeah, thanks. So, Sunil, can you first share the movement of NPA during the quarter? You know, what was the slippage recovery and the write-off? And secondly, on this slide eight, you know, is there a reason why you would not include SMA-0? And if you can also provide what will be a, let's say, a lower bound for how much, you know, the Assam can get you based on whatever you have. I mean, just a lower bound number will really help. And just last question is, given the provision that you have taken, would you expect that, you know, next quarter, December quarter onwards, you should be back to normalized? Or you think that is still some time away given your collection efficiency is still not, you know, in the 99% mark. So these are three. Thanks. Thank you. To your first question on the movement of NPA. At a pan bank level, we have seen gross slippages of INR 2,943 crore. The recovery is an upgrade of INR 619 crore and the net addition of INR 2,323 crore. We have not done any write-off. What is also important here is the timing of recovery in our core geography, particularly East India. You know, we started recovering from mid-August. These improvements that we are seeing in our delinquency position is effectively the impact of last one and a half months. To your question, why would we not take SMA 0 or 1-30 as the stress pool? Clearly, they are not, and we've always seen 1 to 15 days, which is 70% of this pool, right, is overdue due to technical reasons. In India, we have a lot of festivities which comes with a last-minute holiday declaration. The repayment schedules are made without considering those, and hence you would always have one or two installments which will become overdue, but that's not because the customer doesn't want to pay. If you look at this movement in this bucket as well, it has dropped substantially. Clearly we would not take that as a stress bucket. Historically we've not seen any material movement from this bucket, you know, in a steady state scenario. To your question on how the next quarter will look like, in terms of normalized activities on the provisioning and the collection side, we expect by the end of next quarter, we should be in a near normal positioning, right? The NPA is a function of DPD movement. We have a 60+ pool. There will be some flows from there, but as I said, the recoveries are also equally strong. We will have to see whether the recoveries and the flows, when do they interchange, whether it takes two months or three months. We are very confident, at least in next three months' time, we will have higher recoveries than the slippages into the NPA bucket. Okay. No, I was just asking since you made the comment that, you know, you were providing or in your assessment you have provided for the stressed book. You know, so if that is true, then next quarter onwards, what you just need to provide for is, you know, on the incremental book where I'm guessing the collection efficiency would be better. But it's fine. I can take it offline. Thanks. Correct. That's what we are saying, that going forward we should see a normalized level of provisioning, which is around INR 400 crore-INR 500 crore a quarter. That's what we would expect if this trend continues. Okay. Got it. Very clear. Thank you. Thank you. The next question is from the line of Kashyap Javeri from Emkay Investment Managers. Please go ahead. Hello. Hello. Hello, Kashyap. Please go ahead. Am I audible? Yes, you are. Yes. Just one question on slide number 8 again. When you say provisions are about INR 95.2 billion and there is Assam relief scheme, you know, money which you probably at this point of time wouldn't know, but as and when that money comes, would that INR 95.2 billion will be offset against that or these are also exclusive numbers? As far as CGFMU goes, we have the clear picture customer-wise, and we can actually estimate where is the duplication, which we have done. This number that we have given for CGFMU is mutually exclusive of the recoveries that we are targeting. Okay. Assam, unfortunately, we are not in a position to ascertain that customer-wise because the NPA recovery, what will be the exact amount from there, you know, we are not in a position till the scheme actually announce that. That's where we don't want to put that number because for the same reason, because we don't want those duplications between the other two schemes and Assam relief. To rephrase this, sir, let's say if there, with whatever the recovery comes, let's say, you know, whatever INR 1,000 crore, INR 2,000 crore, whatever the number, but so far as there is a provision against those account, that INR 95.2 billion number, will be coming in the write back, like in line with the, you know, one of the answers that you gave to the previous participant. That, you know, incremental provision will be net of, you know, the slippages and recoveries. Yes. There will be a timing difference. You know, we have to take. Yeah, of course. There would also be a difference in the sense that for some of these Assam Relief Scheme customers, there might be provision which is higher or lower than the recovery also. Yes. Sure. Yeah, that is the only clarification I needed. Thank you. Thanks. Thank you. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead. Yeah. Hi. If I have to look at in terms of rest of India portfolio, be it in terms of 61-90, that's also arising during the quarter. Undoubtedly NPAs have also almost doubled from 3.5- 6.5. And 31-60, the pool is also sticky out there. No doubt, Assam and West Bengal, it's coming off. But rest of India, I think it's sticky and it's rising. How should we see the behavior of this portfolio in particular and maybe collection efficiency is still 94%. It's not getting back to the level. When do we see it getting back to 98%-99% which will help to bring down this delinquency buckets? Yeah. As we mentioned, right, we are seeing an improvement in the collection efficiency every month, right? Whether it takes three months, two months or four months, if anybody gets, we don't want to crystal gaze that. Directionally, it is surely going up. More importantly, the customers who are regular, otherwise, but they were not earlier and they were in the DPD pool and they were consistently staying in the DPD pool, we see them coming back to normalcy as well. There has been an improvement in the NPA collections as well. You know, if I have to, it's very difficult to give you a time, exact timing, but we would tend to believe that if this trend continues, maybe in two-four months, we should be in that near normal position. Okay. It's not like a larger part of the disbursement happened in last 12 months. In fact, there would be further forward flows in rest of India buckets. Would that be the case? Because maybe it's not entirely getting this. No, rest of India bucket is at this moment, 94 is a good number that has come because if you recall, the last couple of days in Bihar and Odisha have flooded. That is also sometimes need to give some few days to them. That is the one or two cases that have happened in every corner of that. For that reason, it has come to this. We are seeing that on a month-on-month basis, they are also improving very good on that. Okay. Secondly Sorry, just to add, you know, we would in fact look at differently. You know, if you look at the behavior of these customers, you know- Yeah. They just know three simple things, what is my installment amount, whether it is a 52-week installment or a 104-week installment, and when does my loan gets over. As the maturity date of the loan come, they are more eager to regularize their account because they know that this is the time to get a new loan. Sure. Secondly, this incremental disbursements which are there. Again, we are back to almost like INR 13,000 crores on EEB, which is say 20% of the outstanding book. What is the profile? Is it like more of a given it's largely to EEB group, so this would be vintage customers, but are we equally confident in terms of disbursing this kind of an amount, okay, at this stage when we are struggling in terms of the collection efficiency? Whatever the new disbursement is happening, and you know that we are not now given to this, the multiple loan. We are given the single loan after close on that one loan, and their collection efficiency is very much fair, near to 99% of that. Just to give you that comfort, the loans that we have disbursed in this financial year, the collection efficiency is close to 99%. That does not give us any indicator or any sense that, you know, this is not the right time. Of course, we are there on the ground. You've seen us being conservative for two quarters when the environment was not good. When we see the improvement, that is when we disburse. Sure. One last question on housing finance. Overall, the underlying momentum and the opportunities are huge. Are we done largely in terms of transitioning through the merger integration? When should we actually start seeing the scale up in this portfolio? Disbursement have gone up, but definitely not to the extent the kind of growth we are seeing for the other players in the industry. So you What would be the outlook out there? Yeah. Yeah. You've observed it right. You know, if you look at the disbursement, we have disbursed almost 2x of what we did in the Q1, right? Clearly this shows that the momentum is back. This has not resulted in the book growth for two reasons. There has been the government subsidy which has come this quarter. Because of the pricing pressure that we have seen in this quarter on the housing finance business, you know, we've seen a slightly higher level of pre-closure. These are all timing issues. You know, we don't see those things continue it for, you know, another one or two quarters. As our cost of funds reduce, we've also become more competitive. Clearly there is a demand. Once we see rates normalizing, we should see the balance sheet growth also, which we are confident from the next quarter onwards. We have Suresh also on the call. I would want him to share his views as well. Yeah. What would be the pay out? You mentioned there are prepayments, so what should be pay out? Yeah. This is Suresh here. This Q2, we've had a prepayment of almost close to INR 700 crores, and we had an additional this CLSS subsidy coming from the government, close to around INR 85 crores. Total it's about INR 780 crores is what we've seen, the portfolio going down. Not to mention the amortization, the normal amortization which happens because of the EMIs coming in. This is the reason, main reason, and prepayments have been a little higher to the tune of about 15%, which has been a little higher than what we even earlier experienced of about 13%. It's something for this quarter, it's been a little on the higher side. Sure. As rightly mentioned, the disbursement is looking up. The sanctions and the, you know, logins have seen a very good improvement in the last couple of months, which gives us a lot of confidence that we'll be able to grow the book, and the disbursements coming, coupled with the, you know, rate reduction that we've been able to pass on, of late, we feel that we'll be able to definitely see a growth in the book in the coming quarters. Okay. Yeah. Thanks a lot. Thank you. Thank you. A reminder to participants, please press star and one if you wish to ask a question. The next question is on the line of Shreya Shivani from CLSA. Please go ahead. Hi. I have a question on the collection efficiency. On the slide where you've given the collection efficiency including arrears, that is for the total bank. Can you help us with some numbers or at least some estimates of West Bengal and Assam collection efficiencies in September versus June for including arrears, just to get an idea how those portfolios are performing when talking