Ladies and gentlemen, good day and welcome to the Q1 FY 20 23 Earnings Conference C all of The Federal Bank Limited. As a reminder, all participants' 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 this conference is being recorded. Now I'd like to turn the conference over to Mr. Anand Chugh from The Federal Bank Limited. Thank you, and over to you, sir. Hi. Thank you so much. Good afternoon, everyone, and thanks for joining us on this call to discuss our FY 2023 Q1 numbers. I'm here to officially hand over the baton to Souvik, with whom most of you would have interacted by now, just as you would have had a chance to go through our numbers and investor deck for the quarter gone by. This has been a good quarter for the bank with everything from NIM to asset quality to cost to income ratio to ROA, ROE improving on a sequential basis. We have on the call Shyam, Ashutosh, Shalini, Harsh, Venkat, along with other senior officials of the bank. Without further ado, I'll hand over the mic to Shyam for his opening remarks, and we follow this up with the Q&A. Thank you, everybody, and good afternoon. Thank you, Anand, for a great job and all the best in your new role. Welcome to Souvik as he sets us into the new role. Like Anand mentioned, yes, Q1 was good. It was very much along the plans that we laid out for the financial year, and I'm happy that we've made a good start. I do think all of you have had a chance to look at our numbers. So I'll keep it very short and, you know, open it up for question and answer. The high points that we sort of wanted to talk about is through all this, the asset quality continues to be strong, and we believe that that momentum will continue through what may look like a tough period even going ahead. Credit growth has started picking up. We did see good growth as in Q1, definitely better than many years. Quarter one tends to be sluggish. I'm happy that Q1 this year bucked that trend and started seeing a meaningful growth both sequentially and a Y o Y. It was quite broad-based as you may have observed. Our liability franchise, you know, continues to be very granular and growing quite well in areas that we want to be focused on. I'm hopeful that the environment that we are in today is actually an advantage for Federal in terms of deposit growth. That sets us apart for the year and the years ahead. Many of the platform enablers we've been putting in, be it some of the new businesses like credit cards, personal loans, microfinance, gold, business banking, commercial vehicle, commercial equipment, have all started seeing traction through the COVID period. Some of you may recall in February 2020, we held pretty much almost a full day conference in Mumbai and shared our plans. Some parts of the last two financial years that had to go on to slightly slower gear given the environment that we were operating. Happy that that period has cleared and all these businesses have come back to trajectory, and particularly microfinance, commercial vehicle, commercial equipment and credit cards are giving us a good feel about the opportunities ahead. Over the next two or three years, those should become a meaningful part of the incremental parts of the growth of the bank. For the quarter that went by, you would have seen, sequentially, revenue grew, so did YoY. This quarter saw no one-offs either on the upside or on the downside. If at all, the treasury and the bond market rates had had an impact on treasury to some extent, but equally we benefited to some extent on the employee provisioning cost. There were no significant upsides or downsides, and we could smoothly land the quarter quite well, and happy that we've entered the sixth handle in our net profit and more importantly, our ROA touched 1.1%. This is the third quarter sequentially ROA is trending up, and we hope and are hopeful should see this progress. I won't belabor much on the environment. I'm sure all of us are living through it. I don't have any unique commentary differently from the market gurus who have a better view. I tell myself and the team, "Let's behave like bumblebees." We don't have to believe that the market is tough and start to hide behind anything. We just have to make sure we flap our wings and we will fly. We're well-positioned to do that. I'm gonna say that our opening remarks are that we said what at the end of the March quarter, and we do believe this year mid-teens or higher growth is possible, and we will course along to make sure that our ROA commitments are honored and our credit quality remains as strong as it always has been. Liability growth will be pretty granular in nature. Of course, fee income trajectory is strong. Barring anything like a treasury gain or a treasury loss, which has not much that you and I can do, we are on course to making sure that FY 2023 is along expected lines or hopefully even better. With that, I pause. Once again, thank you very much to everybody and happy to take questions. Like Anand mentioned, our entire senior team is on the call. I'm sure all of them will chip in and share their insights as and when required. Allow me to just open the call, operator, and, you know, be happy to take questions. Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star then one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star then 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. To ask a question, please press star one now. We have a first question from the line of Mona Khetan from Dolat Capital. Please go ahead. Yeah. Hi, sir. Good evening, and thanks for taking up my question. Congratulations on a good set of numbers. I have two questions. Firstly, on the margin front, with about 90 basis points rise in repo rate so far, have the yields for EBLR loans also be raised to that extent? Because on the savings account side, the increase has been much less at about 25 basis points. Yeah. You said two questions. Anything else? Yeah. The second one was, you know, what's aiding such healthy growth trends in Q1, which is, as you mentioned, a seasonally weak quarter. Your thoughts on the demand scenario and also sustainability of the current growth trends. Yeah. On the first part, Mona, I think the answer is, yes, the rate transmission has happened in terms of that which is linked to repo is transmitted almost the day after the repo increase or the next day, T+1. Anything linked to any other benchmark is on reset date automatically happens. Mona, all of the book is getting repriced as and when the reset date happens. Like you pointed out, on the deposit side, we've had a modest increase. We are now caught up with many other banks which had much higher. We at least matched up with SBI to get to 2.7% on savings. Otherwise, we