Ladies and gentlemen, good evening and welcome to the CSB Bank Q4 FY 2023 earnings conference call hosted by Axis Capital Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Chirag Gandhi from Axis Capital. Thank you. Over to you. Yeah. Thank you, Ryan. Good evening and hello everyone. On behalf of Axis Capital, I would like to welcome you all to Q4 FY 2023 earnings call of CSB Bank. From the management, we have with us Mr. Pralay Mondal, MD & CEO. Along with him we also have Mr. B. K. Divakara, Chief Financial Officer. Now I would request MD Sir to begin with by giving his opening remarks, and then we can open the floor for Q&A. Thank you, and over to you, Sir. Thank you, Chirag, thank you everybody for joining the Q4 and annual results call of CSB Bank. To start with, I'll give you a very brief understanding of the global scenario and then the domestic scenario as well. On the global economic activity, we can see while it remains robust amid the high inflation levels, tight financial conditions and looming geopolitical uncertainties. Amid the slow growth and target is easing of inflation, the global slowdown impact is turning out to be less severe than expected. Far at least that's what it looks, but we have to wait and watch. These conditions are expected to prevail for a while and inflation rates until the inflation rates moderate significantly. Both IMF and the World Bank have projected world output year-on-year growth rates of less than 3% in 2023 and marginally above 3% in 2024. Market is expecting a 25 basis Fed rate hike in May 2023, and then take a call to pause provided there are no major data surprises inviting rating action beyond May. On the domestic side, of course, the global challenges kept aside, Indian economy continues to be looked as a bright spot, both locally as well as based on some global commentary. Domestic growth was buoyant in Q4 of FY 2023. RBI has revised the inflation projection to lower levels and took a tactical rate pause decision in the last MPC, affirming its stance on neutral accommodation to ensure a progressive alignment of inflation within the target while supporting the growth. The latest MPC announcement, the inflation for FY 2024 is projected at 5.2% and GDP at 6.5%. At the current inflation, as the current inflation is within the target, no rate hikes are expected in the short term until and unless there are any surprises on the stronger data releases. The 10-year G-Sec rates plunged from a band of 7.35-7.4 in March to around 7.1-7.15 levels right now after the policy announcements. liquidity that has was in a slight deficit mode, went to a surplus around INR 2 lakh crore, and which has normalized little bit more now. The cumulative impact of monetary action taken in FY 2023 is still unfolding, and the real rate of transmission is getting spilled across FY 2024. As per advisory statistics, the banking system deposits grew by around 10% this quarter and advances by around 16% for the year. Also I was reading a article by Nomura that next year, that growth is expected, I mean, while nominal GDP will be around 10%-12%, but credit growth is also not expected much higher than that. On that backdrop, let me just get to the CSB specifics of this quarter and this year performance. Overall the performance on both top line and bottom line was reasonably good on a quarterly and financial year basis. Highlights of our performance, I'll just quickly talk about the key highlights. Improved profitability. Net profit of INR 547 crores, up by around 19% from last FY. For the quarter ended 31/3/2023, the net profit is at INR 156.34 crores, which is up 20% vs. Q4 of last year. Provisioning buffer of around INR 170 crores over and above the regulatory requirements. We've maintained the NIM above 5% for the quarters and FY 2023 around 5.38% and 5.48% respectively. ROE improved year-over-year from 1.9% to 2.06% for FY 2023. On the liability side, I think the team put up a good show. Deposits grew by 21% year-on-year as against industry growth of around 10%. CASA ratio improved marginally quarter-on-quarter from 31.44 to 32.18 percentage. On a year-on-year basis, there was a slight negative growth in CASA ratio. Asset net advance growth of 31% year-over-year and 12% quarter-on-quarter. Industry has grown about 16% year-over-year. Gold portfolio registered a growth of 48% year-over-year and 10% quarter-on-quarter. Yield on advances for Q4 FY 2023 is at 11.17% with an improvement of 15 basis points from the Q3 FY 2023. Yield on assets for FY 2023 is 10.92, and it was 11.21 in FY 2022. Improved asset quality metrics is also another key highlight. We are pretty well in all key indicators like GNPA at 1.26%, NNPA at 35 basis points at, for 0.35%, and PCR 92% which is with the write-off included. Contingency provisions accounted in the books is high, higher than NNPA, continuing with the accelerated NPA provision higher than the RBI requirements and contingency provisions. We have fully provided the SR population in line with the RBI guidelines. On the capital, in spite of a growth of 30, almost 30%, the CRAR is above 25, it's around 27.10%. Low proportion of risk-weighted assets compared to the industry as well as in this. On the shareholder valuation, book value per share has reached INR 176. EPS INR 31.55, ROE 20.35%. On the investments, we are making major investments into branches, so we plan to open at least 100 more branches in FY 2024. Working on technology enhancements, lending systems, liability systems, payments, channels, core system. I mean, there's a host of work that is going on in the technology side and a major investment this year. I mean, this year our major investment will be on technology, distribution, people and channels. Also we will become a true, truly pan-India bank because more than 60% of our branches, incremental branches this year will be north and west, you know, regions. In conclusion, the success of our organization has four elements in it: vision, aspiration, passion and execution. Our vision for now is SBS 2030, which is the first billion scale thing launched last year, which is well imbibed within each and every CSBM, and they are translating into reality. The entire team is aspiring for this to happen and working passionately towards it. The achievements in the year one by have boosted our confidence as far as the resolution is concerned, and we embark into the most crucial build phase of SBS 2030. In FY 2024, we are planning a lot of investments, especially in the technology space which I just talked about, where payback period will be closely tracked. We know that it will be an exciting journey and the kind of synergistic approach we are taking within the bank will continue to extend our footprints pan-India, and we will begin to focus on our current goals, and we hope to have an even better year next fiscal. With that, I hand over the conference to the... In case, Mr. Divakara, you want to add a few points, post which we will hand over the conference back for the questions. Nothing specific from my side, Pralay. You have elaborately covered it. As during question and answer session, if anything needs to be clarified, I will chip in. Sure. Thank you. We can get into the Q&A. Thank you. 