about including arrears? For West Bengal, including arrears, the collection efficiency has been 138%. In September? Okay. For the month of September. Okay. Assam? Assam is almost 100%, but this includes all receipts that we have received from the customers, right? The current, the due, the previous, the closures, everything. Got it. For the trend, this trend continue, I mean, without numbers, if it continues into October and the including earlier trends for these two states continues in October or has there been a decline or improvement? Any comments on that? This has continued in October and that has given the confidence of this recovery. Okay, sir. That's it from me. Thank you, sir. Thank you. Thank you. Next question is from the line of Dhaval Gada from DSP. Please go ahead. Yeah. Hi there. Thanks for the opportunity. Two questions. One, on the EEB disbursement, could you give some sense of what percentage of disbursement share is there from Assam and West Bengal this quarter compared to, let's say, last year? Just some perspective. Then the second question was on the restructured book side in the EEB portfolio. Could you split that between Assam, West Bengal and rest of India? Thanks. I don't have the disbursement numbers state-wise readily available. By the end of this call, as I get it, I will share it with you. What was your next question? Sure. The restructured book, split into Assam, West Bengal and rest of India, like you've done for NPA buckets. Yeah. Yeah. Just a second. We have that. Yes. The total restructured book of Assam stands at INR 1,958 crore and for West Bengal, INR 3,172 crore. Oh, perfect. Thank you. Thank you. Thank you. Our next question is from the line of M.B. Mahesh from Kotak Securities. Please go ahead. Sunil, hi. Just a qualitative question. You seem to be suggesting that the collection efficiency is going up and you're kind of indicating that these slippages would be lower as compared to recovery. What would explain the need of these provisions today in this quarter? No, M.B. Mahesh, I said that whether it takes two months or four months, eventually we will be at a situation where the recoveries are more than the slippages. Right? Yeah. In the interim, there will be a timing difference. We have a 60+ pool of almost INR 1,350 crores. There will be a timing difference. We have a restructured pool, which of course will not impact my NPAs or delinquencies today, but there will be some slippages from there next year onwards. While we are identifying the stress today, we are looking at the entire tenure of this portfolio, not of this financial year. Sunil, just to understand this, the situation appeared to be far worse in the previous quarter as compared to what it is today. What has changed between last quarter and this quarter to explain these provisions? We understand the prudent part of the provisioning, but just trying to understand, you had a much larger SMA-1 book, SMA-0 book, which you have disclosed this quarter. Why was it not done in the last quarter, and why this? Why are we closing this quarter? Correct. That's what I explained in the beginning, right? As to why today and why not yesterday or tomorrow. If you look at the movement in my DPD, if you look at the collections, if you look at the disbursements, things suggest that the worst is over, right? My and when I see that happening, that turn happening from the bottom, that gives me the confidence that, okay, this I have seen the worst. Till last quarter the delinquencies only went up, right? The overdue pools only went up. That was not the time where I could have estimated that this is the worst, right? Today, there are indicators which say the collection efficiency is almost 130% for September. My delinquencies are down and my customers are coming back and paying. They are asking for more loans. That gives us the confidence that this is from where the recovery is happening. When I estimate stress, this will give me the entire amount of stress because the bottom has already happened. If I were to ask this in a different way, do you think it makes sense for you to build the provisions as the stress builds up rather than building the provision after the peak stress has been created? Look, we have to strengthen our balance sheet. We have to build loan loss reserves, right? We have to be sure that once we take these provisions, we are doing it at a time where we have seen the worst. Mahesh. Okay. Mahesh. Yes, Mr. Ghosh. Mahesh, if you see that everyone will agree the pandemic is more severe in the second wave compared to the first wave. That pandemic severity has come in May, which is the last quarter. That means the first quarter of the year. That time we are not predicting about it, how much it will likely come as a stress. How do you see that? After that quarter, whatever severity happened and stress happened, now it has been moving up. We have taken that this is the right time to take the decision. The stress is over more or less. We'd like to start the new growth of the business. For that reason, in this quarter we are putting it on that. Perfect. Sir, just as a thought, is there any possibility that you would consider certain standard provisions always getting built up as it's lifting to the SMA buckets? Because it kind of puts the earnings in a completely volatile setup, if you're doing it this way, hence asking this. We understand the impact of COVID. We're not disputing that. We're just saying that the timing of this provision was a bit surprising and hence kind of asking if this has been considered internally. That has been, right? I mean, to your question whether we continuously want to keep provisioning, that we have mentioned that we will want to keep a reasonable provision in the balance sheet. If we take COVID as a base, that may not be a right base to estimate risk and make provisioning. No. I'm just saying that when you're looking at SMA