are in increase. Therefore, term, we are quite priced quite competitively. May I request others to go on mute, please. Those who are not speaking, please go on mute. The second part of your question on credit growth, we saw and we noticed fairly all around growth. I think there is an inherent shift to banks as lenders has increased visibly, combined with, I think, the demand for credit based on inflationary requirements and also the fact that, maybe large capacity utilization is probably at peak in most instances. I think there's a demand increase, for banks, and we are participating more aggressively. Our share gain is visible. Our outreach has improved quite substantially. I think this trajectory will continue. You know, we are at about 1.2% share of the credit, but on the incremental credit, our share of gain is, I mean, our share of market is closer to 2%. I think we will be able to grow this space quite meaningfully and therefore thereby achieve or exceed some of our growth aspirations. Sure. Thank you. Just coming back to the first question. You mentioned that almost the entire 90 basis points has been passed on or the entire thing has been passed on to borrowers. Is it fair to assume that for a large part of the EBLR book at least for half a quarter, which is probably 1.5 months because the rate rise happened post-May, the entire benefit is already reflecting in the margin for Q1? About 40% of the books will have a 40-day gain, and rest of the book will be at sort of a measured across periods in time. 40% of the EBLR book? 40% of the book is linked to repo. Okay. Sure. Got it. Just one clarification. There's been some reclassification in loan book between commercial banking, business banking and retail. What does this reclassification pertain to? Every year based on the year we reset in terms of businesses that move to corporate, commercial or retail business banking, depending on ticket size. Some reclassification would have happened within the book. At the beginning of the year, we reset so that the account focus changes. Sure. Thank you. Thanks a lot. Well, can I just comment to make it clear so that even subsequent questions, if there are on this particular. The EBLR linked book is 48%, 47.9. The fixed is 26% and MCLR is 17. That's broadly the distribution. Thank you. We have next question from the line of Mahrukh Adajania with Edelweiss. Please go ahead. Hello, sir. Congratulations. My first question is on slippage. The retail and business banking slippage is higher QOQ. Is there any slippage on restructuring ECLGS or earlier restructured account that has led to it? What explains the higher QOQ slippage in retail and business banking? That's my first question, sir. Yeah. Did you have a second one, Madhu? Yes, I do. I just wanted to get your thoughts on this whole PPI ban and how it affects you, positively or negatively? That's my second question. Sure. Uh. Let me go with the retail one. Slippage for the quarter reported is about INR 200 crore. Normally, in the pre-COVID, we were running at about 140, 150, depending on the quarter. We believe that, for the quarter that went by and maybe for the next two quarters, you will see roughly about 20% increase from that 140 base, so closer to INR 200 crore or INR 180 crore. Largely because the restructured book, the demand for the restructured portfolio was on the customers to repay. Certainly this, there is an element of at least between 15%-18% slippage on the restructured book on retail, and that's where we are seeing it. It's very much along our guidelines or our expectations and our provisions. If you recall, last year when we added up almost INR 530 crore of provision, we had done a reasonable amount of restructuring on retail and we said we are building up for a 20%-25% slippage on the restructured portfolio and yet keep the 65% coverage. It's almost to script and we don't see anything that exists and shifts differently from what it is. If anything, it may improve. On ECLGS, thankfully almost nil, and at this point in time it's in lag. Got it, sir. Sorry. Go ahead. You want to complete something? No, no, sir. Please go ahead, then I'll ask. On PPI, I think, as you probably know, we don't do prepaid cards or anything to do with that. We see that it may shift the demand to credit card, and that's an area we are putting a meaningful focus. I expect credit card to be an advantage and therefore we may have an opportunity. Got it, sir. On your repo book, reprices in the month of the increase or after every three months? Repo book is instant. T+1. Instant. Yes. All right. T+1. Okay. That's so helpful. Thank you so much, sir. Thanks. Thank you. We have next question from the line of Aditya Jain from Citigroup. Please go ahead. I just want to confirm, so the EBLR would change on the day of T+1, but individual loans might have their own reset date, which as per regulation could be up to three months. Is that understanding right? Or are you saying that even the individual loans have a T+1 reprice? When you say individual, you mean retail? Anything that Right. Individual, I mean, any loan as per its own contract might have some reset period. So, that reset period itself is one day effectively. Is that what you're saying? Yes. All through repo links are T+1, and anything else is contracted, and the reset is based on the contract. Got it. Thank you. Welcome. If I may add, entire EBLR is not repo link. There is a T-bill link also which has a defined, you know, periodicity. Three months or annual or whatever it is, that is T-bill link book. EBLR has two. One is repo link, the other one is treasury bill link. Correct. Got it. Thank you. Thank you. We have next question from the line of Prashant Kumar from Sunidhi Securities. Please go ahead. Thanks for the opportunity, sir, and congratulations for the good set of numbers. My question is just on accounting side. On provisioning for the quarter there is INR 167 crore tops, and in which loan loss provision is INR 150 crore and other standard accounts. In this quarter, I think, the bank's hit by MTM provision. Where has been shown this? Ashutosh, do you wanna go? Uh, I'm- I didn't understand. MTM provision. He's saying, where is the MTM provision? Ashutosh, sir, do you wanna go? Go, please. Ashutosh, sir, I think MTM provision is separately taken as a provision on investments, not a loan loss provision. Loan loss provision is INR 150 crores. Balance amount is, you know, I mean, this thing. See, in MTM there you that amount itself is very small, and it is netting of your appreciation versus depreciation, which is what is the regulatory direction. We did not have much of a investment related depreciation because our AFS HFT book was very