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 touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Jaiprakash Toshniwal from LIC Mutual Fund. Please go ahead. Hello. Good evening, Sir. Thank you for taking my question. Two questions. One, first one, if you can comment on any more HR hiring which you are looking or which you are doing, which you have done in this quarter on the Senior Leadership side? We are almost 70% done on the senior leadership side. We, when we say senior leadership, now we are no longer looking at only CXO level because CXO level, almost 80% is done. We are looking at CXO plus one and CXO plus two as well, and we have significantly enhanced that side of the, you know, leadership strength out there. We are also doing a lot of hiring on the front end as well, and each, every product vertical and every business vertical and support vertical. We are enhancing everything because the way we are planning our growth next year and for the next seven years till for our SBS 2030, we are not looking at a single or two or three products. We are looking at whole service franchise, and for which the only way to do is to create the right verticalization, so that there is a clear focus on this and then integrate the verticalization through a common kind of a platform. Because of that, we are significantly, we have actually significantly hired lot of seniority in the last six months, and we'll continue to have more hirings there. Last year, overall, our number of people we hired was around 2,200. This year, which is around 46% or 47% growth in terms of manpower. Next year we are looking at even higher growth in terms of absolute number and in terms of percentage growth, it should be almost similar what we do this year. We'll continue to invest into our human capital franchise. Great, Sir. Thanks. On the SME loan book side, we have seen a sequential improvement this quarter. Is it more to do a market or a function or is it more to that you have the system teams in place and now this there will be a sequential uptick in the fees on the SME portfolio side? Sure. No, great question. I told this before. Again, I'm repeating that. One is we took last year as an opportunity because, you know, the I felt in the first three quarters, somehow, at least from our risk appetite, the pricing of the risk was not happening in the market. Given, we are a bank with a NIM of 5% +, and given that our risk appetite is very, very low, so we didn't want to significantly expand the business when pricing of the risk to our was not to our appetite. However, we saw that changing in the Q4 of this year, of last year, last FY. If you see our Q1Q growth is around 10% on SME last quarter. We hope that we will continue the momentum going into next year unless the market scenario changes. At the same time, we also exited a lot of accounts last year. Some we exited because we didn't like the business and some we exited because the kind of rates which they were asking, we didn't want to participate there. But in terms of absolute growth in limit setting, etc., we did a pretty good job in Q4. We are happy that the momentum is starting to pick up now. Also, we are going pan-India in terms of our SME growth, in terms of franchise. One of our main models will be to work with every branch, and we are launching our current account and the current team, by which the between the SME, the current Account Team, and we have also launched transaction banking. We have got a very senior resource who is heading the transaction banking. Between these three, triangulation, we'll ensure that our SME business starts picking up this year now. This will be our growth engine for the next seven years. Great, Sir. Just last question on data, getting the CAR has increased to 27% on a QnQ basis, while the profit is stay kind of same as Q3 and we also have the risk RWA to total assets increase. If you can help us to understand the reason behind CAR increase. I think Mr. Divakara will be able to answer this question better. Let me try and then I'll hand over to him. I think, one is, our, some of the backing of some of the profits which also comes in. Also risk-weighted assets has, is also low because our gold portfolio has grown, faster, and hence our risk-weighted assets, to that extent, is doing well. Let Mr. Divakara answer this. Yeah, yeah. Apart from that also, as per RBI guidelines now for taking advantage of this external rating, we need to incorporate bank's name. Somewhere else in some of these cases, though they have promised to include our bank's name, they couldn't do it. The results of about almost a INR 1,000 crore of this risk-weighted assets have gone up on account of non-inclusion of bank's name in this external rating we exercise. Otherwise by and large this it is in line with movement in credit enhancement. Apart from that, this is also one of the major reasons why despite having shown a higher profit growth, this capital adequacy has not moved in tandem with this profit growth. Maybe that is going to be corrected this year. This is what we have been told that the time of next annual exercise of this external rating, they said they have promised to include our bank's name. In quite a few cases they couldn't do this. That's why we couldn't get advantage of this. That's only, this only. Sorry. Sorry to interrupt, Sir. just because the Q3 to Q4 is a 200 basis point increase in CAR, while our RWA to total assets has also increased from 38% to 40%. You think 1,000 crore is because this CAR should be up more than the current number. That's what you're saying? I didn't get this answer. Yeah. That is the March 31st was the deadline for this exercise to be completed now. That in fact, was felt in this quarter only, not in the earlier quarter. That is one of the reasons. Otherwise even credit growth has happened