zero, one and two movements over a period in time, why not make provisions as it builds up? Because that is far more useful for understanding the risk. Anyways, we'll leave it off on this. Just second question is on that, the credit guarantee scheme. What is the timing in which you get this repayment? CGFMU guarantee post-March 2022 is the first time we can assess and start claiming. If you were to give a, let's say, a claim today, is there a defined timeline under which it has to be paid? Just a clarification, if we have missed it, if we had this conversation in the previous quarter. No, the process for CGFMU is fairly simple, right? It doesn't require any court decree. It doesn't require any. Correct. you know, all avenues available to recover before we file for it, because it's an insurance, right? I have paid premium. Correct. Correct. It is not something which is coming as part of relief. I don't think timing should be an issue there. Okay. Perfect, sir. Thanks a lot. That's all from my side. Thank you. Thank you. Our next question is from the line of Param Subramanian from Macquarie. Please go ahead. Yeah. Hi. Thank you for the opportunity. My question is on slide eight. The stress pool that you've disclosed, firstly, what is the collection efficiency that you're seeing over there? That's my first question. I'll come back for a second question. As I said, we are not looking at the collection efficiency specifically that we've not looked at it, but we surely looked at what is the amount of collection from this pool in the month of October, right? That amount is more than what we are budgeting on an average recovery every month. Okay. Sunil, you've mentioned the number INR 1,100 crore. What is the demand against that? It would help us, you know, get some color on the collections that we are seeing on this portfolio. That's what I said. We've not mapped the demand against it. We can do that, and we can share it with you. My second question is on the collections that you've shown on the West Bengal portfolio on slide five. If I look at it quarter-on-quarter, 85%-86% is more or less flat. This is despite, you know, NPAs going up on the West Bengal portfolio. There has been some NPA recognition. Why is it that, you know, the collections have remained, you know, sticky, because I would assume Q2 has been better than Q1 in terms of business on the ground. No. One has to look at it on the timing of the difficulties we faced, you know, the COVID-19 second wave and the recovery post that. For Q1, we went into restrictions only in the month of June, right? When the rest of India was on restrictions starting end April, because we had elections in these geographies, right? There was no restrictions in force. Our collections in Q1 was comparatively much higher because there was no restrictions on movement on account of the second wave. Those restrictions continued till mid-July. Yeah. Or end July rather, you know, before it actually opened up. The way to look at it, in April was best, May came down, June was the worst, and from there on I started improving. On the whole, on an average, the number remained more or less the same. Right. Got it. Thank you and all the best to you. Thank you. Thank you. Thank you. Thank you. The next question is from the line of Kartik Chellappa from Buena Vista Fund Management. Please go ahead. Yeah. Thank you very much for the opportunity, sir. Three quick questions. The CGFMU recovery of INR 30 billion, the way you estimate it is you take 75% of the NPL above 3%, is it? For example, INR 540 billion portfolio, 10% NPL of INR 54 billion. The first 3% NPL, you have to take it on your books. The balance 7%, which is INR 38 billion-INR 40 billion, 75% of that is this amount. Is that the way you arrive at this number? Yes. There is one more rider, which is it is capped to maximum of 15% of the guarantee available, and that's on the disbursement. When we had taken INR 14,500 crore worth of portfolio under guarantee, the disbursement amount was INR 20,000 crore on which we had to pay, right? 15% of INR 20,000 crore is INR 3,000 crore, so that's the maximum cap. This is the formula. I will be able to get much more, but the cap is at INR 3,000 crore, which is what we are giving you. Okay, got it. The total provision amount this quarter, which is about, let's say about INR 56 billion, if I look at the split, it's basically INR 15 billion provision on NPA, 21 billion standard assets, INR 10 billion restructured assets. What about the balance INR 10 billion? What would that be? Those were the normal provisions which we have taken on the NPA which went. These INR 15 billion that you see is the accelerated over and above the normal provisioning. The normal Normal provision INR 10 billion, accelerated provision INR 15 billion, standard asset provision of INR 21 billion, and then restructure of INR 10 billion. That adds up to about INR 56 billion, is it? Yes. Okay, got it. My last question is on housing finance. The INR 700-odd crore payout or prepayment that you have seen, typically, which are the institutions that you have lost to, in case if you know or can provide some color? Is it predominantly banks or other HFCs? Because it looks like it is driven basically by a very competitive rate. Yeah. Good evening. Suresh here. Yeah. That you are right. It is mainly because of the rate where this prepayment pressure is coming from. Obviously it is more from the banks. There is very little from it coming from the smaller HFCs or other things. Yes, the banks, the leading banks and even public sector banks now, we've had a good amount of prepayment going to that or portfolio shifting to them. Is it confined to any specific geography, sir, or is it pretty much across the board? No, it is actually, you know, in the core markets, obviously the portfolio is higher. So the volume also is higher in our core markets in the West, where the portfolio size is