thin. It means that MTM provision has not impacted during this quarter, right? The resultant number, which is marginal. Okay. Only the treasury income that is, the part of. Yeah, income is impacted because in the first quarter you would be aware there is a tradition of shifting from HTM to AFS. I mean, inter-category transfer, I would call it, not HTM to AFS. Inter-category transfer is permitted in the beginning of the year. We have not made any inter-category transfers this year. Our book is. Oh. Our AFS HFT book is very, very slim. Okay. Thank you so much, sir. That's it from me. Thank you. We have next question from the line of Nitin Aggarwal with Motilal Oswal. Please go ahead. Yeah. Hi. Good evening, everyone, and congrats on a steady quarter. My first question is on restructured assets. Like, if you can, share some color as to what proportion is now under a moratorium and any color on SME overdues of these accounts. I think about INR 1,300 crores of the restructured book has already been in demand, therefore they're in the- Sir, may I come in? Yeah, go ahead. 43% has emerged out of moratorium. It is spread across till 2024. In Q4, INR 1,000 crore has emerged. Coming to three quarters with INR 700, INR 300. That is the split. Okay. So when we say that 25% is like the outlook that we carry on the securities that can happen from this, it includes non-paying accounts, of course. Do we, Shyam, like, have like a good degree of confidence on these accounts which are under moratorium? Yeah. I mean, we have to rely on the experience of, say, the last two quarters. Roughly it's been between 10% and 15%. You know, at the top end could be 20%. That's where the trend lies. Right. The other question is on the RWA growth this quarter. If I look at the loan composition, the corporates has gained share marginally, but RWA growth looks to be a tad higher, which is resulting in a Tier one consumption also of 110 odd basis points. Now that we are looking at a much stronger growth in FY 2023 versus what we have seen in the prior years, how do you look at this consumption as well as any thoughts around the capital raised or, I mean, like, how do you see that? On the second part on capital, I'll hold that answer because we will see how the next two, three quarters shape up and how, you know, the environment is. In terms of capital consumption, this quarter if you break, you know, you mentioned about 100 odd basis points. About 70 basis points is RWA increase for the credit growth, and there were elements of credit growth which had businesses that are short-term loans to companies which have greater than INR 10,000 crore borrowings from the market. As you know that the RWA goes up. Even for a highly rated company, the RWA goes up to 100%. So to that extent, the increase in RWA is a consequence of this. In terms of our unsecured growth, particularly credit cards, while balance sheet growth is yet to sort of pick up, we've seen good line extension already happening, and that also consumes capital. Two parts. One, both the credit quality and the credit extension for the segments we want are going well. In terms of how much consumption happens and what we're able to add back at the end of financial year, we will see if we dip below, say, 13%-13.5%. At this point in time, it's too premature. Right. Lastly, just one clarification on the earlier answer that you gave around the loan mix, based on how the mix of floating loans is. Our yield on advances on a sequential basis is pretty sort of static, despite like the T+1 repricing of repo, and we have also grown well across segments. Why is that so, and how do you see the repricing playing out in the coming quarters? It'll come through. You know, there are some businesses like agri where this leakage is also means a revenue offset, right? To that extent, you will see that play through. Over two quarters that should stabilize. Three, we have guided for somewhere in the 3.25%-3.27%, and we think we're at 3.22%. Another five-seven basis points will happen. Okay, sure. Thank you and wish you all the best. Thank you. Thank you. We have next question from the line of Kaushik Poddar with KB Capital Markets Pvt. Ltd. Please go ahead. Yeah. Shyam, your advance growth has been good, but deposit growth was not keeping pace. To that extent, what's your strategy for upping the deposit growth? No, sorry. I'm talking deposit growth. Your deposit growth was not keeping pace with your advance growth. How do you plan to up your deposit growth? I think, Kaushik Poddar, the deposit growth elements you have to see. We can pay more and grow term. Term is very price elastic. So we are focused on growing the granular retail CASA, which has grown 15% YoY. CD ratio being at about 82%, we are reasonably comfortable even if it went up to 84%-85%. That said, in Q2 you may see that our deposit rates now for both domestic and NR deposits are in top quartile. So you'll see pick up on deposit. Deposit to some extent is dial up, dial down, depending on how the CD ratio is and what you want to do with growing term. If you notice in FY 2022 end, consciously we didn't grow term because there was no great point in pricing up and taking term. As we see opportunities, we are doing that. Our more structured CASA is growing quite well, domestic and NR. Now, what you just now said is that you have upped your term deposit rate, is it? Yeah. In Q2, you may have noticed our term deposit rate is in the top quartile. Okay. About the relaxation that RBI has made regarding that FCNR deposit. Do you see some opportunity there also? It's material. Again, there we are, you know, very, very competitively priced, probably among the better banks. We are 7% of India's non-resident deposit market share. About INR 10 lakh crore is the deposit share of non-resident deposits. We are about INR 80,000 crore as Federal Bank, right? We are about 7.5%. If India gets $2 billion, which is what most people believe will come in the next two, three months or through the window of this dispensation given, we should get our share or higher. Okay. As far as capital raising goes, I mean, you are holding it back by another three quarters or something. That's what you said? No, I said there is no plan at this point in time. When people said there is a likelihood of consumption of capital and therefore the need to go to the market, I said we'll wait to see how the year shapes up, and then we'll decide timing, opportunity and price. At this juncture, there are no plans. Okay. On this ROE, what is your target rate? I mean, if I remember correctly, you are aiming for something like 1.25. Is that what it is you have in mind? If that be so, when do you plan to reach that? We said we'll exit