also for Q4 growth was quite sharp in this quarter. These are the two main reasons. Okay. I think Mr. Divakara, the question he's asking is that in spite of the fact that risk-weighted assets has gone up, how is it that we have been able to show a sharp uptick in our CAR when risk-weighted assets, I think because of primarily the profit growth, and the balance sheet growth, right? Profit will be reckoned only at the year-end. First three quarters though we have been making profit so it has, we couldn't get that benefit. For capital adequacy purposes, that gets accounted only in Q4. Yeah. only when the annual published results are announced. Got it, Sir. Got it. Thank you. Thank you. Thank you. I'll come back and raise it. Thank you. Thank you. Our next question comes from the line of Pruthul Shah from Anubhuti Advisors. Please go ahead. Yes. Thank you for the opportunity, and congrats on the set of numbers. My question is with respect to the loan book distribution, based on interest rate, methodology. What is the proportion of loan book which is repo linked and MCLR linked and fixed rate, if you can give a number? Divakara, you will have that specific number. I know broadly, but if you have the specific number, you can give, otherwise I'll give the broad numbers. Thank you. Just a second. The rate of interest is 68% because predominantly so we are into this gold loan business. That is why it's, 68% is fixed rate of loans. MCLR? MCLR, 27% and the repo link is. Eleven. 11%. Okay. Broadly the way it is, corporate book is primarily MCLR linked. The SME is primarily repo rate linked, and on the gold loan is mostly fixed rate. On retail it's a mix of both fixed as well as the variable rate. It broadly mirrors the portfolio mix in the bank. Okay. Got it, Sir. Got it. Sir, one another question with respect to cost of borrowing. QOQ if we see the cost of borrowing has gone up in this quarter. What was the main reason for it, whether it was to, you know. Also our current deposit ratio has gone up this quarter. Is it that because we are getting a possibility in case of advances, we are borrowing at a higher rate? Is this the understanding correct? Would you like to comment on that part with respect to cost of borrowing then CDR issue both? I will give you my perspective on a macro and at a kind of a high level than Mr. Divakara can dissect the numbers. We are very clear that the scenario where we are in on the Global Banking scenario, and we cannot be completely insulated from what is happening globally. In a way, now we also heard that from our Governor's speech, which was published in media today, is the liquidity management and the capital management is of top priority of the banking because that ensures insulates the banks from any kind of unnecessary risk. While none of that is hitting the Indian shores today, but I think we need to be prudent. From that perspective, on the capital side, we are very well protected because we are one of the highest CRA ratios in the banking ecosystem. On the liquidity side, I was very clear that we are looking at growth. Strategically, I'm saying we are looking at growth for the next seven years. When you're looking at growth and I've said this before, that I'm willing to sacrifice margins for growth. Okay? Because ultimately we are building a large franchise and we leverage this franchise over the next decade, two decades. Given that perspective, few basis points here and there, I don't want to lose my sleep on that. Given that perspective, we are very clear that we will focus on ensuring that our LCR, our liquidity and our ability to grow the ecos-- grow the asset side is not constrained by any kind of a liquidity risk or any kind of a liquidity availability. Given that perspective, we have grown our deposits twice the system, which is 21%, reserve is 10%. That's number one. Even with all that, if you look at our CD ratio is, if you look at all the private sector banks, we are well within that range, actually on the lower end of that range. I think we are at 83% if I remember the number correctly. On the, I think 83%-84%, I think somewhere there. On the in spite of doing all that, and in spite of the fact our broad comfort is between 5%, around 5% on NIM, we have been able to retain the NIM at a very, very healthy rate. At this NIM and with this growth and with this level of LCR, I'm quite comfortably in having a few basis points going up on the, on the cost of borrowing or cost of deposits. I have no issue with that. The good news is that we are seeing that 10-year G-Sec is tapering down, and hopefully the rate cycle is coming almost to a close to peak. Given that, I think our strategy is playing out very, very well. The other thing which we have done very tactically is we have not kind of taken long-term deposits or long-term CDs. We have kept our this thing really short-term and to that extent, whatever is there, we are not going to get bound by hard rate for too long a time once the interest rate starts getting flat to starts coming down. Overall, strategically we are going this way and I'm pretty confident that we should be able to be closer to 5%, 5%+ for some more time. Given that perspective, we are quite happy in building and building some buffer in the liability side. That's broadly the strategic perspective the bank has. Okay, Sir. Also one thing that this quarter gone, RBI has increased the repo rate, but we have reduced our MCLR in the same quarter. What the strategies there, if you can comment on that part? I'll request Mr. Divakara to answer this. Before that I just wanted to add one more point in my previous response that we have also tactically brought down, for example, our CD last year on 31/3/2022 it was INR 520 crores. This year we ended with only INR 96 crores of CD. March 2023. Which means that most of the liability side of the business we are seeing are mostly deposit focused and hence core franchise. With that, Divakara, I would like to answer that question on repo rate and MCLR. The marginal cost, MCLR has been reduced by few basis points, because it is being computed as per RBI guidelines. This operating costs have slightly come down. Based on that formula only it has been worked out, but it is not that, quite steep. It's only by few basis points only it has come down, and that has been passed on to the customers because our MCLR is already very high. We thought as and when, some opportunities are there to pass on the benefit to the customers, why can't we do that? Based on that, it has been, done. Okay. Okay. Got