higher. Yes, it is. Otherwise, it is not. There is no specific geography specifically where, you know, we have seen an excess extra kind of prepayment coming from. Yes, Gujarat, Maharashtra, Madhya Pradesh now we have seen a higher prepayment. Okay. This is very clear. Thank you very much, team, and I wish the team happy Diwali and all the best for the quarters ahead. Thank you. Thank you. Thank you. Thank you. Our next question is on the line of Shagun Varma from Goldman Sachs. Please go ahead. Yeah. Hi, good evening. Just a few clarifications. Number 1, what were the upgradation recoveries and write-offs in this quarter? Yes. INR 619 crores is recoveries and upgrade. There is no write-off. Okay. What was it previous quarter? I think it was about INR 5.5 billion or thereabout, right? Yes. Upgradation recovery, just to clarify. Got it. The second point is, just in case I mean I've missed it. I just wanted to check. I mean, what's the overlap between the restructured book and the overdue book? I mean, where does this restructured book would be sitting within various buckets? Restructured book is in the zero DPD, right? Because they've been Okay. Restructured, so they are not part of the overlap and that's why we have considered them as part of SIP. Got it. Sunil Samdani, last quarter you were providing, I think, 8-3 0 day portfolio on the call. This time you've given 1- 30 day. When I look at September 2021 number, what would be the comparable 8- 30 day number in that within 11%? About 70% will be within 1-8 days. 70% would be within 1-8 days. Sorry, 1-8. Yes. Am I right? Yes. Got it. The other point is, you mentioned that, on a BAU basis from next quarter you should get down to a provisioning of INR 4 billion-INR 5 billion, depending on the slippages, et cetera. Again, the question would be if you've taken accelerated provisioning and the scenario is improving, shouldn't this provisioning number be substantially lower or in fact almost negligible? That, you know, this is how you look at it, right? If I want to consume my entire provisioning which I have done, then yes. This is not, right? We are saying that we want to look at it as a business as usual scenario where we used to be at a 1.5% credit cost per annum, and which is what we expect in the next financial year to be. Of this provisioning that we have taken, in case you know, the Assam recovery happens, would you be left with a substantial part into your loan loss reserves or this entire pool that you have created is likely to get consumed just to clear up the stress that is there on the books? No, there will be excess. Okay. Do we know that number? I mean, have you estimated that? I think slide eight is where you put out, but if you were to do this internal math, you know, how much would you be left with as an LLR on the balance sheet? We don't want to estimate that today. Clearly, given that we have provided for the entire possible stress, though we don't believe this is stress, given the recovery position, there will clearly be a good LLR available. We will be in a better position to say that probably next quarter. Got it. Just one last question, this, CGFMU, number of INR 25 billion and INR 30 billion, there is no contingency risk to this number, right? In case you want to recover this amount, we should be able to do that, right? Or there is any Yes. contingency that is attached to it. No, not really. Because it's an insurance, right? I'm paying premium for it. Right. Correct. It's not coming free. It's relatively simpler process. Understood. Got it. Thank you so much and wish you all good luck. Thank you. Thank you, Rahul. Thank you. The next question is from the line of Abhishek Khanna from Jefferies. Please go ahead. Hi, this is Prakhar. I wanted to ask, you know, for a few things. One, can you help us reconcile this stock exchange release schedule on the restructuring COVID 2.0 because, you know, that number shows up a higher number in the restructuring category, the COVID wave two collection number. Which one you're looking at? Just a minute. Yes, sure. That's basically the, you know, it's on page six, I think, of the exchange filing. The exchange filing of the P&L and all. Correct. Right. If you look at C, which is exposure to accounts mentioned in B before implementation of the plan, the business loan part itself is some INR 7,500 crore and then on top of it another INR 700 crore or something between personal loans and small business loans. Whereas your restructuring number is some INR 3,500 crore. Can you help us reconcile? Is it like this number I think is borrower-wise and maybe that number is facility-wise. Yeah. This is the individual, no. Let me just confirm. This could be the asset position, not the incremental position. Number can't fall so much, right? My side suggest if you can answer during the call great. Else if you can file a proper. Sorry. Sorry, Prakhar, I'm still not clear on your question. What is the confusion here? My confusion is that, generally, if I'm going wrong, this schedule shows that the exposure to borrowers before you restructured them was about INR 8,000 crore. Which is the sum total of these three aspects, the second wave restructuring. Your press release shows some INR 3,500 crore number. No, that is the overall position as at, which includes first quarter and the second quarter put together. You are saying that the gap is collections only or the gap is also because this number, the BSE press release number, includes facilities which might not have been restructured, so they are borrower-wise numbers, whereas your number of 3,500 is a facility-wise number. See, my total restructuring pool that is outstanding today is INR 8,326 crore. Whether we had done it in Q1, Q2, or Q4 of last year, all put together the outstanding is INR 8,326 crore. Of which Eight thousand three hundred and? INR 26 crore. Okay. That's the outstanding. When at the time of