FY 2023 between 110-115. I believe we are at 110. Right. I think we will take that 1.15. We said exit FY 2024 will be 1.25. I think we are on course for that at this point in time, unless something dramatically changes. Okay. Thank you, Shyam. Thank you. Thank you. We have next question from the line of Rakesh Kumar from Systematix Shares. Please go ahead. Yeah, hi. Hi, sir. Thanks for the opportunity and very good set of numbers. Quite a lot of surprises on treasury operations, though we had close to around 1/5 of investment in AFS and HFT. This is quite surprising. Some queries that I have, firstly related to you know the PSLC and like overall PSL shortfall that we have. Like, you know, just calculation I did, that you know the purchase we have done of the PSLC investment in RIDF and then IBPC that we have on the net basis, you know, in this like for year FY 2022. That is quite a sizable number of the total PSL outstanding. Why that, you know, we have so much dependence on PSLC? Ashutosh, do you want to talk? May I come in, Shyam? Yeah, please. See, PSLCs were available at one basis point, 0.01%, one basis point towards the end of the previous quarter. I think that's one part. Whatever shortfall was there, we have fully taken care of that. There is something called, you know, average PSL and all for every quarter and all. Whatever earlier quarter shortfalls were there, those also were taken care of in the March quarter. We are not into PSLC in this quarter. You would not have seen the same because it has quick mortality. On 31st March, it all expires, become zero. In this quarter you would not have seen that. Sir, I was referring to. Are you talking of PSLC certificates? I was talking about, you know, what we have done in FY 2022, entire FY 2022 as per the annual report. You know, what purchases that we have done. I was referring to the annual report numbers, not this quarterly numbers. That's exactly what Ashutosh has said. That's what I was telling about the FY 2022. FY 2022, we had a shortfall, cumulative shortfall going on for the first three quarters. In fact, most of it was H1. The third and fourth, we took care of it mainly in fourth, by having the PSLCs done. And PSLCs were available at a very, I mean the least possible price, one basis point. That's the least. You don't have a price below that. It was a good economics also to do that. Got it. Rather than acquiring portfolios and other things, you know. These are other options. This was the cheapest option available. Based on the industry weighted average premium, would we have, you know, spent close to INR 170 crore on the entire year, FY 2022 for PSLC purchases? I don't think our number is that. Did you say INR 170 crore is the cost of acquiring PSLC? Yes, cost of it. No, no. Not even a fraction of that. Not even a fraction of that. That's what I said. Nowhere close to that. No. Secondly, sir, in the annual report we have discussed about expanding our branch network, which has been so far kind of a standstill. What is the change in the strategy, there we have? Yeah. For now we have- Shyam, before that, just complete the question, the earlier question. I just want to add that in this financial year, month-on-month, we are on target. PSLC, there is no shortfall. Yeah. Let me just answer the question on branch expansion. For about five, almost six years, we added only 20 branches. The objective was in my first five years, we added about 750 branches. We wanted to make sure they are all productive and performing. Happy that at the end of March 31, 2022, there was only one loss-making branch in the bank. That said, we were confident that our traction on leveraging our franchise is working. We also said we will focus on digital and do digital quite successfully. While we did that, we said we will move from branch light distribution heavy to light branch heavy distribution. Light branch means smaller and compact branches in locations where we don't have our flag. Even in Q1, we added 10 branches this financial year. We're committed to adding about 65 branches this financial year and over the next three financial years, including this one, we think we'll add about 200-250 branches. You know, those are very much included in all our guidance in cost income, marginal revenues and plans around that. We believe that this will be. We'll create two, three more geographies where we are quite potent and dominant. Okay. Sir, we have, like, you know, total return of, you know, loans close to INR 3,000 crore as on end March fiscal year end 2022. What kind of recovery that we are expecting for this year, FY 2023? We did very well in previous year. Any guidance, any, you know, on that front? I'm not calling anything specifically out on that, Rakesh Kumar. You know, our overall credit cost factor in the ins and outs. Yeah, there are opportunities. That said, the bulkier opportunities, we may not be the primary lender or the only lender. Our strength is when we are one or the main lender, then we have opportunities. When it's part of a consortium, part of a much larger platform, then there are too many elements to play and legal processes take endless time. I'm not in a position, but we made full provisions, so therefore those who end up being engaged, then when they come. Sir, just one last question. You know, there is a government security, the non-SLR, you know, portfolio. What is the characteristic of that non-SLR government securities? Ashutosh, do you wanna go? Yes. See, there are certain bonds which are issued by government, but they are not part, they are not SLR securities. I'll give you one example. These are when this SEB restructuring was done, you had these state government bonds issued. These state government bonds in lieu of the liability of SCBs, these bonds were not given SLR status. Similarly, whether it was oil bonds given to oil marketing companies, bonds given to banks for recapitalization, these are all central government securities, but these do not have the SLR status. Got it. Thanks a lot for taking my questions. Thank you and all the best. Thank you. We have next question from the line of Pranav from RARE Enterprises. Please go ahead. Hi. Thanks a lot for the opportunity. Sir, I have three questions. First of all, the loan growth was very good, and can you just elaborate factors that are leading to it and sustainability of the same? Second is, in terms of slippages, so as you mentioned that there will be some slippages uptick because of restructured book. This will continue. This is happening in both retail and other categories of restructured. Is there any other, so something like inflation or economic slowdown leading to retail restructured book? That is second