it. Thank you. I'll get back in the queue. Thank you. Our next question comes from the line of Samraat Jadhav from Prosperity Wealth Advisors. Please go ahead. Yeah, am I audible? Yeah, yeah. Yes, I'm back. Okay. Yeah. Two questions. One is we had an impact in NIM Q, bottom quarter from first quarter for 2023. There was a good increase, and then we had a drop in last quarter. What could be the reason behind that? As I said before that, in general, I'm not saying guidance, but in general in my all my previous analyst calls, I've said that we are quite happy to have a NIM closer to 5%, but we'll focus on growth because NIM by itself doesn't mean anything. Which we have got the growth, which is double than the system. The NIM also is a function of the mix of businesses, the cost of funds and various other things, right? To that extent, I think, we are on a year-on-year basis, if you look at NIM, it's looking okay. Maybe on a quarterly basis, it is slightly taper down from that perspective. I think, it's 5.38. It is down basically. 5.38 for this quarter. Yeah, for this quarter. For the quarter it has been slightly down, but when you look at Q1 vis-a-vis Q4, we are pretty much okay out there. When you look at Q4 last year vis-a-vis this year Q1, we are almost similar. I think this will play in this range between 5%-5.5%, and we hope to retain at this, that, this kind of a level. We should not have a problem with this. We are quite happy being in this range. Too high a NIM is not sustainable when you are growing a franchise consistently. True, true. Okay. You also said in your remarks that you have a micro goal target of opening 100 new branches. That's right. Yeah. That would be for the full financial year? Yeah, for the full financial year. I'll tell you that strategically what the thinking is that, we are going to start focusing on building the CASA franchise now. Okay? I'm sure some question will come on CASA at some stage, so let me just up front it. Hence, the CASA franchise will not be built on gold loan focused branches. We are expanding significantly north and west. Almost 50%, 60% of our new branch openings, almost 60% of our new branch openings this year will be north and west. Along with that, we are building products which will help us in building the CASA. CASA is not always, grown by, just focusing on liability. We will start retail assets. We are starting payments. We are starting, SME in a big way. We are building transaction banking. We are focusing on current accounts. In a way, both savings and current are nothing but flow in that remains in the account depending on either transactions or usages. To that extent, we have to start building, and we have significantly grown our new acquisition this year, and we want to get significantly more new acquisition next year. We are building a fairly large team to get new customers to the bank. New customers to the bank only helps when we have the right products and services and the technology to onboard them and cross-sell other products. This entire journey is a 3, 4, 5 year kind of a journey, and we are starting it this year. Significant investment on technology is going to help us in scaling this from FY 2025. Our CASA journey is, in a way, we are kind of, team off this year. This will see larger scale over a period of time. Hence, as we see FY 2024, we should see similar kind of a CASA ratio as we are, while we continue to grow at a similar kind of a pace next year, both on deposits and non-advances. That's broadly what we are kind of strategically thinking of. On the branches, I said that yes, we'll have 100 branches minimum and out of that 60% will be in north and west, and these are not necessarily gold loan branches. Okay, great. That's it. Thank you. Best of luck for the rest of the year. Thank you very much. Thank you. Our next question comes from the line of Shirish Vaze from Moneylife Advisory Services. Please go ahead. Thank you, Sir, for taking my question. My first question is regarding our gold loan origination. Can you provide me with the split of what% of our gold loans are we currently sourcing in-house, and what% are through externally through direct assignment, securitization, other means? Thank you. This is a easy one. The gold loan portfolio, what you are seeing has nothing on direct assignment. The direct assignment portfolio is reported separately, and that comes under the wholesale part in the banking business, which we do through some of the NBFCs. Gold loan business which you are seeing are all organically, in-house, acquired customers within the bank. Got it. Thanks, Sir. My second question is around our treasury strategy. I can see that we have a duration of about 4.57. I just wanted to understand how are we thinking about the duration strategy going forward? Are we going to be increasing the duration of our treasury portfolio? If we have a view on our interest rates? Are we going to be conservative and sort of holding low duration securities for now? Thank you. Thanks for the question. I will give a partial answer, and then Mr. Divakara can add to that. Obviously, in the overall global scenario, the way things are playing out, increasing the duration may not be the right kind of risk strategy, or even from optically, it may not look the right thing to do. We'd obviously watch things out because treasury strategy can change depending on how the macro changes globally and in India. What I say now may change after a quarter or after six months or after a year. Right now, the way we are seeing, and there are, I mean, as you know, that the yields have softened a little bit in India, the 10-year. From that perspective, I think we can tactically move some portfolio and book some not only profits but also reduce the duration of the portfolio. I think we will use those tactical opportunities to ensure definitely we don't increase the duration of the portfolio. Mr. Divakara, you want to add anything to that? No. Duration of AFS portfolio is already 0.37. It's only on account of this HTM. We don't have anything in HFT also. Only in HTM, it is at 5.61. Overall it looks 4.57. AFS duration is hardly 0.37%. We don't anticipate any issues on the, this. I understand the question what you're saying. I'll tell you what I had done when this issue happened, etc.. This is for the entire banking ecosystem. Even when you're in HTM, you can say that hypothetically, what happens if, you know, I'm not saying that is going to happen, but I'm just saying what happens if you do a hypothetical