restructuring it was INR 9,035 crore. Between these last three months we have collected about INR 700 crores from that. Okay. Can you split this between round one and round two? Like this wave, like what would you have restructured of this INR 8,326? Round one, that was around INR 695 crores. Half of it is already out, but we would still require to show it as restructuring till we receive 30% of the amount. These were the short tenor restructuring of three months moratorium, and round two was the rest of these 9,000. I'm talking about the initial amount. This is the initial amount, not the outstanding amount, INR 695. Yes. Got it. Okay, we should basically look at INR 8,326 as your total outstanding restructured book, including all forms of loans and all types of restructuring, right? Right. May I ask, like, at a broader level, what would have been the extent of moratoriums that you would have offered on these loans in terms of period? What we offer them in Q1 is till March, and what we offered them this quarter is till June. Okay. Till June they don't have to pay? Not even interest. No. You are collecting 70% money from 70% of the customers or 70% of the original dues? Is it by customer or by numbers? 70 customers are paying. Okay, got it. Second part, just wanted to reconfirm what is the interest income recognition policy for restructured loans and overdue loans? Restructured loans, we continue to provide interest as per their rate of interest. Overdue, anyway, there is no confusion because till the time they become NPA, you continue to accrue interest. These are indicated for us, the non-paying customers is only 4%. Large part was them, which are in overdue or part-paying customers. Just a little bit of a, you know, color on the ground, what level of economic activity recovery have you seen in, you know, West Bengal and Assam, especially for your target level of customers? What is working? What is still not working? If you could give some pulse of that. No, we are seeing that the very big improvement has come on that because this is the people are depend on this credit, and if, because of their business is now started to normal, and so that they cannot be like to go to this, the private money lender to take the loan for very high interest rate. They are now started coming on that, someone coming on that full installment, someone coming the partial installment. We find out on this. This is a full no installment paid customer have been reduced from 9%- 4%, and 49% of the partial has come down to the 17%. That is a very good improvement is coming on that collection efficiency across the country. Got it. Sir, last thing, you know, there was some news about the holding company looking to acquire a stake in some of the non-lending financial businesses. If you could clarify anything on that will be useful. Thank you. This is the part of our holding company we cannot be answering here. Your earlier question on that, more on that, the business across all types of business in microcredit are same character on that. Got it. Thank you very much, sir. Thank you very much, Sunil. Thank you. Thank you. Thank you. The next question is from the line of Anand Dama from Emkay Global. Please go ahead. Yeah. Thank you, sir. Sir, on your Assam and West Bengal, particularly on Assam. You will have the Assam relief money flow, flowing through maybe in third or possibly in the fourth quarter. On a normal basis, when do you believe that you will cross the 90% threshold, recovery rate in Assam? And what are the basically underlying conditions, which will actually drive that, collection efficiency? Clearly Assam you know the issue was more about the credit culture, you know, which was distorted during the time of elections. If the normalcy has to come, it has to come if the same reasoning gets reversed. Which means this scheme that the government has announced is directed towards that to improve the credit culture, right? The scheme says the more you are regular the more money you get. You know, the scheme says, "I will give you overdue, make you regular. If you continue to be regular you get another INR 25,000." The whole idea is to bring back that credit culture. As the scheme gets implemented when people see that those who are regular are getting more money, that's the time we will see this normalcy coming back in Assam. Till the time basically the customers do not get the money, they would continue to not pay, right? I mean, I think the scheme is largely known to the people, and I'm sure that your RNs also would be educating the customers that they have to pay and the standard so that they will get the money for overdue from the government, right? What are basically you know still making them not pay you as of now? If you see that the Assam portfolio and customer recovered, and the repayment was the best in the country in our life. Now it has been happening that time government declared directly. Now same government declared you pay, otherwise you cannot get the my money also. That is a very big message. That they are returning back on that. This is the one part. Second part, if you see that the there is a two type of, the government have been divided in a two category of the customer. One is an regular paying, another is an overdue customer. Overdue customer, overdue money will be paid by the government declared. The, those are regular customers, they will be get the INR 25,000 per customer. They have now decided first they will give to this the regular customer INR 25,000. That means there are incentives given and showing this as the example, if you also come in regularly, you will get the next. They are not given to who are overdue customers. That is on one side, we have been seeing that. The customers also understand very clearly that they need to return back to normal, otherwise they will not get the money. People are moving on that and coming back. Your question was when do we see that 98% kind of a level in Assam, right? To that I said that for that to happen, these factors have to play. Otherwise, we are increase in the collection efficiency, because ultimately people have to go back to, and do their business and they need money. If you see, we are seeing the maximum improvement has come in Assam. 