question. Third question is, sir, how you are looking at now employee expenses because you have given guidance, I think, of 200 basis points of cost to income improvement. How are you looking at employee productivity, going forwards, and how are you measuring it, tracking it? Thanks a lot. Thanks. Yeah. Credit growth, I mentioned, you know, we look at the outlook is quite positive at this juncture. We grew sequentially at a rate of about 18%, and that should be around 8.5% by 2023. There are some businesses that may do 25%, some businesses maybe 12% and 14%. So blended will be about 18%-odd growth, which we are confident will happen. You know, don't hold me to 18%. It could be 16.5%, 17.5%, 18.5%, 19.5%, but that is all. That's what we're working on. It's broad-based. It's not just one business. The second question was around, sorry. Retail slippages. Retail slippages. Yeah, I did mention that, I think the best way to look at us is, financially at 2021, financially at 2022, and I said this in the March call also, our overall slippages for the year were about INR 1,800 crore, both the years. I also said, I think FY 2023 will mirror that. If you saw Q1 with about INR 444 crore, that's exactly on course to where it is. Now, within the quarter, within the product, there will be some mix up and down, but I don't see it be wildly varying. Thankfully, our corporate book is holding very well. For many quarters, it's had no, you know, nothing went in the SME book. So that will continue. Commercial banking, there will... Commercial banking, business banking tend to be, you know, sometimes you may have one account of INR 30 crore, the next quarter, nothing at all. So between commercial banking and corporate banking, it's. There is not much of a threat on that count. Business banking, retail, SME, agri, you will see some impact driven by the COVID restructuring, coming out of COVID restructuring and the current there is slowdown in the economy in some pockets. But on balance, the numbers that we pointed out look quite possible, and that's why we have given our full year numbers around INR 1,800 crore or plus or minus a few crore here or there as the slippages. Our credit cost- Sir, my question is that, is it just restructured book or is it economic slowdown or anything else like inflation? I think, you know, I think it. impacting retail, causing this. Restructuring guy, the restructuring he took because he saw some stress in the environment, and they were hoping things will work in favor. If the environment continues to be a bit sluggish, their recovery, their ability to repay may take a little longer. These are secured books, right? Because large part of our retail- Okay. is home loan or land loan against property. I won't call out specifically saying it is recession or slowdown or inflation. Those are already built into the statement that the restructured guy may have challenges. That's why we said roughly putting 18%-20% or whatever that number is, may see slippages in FY 2023, and that's how the number of giving the full year slippage guidance is. Within quarters, it may swing a little bit here or there. Q1 was INR 200 crores retail. Q2 may be less. Q3 may be a little more. In our order of magnitude, it won't change materially. These are largely secured books. Just to supplement that, you know, I think there may be, you know, because of the need for restructuring and all that, it's the probability of default there could be 10%-15% or whatever it is because this is yet to be tested also. The loss given default here is going to be very, very low because these are all mortgage books, you know. Right. The third one, employee cost, I think [inaudible], hang on, we get misunderstood for the fact that as though it's a productivity issue, and I've said this many times, Pranav. It's not a productivity issue. It's the issue of cost that we have to carry for pensioning. Unfortunately, last year there was a family pension for people who even retired, right? Now we can't make an old man who's retired to make productive. That's a cost, the cost of doing business. Thankfully, when yields have, you know, sort of gone up, while treasury doesn't get the gain, there are some gains that come on the employee cost because the actual, pensioning requirement comes down, as you saw that this quarter. We think we are in the INR 500 crore employee cost for FY 2023 first quarter. If yields are in and around this region, somewhere this number. If yields start trending lower, it may go to INR 530 crore, INR 540 crore. We think full year employee cost will be about INR 2,100 crore-INR 2,200 crore. Great. Thanks a lot, sir. You're welcome. Thank you. We have next question from the line of Abhishek Murarka from HSBC. Please go ahead. Yeah, good evening, and thanks for taking my question. I just have one question. How much of your deposits are repo linked? And what is the repricing timeline there? And also, what percentage of your incremental deposit mobilization is typically repo linked? Just wanted to know that. Thanks. Our savings book is repo linked. Right? You know, it's, you know, we're not obliged to pass on the entire gain as we didn't in the Q1 you would have noticed, or it went up from 2.50% to 2.75% as our savings did. Right. Because repo minus something, that minus is our choice. Okay. If just to clarify, if I have a repo linked SAR and repo goes up by 40 basis points, it's not necessary that my SAR rate will go up by 40 basis points. No. Not at all. Because the spread. It won't go up immediately, Mr. Murarka, but only thing is in case bank revises the spread, which is done by ALCO and all, then it would not, the entire thing would not be passed on. If it is not revised by ALCO, that spread is not revised, then entire thing would be passed on because it's repo linked. Exactly. That's what I wanted to understand. If I have a repo linked SAR and the repo goes up 40 basis points, then the next day it goes up by 40 basis points until the ALCO comes up with a revised spread. ALCO meets the same day. ALCO meets the same day. Yeah. Okay. They may revise down the spreads. Okay. Have you seen any revision in those spreads after this 90 basis points, you know, cumulative repo hike? Yeah. That's why our rates are 2.75%. It's gone up from 2.50%- 2.75%. Okay. 20 basis points effective. Okay. Got it. Twenty-five. Right. Got it. Thank you. That was my question. Welcome. Thank you. We have next question from the line of Renish Bhuva with ICICI Securities. Please go ahead. Yeah. Hi, sir, and congrats on a great set of numbers. Just two questions. One, on the, again, on slippage side. You know, of around INR 400 crore of slippage, how much of this is from the rejected book? About