calculation of a end-to-end on a HTM portfolio as well. We do all the calculations and we see what are the risks, what are the this thing and what are the challenges, etc.. Given that perspective, I think what Mr. Divakara is saying is right. At the same time, there will be tactical opportunities, just say that you can move one time from HTM to AFS and book some profit, reduce the duration and things like that. We look at those tactical opportunity, but overall broadly things don't change because we are not into majorly trading and we as Divakara, Mr. Divakara just said that we don't keep too much of AFS in our portfolio. That's our strategy. It's not a major, we are not into majorly trading into this kind of portfolio. Duration, I don't see how it will significantly go up from here. Got it. Got it. Thanks, Sir. I'll go back and look. Thank you. Our next question comes from the line of Mona Khetan from Dolat Capital. Please go ahead. Yeah. Hi, Sir. Good evening. My first question is on the cost of deposits. We saw this rise of 55 basis points, quarter-on-quarter, rise in cost of deposits this quarter. One, I just wanted to understand what exactly led to this. Two, assuming that there is no interest rate increase, what sort of rise in cost of funds, per quarter could one sort of anticipate broadly speaking? Thanks, Mona Khetan, for the question. In a way, I partially answered this question already that we wanted to ensure that we have enough buffer and dry gunpowder in the system to grow, not only for the last year and last quarter, but on a sustainable basis. Especially when our NIM and other things are looking very good. I don't, you know, somewhere you have to ensure you take a call. Given that perspective, we have ensured that our LCR and our CD ratio and our liquidity is extremely strong. Having said that, when so much of increases happen on the repo rate, at some point of time, somewhere some increase will happen on the cost of funds also. Sorry, on the cost of deposits also. That has happened this quarter because if you see for us, this never happened in the whole year, right? This is only in one quarter. Right. This has happened. Last year we ended at 5.29%. Last quarter we ended at 5.24%. RBI will tell us that you are not transmitting this thing to the customers, no? We also have to be looking at that, and that's little more on the lighter side. Having said that, I'll tell you what we did tactically. We said that, A, we will keep it little more shorter term, okay? We will not because we knew that there is a reasonable likelihood of G-Sec flattening out, and hence we didn't take too much of a longer call. That takes me to the second part of your question, which is what would be the outlook ahead for the next few quarters or next year. I think outlook ahead is reasonably flattish from here, and we don't see too much of growth on cost of the marginal growth can happen, but I don't see anything which would impact on NIM to that extent, which eventually actually impacts your P&L positively or negatively. That is not keeping me awake at night, the NIM and the strict cost of deposits at this point of time. Okay. When I look at your, you know, so I see that most of the rises come from higher term deposits. Now, when I look at your quoted rates or card rates, you know, they have not necessarily increased over the quarter. Is it like a lot of wholesale term deposits coming at higher cost short term or something like that? See, you know how much business happens in a tight liquidity situations on card rates. Okay? We all know that. We were, at least I can tell you that we were lower than some of the larger banks, where we are quoting even, but none, nothing is really wholesale as such. Our rates, no most of these are retail. By RBI terminology, these are wholesale because these are more than INR 2 crores. These are actually mostly retail customers. Except for one or two maybe wholesale customers were there, but mostly these are retail customers. The way we know means retail branch banking source then basically from that perspective, but they could be slightly larger ticket size. Secondly, none of these businesses which we did are very clear that we are not going to compete with some of the banks which have given very high rates. We are not competing there. I said that only when the top three largest banks, top three largest private sector banks, there I said that either we'll match or we'll not do the business. To that extent, this is mirroring what the larger part of the market was and not some of the players which were giving because we didn't participate there. Thirdly, you know, the benchmark rates or the card rates generally one do it very carefully because you have existing book. You have existing, for example, savings book, FD book, renewals, and all of that stuff, so you know how this entire thing plays out. One would handle the card rate very carefully. Otherwise the cost of funds can go very, very high. That's a way, I mean, that's a very standard practice across all banks, so we have followed that. Yes, to some extent, special rates if you can ask. Special rates have gone up last quarter a little bit for the entire ecosystem and the industry, and that is true for us also. We have not given crazy rates in the market to buy business. We have not done a single deal which is higher than any of the large three largest private sector banks, or at what rate they are doing those businesses. Got it. I mean, the kind of rise we are seeing in this quarter, it's not something that will be sort of replicated in the subsequent quarters, maybe 20 bits per quarter or something. See, I cannot, you know, do that kind of splitting of hair at this juncture. It's almost like struggle of living. What I can tell you is that I am not worried on this. I am going to protect my NIM to a great extent and to, I mean, I'm not at all worried about NIM, and I don't see cost of deposits really. I mean, maximum one or two quarters here and there, little bit few basis points here and there can happen, but eventually it will actually start tapering down after that because we have not taken a long term, long term funding. That was done tactically, as I recall decision, and that is exactly how it is playing out right now. Sure. Secondly, on the loan to deposit ratio, you mentioned, you are at the lower end of, you know, average for private banks at 84% or thereabout. Can one assume that loan deposit ratio can continue to rise from hereon or it has reached that, you know, level where it