30% improvement has come in collection efficiency from June to September in Assam. The economic activity is now largely normal, right? At this point of time as we speak or there are still hiccups over there as well? No, that's largely normal and it's improving. It is mainly the Assam relief scheme where, you know, customers have confusion. Here is COVID-19, recovered a little bit late from the other states. That is also there. Whatever the main Bengal and they are in July, August. What is really confusing is basically, you know, if the economic activity is there, and I agree that basically they will not pay in full, but at least they should start making payments in part, right? What is holding them up is primarily the Assam relief scheme money not flowing through or that they don't want to pay, there is no intent to pay? No, no. If you see, that's what I'm saying, right? We have seen the improvement. If we expect that from 50% we will reach 90% in a quarter is a little difficult to expect, right? Because there is a level of communication which is required to be done with the customers, education which is required to be given to the customers. It takes time for them to come back to this, you know, the near normal situation. We are seeing that improvement. It will take us to that 85%-90% mark. Your question was when do we reach that 98% mark. You will always have those customers, you know, which will be a little tough nut, who would only react last minute when they see the world around are getting money because they have become regular. I am not getting money because I am not regular. Another point you said that the business, Assam is the main business is agriculture, and 50% their business depend on West Bengal. In the time of COVID-19, everything have been stopped. No train, no flight, no people can be like to travel, even with the goods. There have been both side have been affected, both the states. Now it has been opened. Now opened have been started. That the people's demand also both the side has increased. same question for West Bengal, like, you know, when do we expect we get to 98% kind of a collection efficiency over there? What is holding that back at this point of time? Rest of India is at 94%. West Bengal is at 92. Why do we isolate West Bengal, right? There is a slight gap, but that will get bridged. As we said, there was a timing difference in opening up between eastern India and the rest of India. Okay. Sure. Last quarter basically you had provided the data on the NPA pool where you had provided, you know, how much the, how many customers are actually paying, non-paying and stuff. If we compare that same data for the second quarter, the paying customers certainly have dropped from 74%- 66%. I understand it is not right way to correct, you know, compare basically because I think the pool itself has changed from first quarter to second quarter. Is it possible for you to give the same comparable data for the first quarter, like, you know, the customers who are non-paying at that point of time, whether they are paying or not? That will be really helpful. Because One point here. The moment portfolio changes and then you give the, paying and the non-paying customer data, that really doesn't help much. No. You, if you keep in the historical point of view, the first quarter was the worst because the second wave has come in May and June. It is not comparable with the first quarter and second quarter. For that reason, but we are, whatever the data we have been shown on that and seen that the 1-30 days, 31-60 days in everything we have been seeing that very good improvement. Collection efficiency also seen that very good improvement. People are coming to the business that is also very good and Puja time it is a very good way people have got the business. That is what we find out on that the future it is coming to normal. Okay, sir. Sir, last question. The non microfinance restructured pool is also somewhere about INR 21.3 billion or so. Is that right figure? If yes, what is basically sitting into this pool? Yeah. One minute. That's okay. The second largest restructured pool is the Housing Finance, which is about Second largest portfolio also in a housing finance. In housing finance that is INR 1,300 crore. Out of these INR 1,300 crore, about INR 450 crore have also already moved out of the restructuring moratorium term because they were given a short-term moratorium of three months. Since their guideline says that till we receive 30% of the money at the time of restructuring, they will continue to be shown as restructured pools, they stay here. Then there is SME, which is INR 200 crore. Thank you. Thank you. Our next question is from the line of Antariksha Banerjee from ICICI Pru AMC. Please go ahead. Yeah, good evening. I have just one little qualitative question. Not too much to do with the current numbers. You know, given the experience of this last one and a half years, I think the USP of Bandhan has been that we have been one of the oldest microfinance lenders, and we probably have one of the highest vintage customers. My question is going ahead, when you decide ticket sizes, would you want to keep some cushion as far as the income of the customer is concerned, be it an eight-year-old or ten-year-old customer? Just so that when a crisis like this occurs or when there is a stress event, rather than, I mean, there are two ways to go conservative, right? You take more provisions and you allow for that customer to lose, or you just leave it at the customer's end for them to survive without that one month, two