INR 110 crore of the entire INR 444 crore is from the restructured book. Okay. If I to assume mostly from the retail side, I mean, retail rejected book. Retail business banking, that's the two large ones. Got it. Sir, second, again, on the deposit side. You know, in our presentation, we highlighted that around 4.5 accounts are being opened every month by FI and Jupiter. On the aggregate basis, what is that run rate of new account opening on the liability side? Roughly about 12,000-14,000 accounts a day. 12,000-14,000 accounts a day. Yeah. Large chunk of these accounts are opened by FI and Jupiter. Yeah. This is the two accounts opened by our partners. I mean, we do about seven accounts every day as and when. What is the, let's say, average balance of accounts opened by fintech partners versus sourced organically? Early, but it's lower than our normal balances built on ourselves. These are people who are younger and new to work, new to category. Mm-hmm. The balance build will take time. I think the book is about INR 500 crore now. Sir, just last clarification on the investment side. We highlighted that we have not transferred anything from AFS to HTM in Q1. Is that right? Yes. No, no transfer. Other than the regulatory shift which is to be done in case of your PE and venture capital investments or so, which is a very small amount. There you can keep it in HTM only for three years. In fourth year you have to shift it to AFS. That's a regulatory transfer. Other than that, we have not done any inter-category transfer. Maybe just, you know, again, follow up on that. You know, I was just wondering, despite you know a sharp increase in the yields, why we have not been impacted on the treasury side? I mean, why it is just INR 8 crore? Maybe we can take it offline also. If you keep your investments in HTM, you are not required to mark to market, number one. Correct. Number two, if you are having a very small, say, treasury bill, mainly treasury bills and AFS and all that, which are taken at cost, there would be no need for marking to market. There would be no, I mean, depreciation. No. Even if I look at the trade substitute portfolio, I think we have roughly INR 2,000 crore of that portfolio. There also, I mean, even if you consider, you know, the corporate deals going up, of course, I mean, we would be factoring all these things. Net-net it is INR 8 crore and we don't see any further hit or how one should look at this? Actually, for your information, that portfolio is appreciated. Had it been NDS, we would have booked some appreciation there. Okay. Yeah. Okay. Okay, sir. Thank you, sir. It is always netted off, you know. Your appreciated bonds. Yes. is netted off. I mean, the depreciation is netted off against depreciation. Correct, sir. Yeah. Now I'm just wondering why there was no depreciation, but maybe we can just take it offline. Yeah. Thank you. Yeah. Thank you, sir. Thank you, sir. Thank you. In the interest of time and fairness to all participants, ladies and gentlemen, please restrict two questions per participant. The next question from the line of Jai Mundra with B&K Securities. Please go ahead. Yeah, hi, sir. Congratulations. Sir, during the quarter, we had raised the CASA rate, card rate of CASA by 25 basis points. The overall cost of deposit is actually down by 8 basis points. Right. If you can help explain, you know, what is the where did you gain actually? Ashutosh, your please. Sorry. Please come again. I'm saying, sir, on your SAR, the total cost of deposit is down 8 basis points quarter-on-quarter. Whereas- Yeah. You know, we are in rising rate environment, and you anyway had upped your CASA cost by 25 basis points during the quarter. Yes. Which area did you actually benefit, which would have offset such increase? See the term deposits which are there for three-five years, you know. The higher value so-called deposits and all, they mature and get repriced. When you have something in seven CDs getting mature, if it's a five-year deposit, you have to carry it because it's a fixed deposit. You have to carry it. Your higher yielding deposits, I mean, rather where the cost is higher, when they get repriced, you get the benefit. Right now this is just a coincidence that it has just stabilized there, number one. Number two, the CDs and all, which you know what I mean, I mean, if you see during the quarter and all that, have also got matured and all. Overall, the impact on that had been, you know, I mean, some five basis points, six basis points, but that's not going to be the trend. You would see the, you know, cost of deposits moving up in the following quarters. I mean, let me not give you a picture when the cost of deposits still have scope to, fall and all. This is the earlier ones which are longer tenure deposits maturing and getting repriced at a lower rate. If I can just add to that. This is Shali. I think to add, and Ashutosh Khajuria has summarized it correctly. Normally when there is an interest rate change, obviously liabilities lag in terms of catching up with the interest rate as we pass it on, you know, on a repo basis as we explained earlier. That is one. Two, the Savings Account rates actually were changed in two tranches in May and June. You've not seen the full impact of that for the quarter because they were changed in May and then in June. Term deposit rates in the month of April, until the repo started increasing, we had very strict control on our term deposit rate. I think it's a combination of all that. There's a lagged impact. Clearly the forward-looking view will be different because next quarter, for example, we will see the full impact of the savings account interest rates. Term deposit rates have been raised by us as Shyam alluded to in the earlier part of the call. This is just a question of, you know, catching up and it will happen in the coming quarter. Sure, ma'am. Yeah. Jai, this is Venkat here. Just to clarify, I recollect you mentioning cost of deposits, savings going down. Actually, savings has gone up, but the overall cost of deposit has come down 8 basis points. Right. Between last quarter to this quarter, the savings has gone up by 12 basis points, but the overall is down by eight. That's for the reason which Ashutosh mentioned. Ashutosh and Shali both mentioned the reasons. Yeah. Right. Secondly, sir, if you have this, I mean, I think the number is very small, but just to get this correct, that if you have the bifurcation of MTM hit and TWO recovery, I think both these things are clubbed together so as to arrive at that number. If you have that number, it would be useful. Which one? Sorry? The MTM hit during the quarter and TWO recovery. I think both of them. Oh, in the other income line, is