should remain closer to where it is? I think it depends actually on our credit growth next year. Okay? If we are at around, let's say if the market is at 10%-12% and if we grow by, let's say 20%, 23%-25%, then we should be able to retain this kind of CD ratio. Suppose we do a better job and you know, grow the book faster, then I don't mind having a CD ratio because, since 86%, 87%, 88% CD ratio, I have lived with in my past, in my previous organizations. It's not a big deal. As long as it remains below 90% for a good cause, not because we cannot mobilize liability, but because our credit growth has been faster because all the cylinders are firing. Mm-hmm. I would not be asleep on that as well. We will never go above 90%. Got it. On the clean come side, we've seen a very strong uptick in clean come this quarter. I mean, and the entire fiscal as well. Could clean come continue to grow at a higher pace than loan growth, something we saw in this fiscal? This I can tell with definite conviction that it will grow much faster than the loan growth. Okay? I'll tell you why. Mm-hmm. This is something... Actually, if you look at most of our operating metrics, Mona, most of the operating metrics, if you follow my analyst calls in past or our one-on-one meetings, most of these trajectory is exactly moving in the same line which I have talked about before. That's what gives me and my management a lot of satisfaction that it is moving exactly as predictable, each of the operating metrics. On this fee income, let me tell you, which I had told before, that we had a significantly lower fee income this year on treasury and on PSLC income. I think between the two we did almost INR 30-31 crores lesser than last year between the two, okay? Mm-hmm. In spite of that fact, we have grown by 28% on the fee income, which is in line with the credit growth. Next year, the PSLC income will come back for reasons which I've explained before. Right. We do have a very good PSLC book this year as well. Our momentum on the processing fees will only go up because with credit cards and retail assets and SME businesses coming in and transaction banking getting launched, the granularity of the fee income is only going to improve significantly. Our TPP business, trade, forex, we are focusing a lot more on NRI and trying to ensure that our some of the remittance happens on the NRI book through, directly through the bank. All of these will give us significantly higher traction on fee income. I am very bullish on the fee income. I said that sometime back, if you take ex-treasury and ex-PSLC, our fee income is to be less than 5% of the total income. I said that at some point of time by, yes, 2030, we should be somewhere around 17%, 18%. In fact, we are ahead of, that trajectory. Yeah. We have almost reached, I think, some, 13%, 14% or something like that, or 15%, I don't know. I think our At least definitely I think in the next two years we should be able to reach at least 15% of our, coming to the fee income of the overall income, which will be then we are in the same league as the big players. I think we are well on track on that front and this is something which is doing very well. Got it. If I look at this quarter, the 44% growth in, you know, the core fees, which is commission and processing fees. This already included or what has this benefited from? Is it the same thing you mentioned cards, trade, forex, transaction fees? No, those have not yet come. Okay. This has come primarily from gold, insurance, some debit card, credit cards, small little here and there, ATMs and all that. Mostly it is... And liability fees, of course. The standard liability fees, which also has grown. As, because as you add more customers and this thing, this will grow to the rest of them. I think we have done the basics right. Next year we'll add on few more cylinders to it. These basics which we have done right, some of them will fare even better next year. I am pretty confident that on the fee to total, definitely fee income will grow faster than. Next year we'll not have a negative growth on treasury and PSLC. In both we will have a positive growth. If you add all it up, there is a reasonably good traction you'll see on the fee business. Thank you. Ladies and gentlemen, in the interest of time, please restrict yourselves to one question and one follow-up question. Our next question comes from the line of Sheel Shah from Sameeksha Capital. Please go ahead. Yeah. Thank you. Thank you for the opportunity. We had a great year in terms of profit quality, and we saw improvement each quarter. We had a negative credit cost for two years in a row, and now it is definitely outstanding. For FY 2024, can you please share credit cost guidance and your thoughts on slippages for FY 2024? Before that, let me just tell you what happened in FY 2023 and what is the good news in that. Other than recovery from return of book as well as abolition of accounts, I think, the other factor, which is slippages, is something which makes me very happy because those slippages has been pretty positive for us, you know, the entire entire trajectory. What it tells us that our risk management, our credit governance and all of that is working very well for us. That's number one. Going ahead into next year and future, we see that we have a good risk and credit governance, which finally leads to credit cost, right? Secondly, the credit cost, yes, we had continued to improve on our credit costs and we were more negative this year than last year as well. I think it is around 75 basis points, I think, negative this year, compared to, I think, 7 basis points last year. This, of course, cannot continue forever as you grow your book. What I have told in past, I'm telling again, that our GNPA will be less than 2%, NNPA will be less than 1% and our credit cost will be less than 40 basis points. This I'm saying at least for the next 2 to 4 years on a CAGA basis. I will hold on to that. Having said that, obviously, given the trajectory, we may not have a negative credit cost, but we may not reach that, higher end of this, of this, limit, I mean, higher end of this range. We should be doing reasonably well on our credit cost next year as well, and well below the three, four-year guidance. Okay. Thank you. Just one quick question. If you can share a total investment in tech that you have done for the current year? Total investment? Yeah. In the tech. Tech investment. Big investment. Yeah. What we have done is we have built a structure and architecture and clarity on