months of income and sacrifice a little bit of growth. In terms of ticket size, especially for your core geographies, is there going to be any recalibration when you grow fresh after the experience of COVID? Before the COVID-19, we analyzed our customers, and accordingly, we designed for those who are taking a loan as a microcredit two years and above age. We found out that how they are running very good business, and they would like to shift to an individual loan. They will not continue as a group loan. That automatically our group loan ticket size will come down, and group loan will be treated as an initial entry level and make a very small business, not a big business. That automatically, our ticket size will come down in group loan, and individual ticket size is high. Separately, credit underwriting is done independently by other verticals and provided that credit to them, which is called the MSME. Antariksha, it is never an either/or, right? You can't lend more or to a wrong customer saying that I will price it. You have to give the right amount to the right customer. Correct. We have a policy of one loan, and that is why our ticket size look higher. The fact still remains we have 20% market share in value terms and 18% market share in number of customer terms. With that being the case, you know, we can't be very different. Yes, we are slightly higher because we have high vintage customers. Going forward, any which way there are regulations, right? The new RBI guidelines talk about the FOIR. We can't lend beyond a particular FOIR. That it's going to be a regulation. There won't be any choice, you know. It will not be that because it's a 10-year-old customer, I will lend INR 1 lakh, five-year-old customer, I will lend INR 50,000. The business owner. Okay. Thank you. Thank you. Our next question is from the line of Amit Nanavati from Nomura. Please go ahead. Please. Amit, your line is unmuted. Please go ahead with your question. Seems there is no response from the current participants. We will move to the next- Hello. Yes, Amit. Hello. Yes, sorry. Just a clarification on the interest recognition comment that you made, sir. I kind of missed the comment. Basically, it's the non-paying customers that you've not recognized on your PNL, but the restructured pool will still be recognized accruing interest on your PNL. Is that correct? Yes, even the restructured pool who are not supposed to pay, two-thirds of them are paying. Yeah, yeah. As I mean, as the non-NPA stress pool that you highlight, right? 30 plus restructured, whatever part of that moves into NPA, as in when that happens in that transitory period, one is still left with interest hit on that, right? That's the fair way to look at it, right? Yes, non-NPA customers, there is no reason for not recognizing. Uh- No, did I get your question? Your restructured book. No, your restructured book, I'm saying where you've given moratorium, right? Will you still be accruing interest there or you'll not be accruing interest there? The interest hit is not visible, right? At least for the one-third which is not paying. We will be accruing interest here. There is no reason why we should not accrue interest here. At the same time, as I said, if two-thirds of these customers are paying, there is, you know, it gives us enough confidence to at least accrue the interest. Understood. These are actually my book. I have funded them with my deposits. Understood. Secondly, if you can give some qualitative colors on, vintage-wise, how the collections or NPA trend has been in the last six-nine months that you would have seen, right? A one year-old, three year-old or beyond three years old vintage customers, which pocket you're seeing maximum amount of damage? To be honest, this was more relevant in the pre-COVID environment, right? Because essentially what vintage does is build the credit culture. The challenge that we faced in COVID was an environmental issue. They were not allowed to do business. There was not enough opportunity to do business, right? Whether they were a one-year-old customer or an eight-year-old customer, that differentiation for COVID impact, there is no particular trend that you can evaluate. Frankly, if, say, someone who is like a four year vintage customer, whether you see them bouncing back, there is some loyalty factor that you are seeing or that's not the case, you know. Wherever there has been slippage in non-paying customers, et cetera, because this will also kind of link to the ticket size issues that we face. No, that is always there. You know, the loyalties and the vintage is clearly visible because if you compare geography by geography, you will realize that we are there right at the top. If you compare our collections in West Bengal and compare it with the others, you will see that we have a better collection rate. No, what I mean is someone who's four years with you or someone who is, you know, one year, two year-old customer for Bandhan, whether there is any differentiation in the way they bounce back. Because you are getting collections from NPA customers, you're getting collections from restructured customers as well. Whether these are, you know, higher vintage customers who are still paying or the fresh customers or, you know, lower vintage customers. High vintage clearly will have an advantage. I am saying when the challenge came, even the high vintage customers got impacted. Understood. Yeah. That's it from me. Thank you. Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference over to Mr. Sunil Samdani, CFO, for closing comments. Thank you and over to you, sir. Thank you, ladies and gentlemen, for your time and patient hearing. I wish you all in advance a very happy Diwali. Thank you very much. Thank you. Thank you. Ladies and gentlemen, on behalf of Bandhan Bank Limited, we conclude this conference. Thank you all for joining us, and you may now disconnect your lines.