it? You want that? Yes. Yes, sir. I mean, usually we don't share that, Jai. You know, these things tend to be Yeah. We just net it off and give the net. Yeah, it changes every quarter. There is some quarter we have a remarkable gain on one line. The blended number is a more appropriate number. Understood. Last thing, sir, from my side, if you have the, you know, ECLGS outstanding, or disbursement and any NPA number there. Yeah. Thank you. ECLG, like I mentioned, is in lakhs. Thankfully there's nothing to report in terms of the NPA. Outstanding, if I remember right, is about INR 3,000 crores. Raj, is that number right? INR 3,000 crores? Sir, it's INR 4,000 and odd crores, sir. This INR 4,000 is outstanding, right? Not the disbursement. Yeah, outstanding. This is the balance outstanding, yes. Sure. Great. Thank you, sir, and all the best. Thank you. Thank you. We have next question from the line of Mahesh from Kotak Securities. Please go ahead. Hey. Hi. Just one question. The change in lending yields as compared to the sensitivity of the book. I still didn't get the answer that you explained. Why has it been so small despite it being repriced immediately? You will see it in the quarters ahead because there have been ins and outs. We had some higher slippages in retail and agri, which is a reason there would have been a reversal of interest income on that account, right? Also this increase, you know, this repo increase has happened over two, I mean, two tranches. The second one was only for 22 days, 8th June, and first one happened on 4th May. The first part, which was the, you know, 40 basis points and second one, which was 50 basis points, that happened in the middle of the quarter. I mean, first part was 40 basis points, which was available for nearly two months. The second one was available only for 22 days. Okay. In your assessment, the direction of margin simply because of the change in yields will be a positive one for at least a few quarters or it reprices much more closely given the way you reprice the deposits, right? I mentioned that our blended margin NIMs, we are looking at 3.25%-3.27%, which means another five-seven basis points over the coming quarters. Oh, you keep despite much probable appreciation of the lending yields, is it? Yeah. In ins and outs of everything, book profile, slippages, cost of borrowing, I mean, cost of deposits going up, blended, we think between five basis points and seven basis points. Seven basis points improvement in NIMs is what we are working on. Okay. Sorry, last question, sir. When you speak to your business heads, like, let's say in Harsh or on the retail side, the business environment continues to remain quite positive despite all what we are hearing outside. The stock market is in a slightly different world right now. Like I told you at the top of the call, I said, we believe in the bumblebee. We shouldn't get too swayed by either great news outside or good, bad news outside. Just focus on doing the right stuff, things will happen. It's not a profound answer, but it's the truth. Okay. Perfect. Yeah. Thanks a lot. Thank you. We have next question from the line of Pritesh Bumb with DAM Capital. Please go ahead. I just want to check, our gold loan yields have been down by 64 basis points quarter-on-quarter. Anything there? Any incremental loans with low yields, anything you can give out? We have some attractive entry pricing for loans for shorter tenor and, that is priced more attractively. It's like a teaser, right now? It's a teaser with the belief that some of them will roll over, some of them will pay off. I have to be honest, a larger number of people are paying off. Okay. This, how much time this will continue? Any roadmap on that? I think it goes on this quarter till July or August of this quarter. Okay. After that it moves to a normal rate, I will assume. Yes. Yes. Just- Harsh here. Yeah. Just to add, these are given very selectively, where the LTV is much better. It does attract a lot of new customers. That part was building a large customer base because it is a new business for them. Secondly, there was, as you have seen, many competitive offers by other players have been. We had offered very competitive pricing, so it was to kind of continue and maintain our share. It was one, but I guess the competitive pressure on NBFC players has increased with the increase in interest rates. We see the pressures easing off over here on margin. It will improve. One point to everybody on gold, I do want to state, we should not assume gold equal to what it was two years back when, you know, it was a high-yielding product. It is certainly higher yielding, but no longer in the mid-teens to higher teens. It's comparatively priced. Though thankfully, in Q1 of this year, some sanity came. It's not as low priced that is. In Q4 and Q3 of last year, some banks and NBFCs took the market to a very low rate. Maybe other forms of credit were not growing. Gold almost became like a home loan. Right. Some sanity is coming now. Sure. Thank you. Second question was on credit substitute, which I think we've seen a sharp rise of 20% quarter-on-quarter. Any strategy there? I thought in an increasing rate environment that anybody will not go on back of credit substitutes. Anything there? Harsh, you wanna answer? Yeah. Yeah. I will. The credit substitutes increase both short-term and long-term. We have largely been at the short end of the curve. We have increased commercial paper. The increase in pricing is already priced in over there. That's number one. Number two is strategy. Many of the corporates need to tap the debt capital market because that's under the large exposures framework issued by RBI. Under those guidelines, many corporates need to tap those markets, and we as a bank want to give entire suite of products, including such substitutes. All these products are priced in at the current levels and never done at the cost of margins. Sure. Sorry, last question was on personal loans. I think, Shyam, you were mentioning from last quarter that we were slow. We were not pushing personal loans. Do you still see environment a little difficult in terms of not pushing personal loans to our, especially to our ETB customers? It's beginning to pick up. We did delay the reset of parameters to the erstwhile pre-COVID. In the middle or towards the last month of this quarter, we saw pick up. I think from here on we will see some pick up. We may do about INR 100 crore a month kind of run rate on the ETB base, but it has started seeing pick up. Sure. It will be ranging in a range of 15%-20% is what we can see ahead? In terms of growth? Mm-hmm. Yeah. Full year, we are still looking at a growth. We ended the last year at