what we want to do on technology this year in FY 23. The leadership team is in place, the structure is in place, and we have clarity what we want to do. The easiest way to say what we are doing in technology is almost 70, 80% of what is there in the bank won't be there after two years. Okay? Whether it is a core system, whether it's the LMS, whether it is the LOS, whether it is the corporate net banking, whether it is the inter-API integration. I can go risk management system, the inter project management system, I mean, whatever I talk, the entire architecture. We got full clarity this year how much we started investing this year, but the big investments are coming in the next two years. In terms of CapEx, most of the CapEx will be through in the next two years in the bank, which obviously on accounting principles will flow through over x + 3, x +4 basis. Hence it's not that everything will hit the P&L, but maximum investments in terms of CapEx will happen in the next two years in the bank. After that, obviously, we will continue to do bits and pieces here and there. That's where the major investment will come in in FY 2024 and FY 2025. We'll try and see if we can execute it right. A lot of that will get front-ended in FY 2024 itself. Okay. This is a big investment for us, and this is a big strategy for us next year. Okay. Can you just quantify it? I mean, that's a difficult number to give, but what I can tell you is that in terms of, because I told it before, I can repeat it, that whatever our annual profits are, hopefully we should be able to invest that kind of amount in CapEx. Obviously it will get apportioned over three, four, five years. Oh, thank you. Thank you so much. Thank you. We take our next question from the line of Shirish Vaze from Moneylife Advisory Services. Please go ahead. Yeah. Thank you, Sir. I just had one small question regarding regulatory treatment of our bank. In terms of RBI classification, we are classified as an old private sector bank. We are trying to kind of transform the business towards a new private sector bank. Just wanted to understand from a regulatory perspective, does that have any material impact on us that we are classified as an old private sector bank vis-à-vis competitors who are new private sector banks? Thank you. Frankly, I have not thought through this yet. Since you have asked this question, I have to now think about it. From a regulatory, I mean, license, from a license perspective, whatever I understand is we can almost do everything what large new private sector banks can do. If there is any restriction anywhere, not that I am aware of. Mr. Divakara, would you know anything? No, I don't think so any restrictions are there. We can do all the business what they are doing as of now. I'll check this out. This has never crossed my mind, actually, because we have not actually faced any hurdle in doing anything so far. I have worked in with two, three large private sector banks before. Three large private sector banks before. Three large, two large and one medium. Whatever I have done, I so far nothing I have been told not to do here actually. Let me take a clarification on this. Got it. Got it. Thank you, Sir. Thank you. Our next question comes from the line of Mona Khetan from Dolat Capital. Please go ahead. Yeah. Hi, Sir. I just had two additional questions. Firstly, you mentioned that there's this plan of, you know, big investments this fiscal as well. On the OpEx to assets, we had OpEx to assets of 3.5% or so this fiscal. Could this continue to be at similar levels or will the other OpEx growth of 28% over the last two years moderate given the high base? Very good question, Mona, and this is something which I have been telling to all investors, including investor calls in past, that we'll significantly increase our investments primarily into 4 parts. One is distribution, one is people and leadership, including customer acquisition, mostly in technology for the next two years. Fourth is building channels, including digital and other, and partnerships and things like that. These 4 investments we'll do come what may. Given that perspective, yes, OpEx will go up, because this is not cost, this is investment. Each of these investments has a clear payback period. I said that by FY 2030, SBS 2030, as we call it, our cost to income, kind of our target is somewhere between 40%-45%. Having said that, I said in the short run, our cost to income target is between 55%-60%. We have retained within that this year. Next year, probably we'll be at the tipping point out there. Maybe 3 basis points up and which from next year onwards, again, we'll be in the range between 50%-60%, and it will gradually start tapering down every year to 43% by FY 2030. That's my plan. It will exactly play out that way. Okay, got it. Just finally on the retail growth. We have seen a very strong growth in other retail. Where is this coming from? If you could share some details around it. It's coming from a low base, Neema. Our retail growth has not yet started frankly. Okay? Right. What you are seeing is primarily because we have started nibbling bits and pieces here and there, because I'm very clear with the team that we will not grow retail till we have our systems in place, till we have the right to ask the right business from the right partner, and till we get our branch distribution on retail cross-sell well, and till we get our liability franchise, where we have the acquisition machinery working like a machine, to which we can cross-sell. Frankly speaking, none of those things will take off till FY 2025. FY 2025, we'll start seeing some green shoots out there. Right now it is basically low base, and we are doing bits and pieces here and there. That is showing it up. You will see. I what I told before, I said that by FY 2030, we will have 20% gold, 30% retail, 20% SME and 30% wholesale and other businesses, including securitization and everything. Okay? If you have to go to 30% retail, where are we in retail? I mean, we have to go there, right? You'll see a significant scale up in retail between FY 2027 and 2030, and between FY 2025 for the first time we'll start seeing the real growth happening. What you are seeing is basically on a low base. We have started bits and pieces everywhere. That is what is showing, including AGRI, microfinance, you know, little bit of a PL, some of the home loans, some of these labs, some of these businesses here and there. These are all showing up little bit bits and pieces. This is not the real journey. Real