about 1,700 something. We think we will get it to 2,300-2,400. Sure. Thank you so much. Thanks. That's it from my side. Thanks. Thank you. We have next question from the line of [inaudible] Kunal Jain with Alpha Capital. Please go ahead. Thank you, sir, for giving the opportunity. My question, I need clarification little. When most of the banks are saying that there will be treasury loss because of the rising yield. How this Federal Bank is able to come with the profit? That is my question, sir. Maybe you didn't get what Ashutosh explained. I would request you to connect with Ashutosh offline. He'll explain it to you maybe, in a little more elaborate fashion. In short, I can say there has not been much of a profit booking on treasury because that opportunity was not there as the interest rates had moved up. What was there was prevention of loss and all. The book was very slim, thin, and therefore the provisioning requirement was less. That provision lies against other income. I just wanted to clarify that because somebody was saying breakup of INR 167, you know, INR 150 loan loss provision and 18 is 17.5, 18 is about standard assets. Yes, only NPA provision goes there, and there was no NPA there. The rest of it, you know, the mark-to-market thing goes against other income above the line. There is separate head now for treasury investment income. It's there. Interest is there separately given. Interest income on investments, which is a separate line, which is INR 629 crore for this quarter. There is other income. In that, you have the mark-to-market depreciation, which is required. Because the book was quite slim, the amount also has been quite less. As against some banks who would be carrying larger books, if they, if you carry larger books, you will have a larger hit. Okay. Thank you. Operator, we should start beginning to wind down. Maybe two questions more and close out. Thank you, sir. We have the next question from the line of Sameer Bhise with JM Financial. Please go ahead. Yeah. Hi. Congrats on a good quarter. Just one question. The sequential drop in tier one is primarily got to do with operational risk requirements? No, I mentioned three things, right? Credit growth, the risk weight related to that. In that credit growth, some growth coming from corporates who have borrowings greater than INR 10,000 crore, so there's a higher risk weight on that. Growth in unsecured credit. There's a line of credit is established, then the risk weight is on the full line. These are drivers. In addition, operational risk is not significant. Okay. Just to reiterate, did you say that potentially 18%-20% of the retail restructured book may be, I mean, you've considered that it could potentially slip in the INR 1,800 crore guidance? Ladies and gentlemen, kindly stay connected. We lost the line of the management. We'll be connecting back soon. Please stay connected. Thank you for patiently holding, ladies and gentlemen. We have the management line back in the conference. Sir, you may please proceed. Mr. Bhise, you may please repeat your question. Yeah. Hi. Just to reiterate, you said that the slippage expectation, which probably will remain similar to last year's level, probably includes around 18%-20% of the retail restructure book, which probably could slip. Is that a fair assessment? I said the overall slippages guidance for the full year is around 1800 and, you know, plus minus a few basis points. A few points will be all inclusive. Okay. Thank you, and all the best. Thank you. Thank you. We take the last question from the line of Anusha Raheja with the Dalal & Broacha. Please go ahead. Yeah. Congratulations, sir, for a good set of numbers. I just want to ask, what is the share of non-retail deposits in your total deposit book? 92% is retail, Anusha Raheja. Okay. I just move on to that, you know, 48% you said is EBLR linked loans and 26% is the fixed part, right? Yes. 28% is MCLR. Yes. Is that what you said? Yeah, more or less. What is the percentage, you know, for the current fiscal you feel that, you know, would get repriced at higher rates? Yeah. The floating rate book, which is if you take EBLR plus MCLR as floating rate at different points in time in the financial year will get repriced. Will some part of the fixed part, you know, might be probably in the later part of the year, you know? Depends on maturity. Depends on the maturity, yes. Okay. So largely, you know, closer to around 70% are you seeing that would get repriced at a higher rate? Yes. I just move on to that. What is the full year credit cost guidance that you've been giving? Roughly about 50 basis points. 50 basis points. There is no capital raising plan in the near future. Is that it? At this juncture we are not looking at anything. The board approval has come in, right? We have taken board approval as we did last year also. We're going to the shareholders. The AGM is on 27th. Hopefully we will get the shareholder support. Mm-hmm. It's an enabling resolution, allows us 12 months till we go to the next AGM if there's an opportunity for us to raise. Yeah, sorry. Yeah. No, no. I said we took similar approval last year and the previous year, but we are quite judicious in the use of capital. Mm-hmm. Last year we did our priority bonds, INR 700 crore, that's all. If I just look at the Tier one capital, you're comfortably placed at 14%+, I guess. Yes. At this juncture, yes. Okay. Just one last thing on this. You know, how is the pricing of the FCNR deposits, you know, being done currently? We have just taken up our FCNR rates to a very competitive rate, one-year $ 3.50. Okay. It is commensurate to how the U.S. Treasury yields are moving. Plus competition of what is the competition quoting. All these factors are taken into consideration, deliberated at ALCO and Mm-hmm. Right now what Shyam has said, that is the number. Don't you think this can impact your margins negatively? Because, I mean. Dollar deposits, if we have dollar lending opportunities, it won't. Second, there's no CRR, SLR. Okay. CRRs. Yes. Okay. Thank you, sir. Thank you very much. We can bring it to a close. Thank you very much, sir. Ladies and gentlemen, that was the last question. I'd now like to hand the conference over to Mr. Souvik Roy for closing comments. Over to you, sir. I thank you, and, thanks to Shyam for welcoming me into my new role. Thanks to everyone for joining the call. See you on the other side of Q2, and hope to see you with a better set of numbers. Best wishes and a great weekend ahead. Thank you, everyone. Thank you very much, sir. Ladies and gentlemen, on behalf of The Federal Bank Limited, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines. Thank you. Bye-bye, everybody. Thank you. Bye.