journey will start only post FY 2025 after our system processes are in place. I have done this business enough to tell that we should not scale this business unless all our machineries are ready. By that we will be actually picking up a faster pace than doing it now and then taking two steps forward, one step backward. I'll not do that in retail. We'll only go all out only once we are fully ready. This growth you are seeing is basically because of low base. Okay. The systems are expected to be in place only by FY 2025? No. The retail asset systems will be placed all by FY 2024. Okay? Okay. Mid to end. You know what happens is, based on my experience, I can tell you that once the systems are in place, you need the channel machinery to work, you need the process machinery to work. Also, what we need is customers, right? We are starting that entire sales machinery of customer acquisition. What we'll do is because we have digital access now unlike 20 years back, so onboarding of customers will happen with some retail asset businesses as well because of the digitized ecosystem. All of that stuff will happen this year. That experience of cross-sell, all said and done technology to Raju will deliver. We have to ensure that the culture- Mm-hmm. Of retail assets cross-sell in the branches. I'm getting the team to get activated towards that. With the sales team, they will have a separate strategy. With the branch banking, they will have a separate strategy. With the OCC, which is outbound contact center, they'll have a separate strategy. Only these three machineries are working fine, then we will look at DSS and dealerships and all that to start building the businesses, not the other way around. Because we should go with the, you know, strength and not looking for businesses because our other businesses are not happening. That's the way we'll build retail businesses. So to that extent, yes. The short answer to your question is, the systems will all be ready. Only system which will not be ready this year will be core system. Core system will come in FY 2025 because that is something which we are not going to compromise. We'll get the best of the best and hence, that will take a little while. That will come by FY 2025. Then everything gets integrated around the core system. Sure. Got it. Thank you. That was very helpful. Thank you, Neema. Chirag, any further questions? Ladies and gentlemen, due to time constraint, we take our last question from the line of Pallavi Deshpande from Sameeksha Capital. Please go ahead. Yes, Sir. Thank you for taking my question. Previously you mentioned about the special deposits. What will be the share of that in the total deposit mix? Secondly, on the NBFC side, we've seen some exposure ticking up to the that. What kind of NBFCs would be it? See, typically, I don't have that exact data, but I think we have always worked on a 30-70 kind of model where 30 is last week, I mean, last for us, last week it is very small ticket also from an ecosystem perspective. Whatever you can call as special rates, special deposits, generally it has been 30-70. Maybe it would have gone up little bit last quarter. Again, it will come back to somewhere around 30-70 or 35-65, because most of these are relatively, you know, it is not more than 1 year or 6 months kind of a thing. You must understand that we ran up our CD book completely, almost, right? Which I told. From, you know, actually fairly INR 500 something we had CD book, we brought it down to INR 95 crores. INR 594 to INR 94 crores. We ran off almost INR 500 crores of CD book last year. Given that, I think we had that special dispensation in a way to build some book on a shorter term basis, which we have done. Hence we have buffer on CD and things like that. You know, CD rates are coming down and things like that. It will be a play of all of this till our entire CASA franchise machinery fully picks up. I'm not so unduly worried on this percentage, but it may have gone up little bit this quarter compared to what we generally have around 30-70. I'm giving a very broad picture. I exactly don't have the data in front of me. Yes. Sir, like, NBFC exposure that's at 8.8%. Yes. It was at 7% in the third quarter. you know, what are we seeing in that space? Divakara, you would like to answer that question? After that I'll top it up. I don't think Sri Divakara is able to answer this. Maybe he's not able to connect, so I'll answer this. What has happened is, see, when it comes to NBFCs, we always do at a category of A plus category. Ninety- We do. Our advances to NBFCs are A-rated and above. Out of this total 3,000 and odd exposures towards NBFCs, 94% is A and above type of accounts. Right. Sir, would this be primarily vehicle finance or the diversified financials? No, no, it's not vehicle finance. It's very, very highly diversified. Lot of this is to do with home loans and those kind of businesses. These are highly diversified. In fact, not too many is vehicle actually. Yes, Sir. Sir, lastly, on the recoveries from written off accounts, what would recovery have been for this year? I guess it will be part of the other income. Sorry, I didn't get the question. The recoveries from written off accounts, how much would that have been this year versus last year? When we're talking about the amount that's included in the other income from this. Yeah. Mr. Divakara, you would like to answer? Yeah, yeah. Provisionally written off or recovery. This year it is INR 70 crores. Last year it is INR 77 crores. Right. Okay. Which would be, how much out of the INR 70 would have been part of the other income? Nothing. Might have been correct. That's what. It is netted off against the provisions to be made. Okay. All right. Right. That is a new regulation, right? I think that's the new regulation. Sri Divakara that we have to make it out. Yeah. Okay. Right. Thank you, Sir. That's all from my side. Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I now hand the conference over to Mr. Pralay Mondal, Managing Director and CEO, for closing comments. Thank you very much. I would really thank everybody to patiently listen to our commentary and ask very relevant set of questions. What I can commit is, on behalf of the management, that everybody is very excited to build the bank, based on the SBS 2030 vision. The first installment is delivered this year. More excitement to come in the next few years. That much I can commit on behalf of the management. Thank you very much. Thank you, Sir. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.