Ladies and gentlemen, good day, and welcome to the Q1 FY 2024 earnings conference call of Federal Bank 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 this conference, please signal an operator by pressing star and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Souvik Roy, Head, Investor Relations, Federal Bank Limited. Thank you, and over to you, sir. Thank you so much, and good evening, everyone. Thank you for joining us on this post earnings call. We appreciate your time and continued interest in our bank's performance. We are delighted to continue our tradition of reporting our numbers early and providing you with the timely insights into our financial results. Today, we are pleased to share, as you may already know, that our total business has crossed an impressive milestone exceeding INR 4 lakh crores. This achievement reflects the exceptional momentum we have experienced across all our businesses, highlighting a strong start to this fiscal year. To address your questions and to provide deeper insights, we have our MD and our senior management present on this call. They are here to provide you with valuable perspectives on our performance and shed more light on our strategic direction. Without further ado, I would hand this call over to our MD, who will provide you with additional, you know, details on our recent achievements. Thank you again for your participation, and we look forward to a fruitful discussion. Over to you, sir. Good afternoon, everybody. Thanks, thanks, Souvik. By way of introduction and updates, I thought I'll just begin by sharing some senior-level inputs on the bank. Our Chairman, Mr. Bal Gopal, retired about 10 days ago after completing eight years on the board. The next Chairman, Mr. Hota, took charge on 27th of last month. He needs no introduction. Mr. Hota has been a pioneer and the original sort of father of NPCI, if you will. We're quite pleased that somebody of his repute and capability is now the Chairperson of the bank. In the board, Ashutosh completed his term as Executive Director, has stayed on as a Chief Mentor for another year, and Harsh has become an Executive Director. Both thanks to Ashutosh and compliments to Harsh, and I thought, that's an important starting point for our conversations today. The strength and the depth of the team is now both durable and as known, and they are executing quite well. Just now sort of Souvik talked about the INR 4 lakh crore. I want to point out the INR 1 lakh crore, from three to four, was done in two years, and the previous INR 1 lakh took us, I think, three years, and the previous INR 1 lakh took us five years. The bank is seeing consistent and steady growth. It's important to point out that in Q1 of this year, at least in all my time, first time we saw sequential, you know, traditionally, Q1 is seasonally a slow quarter. We saw strong momentum, and saw all our businesses growing, roughly about 5% sequentially. It's not about the year-on-year growth. We saw momentum, and we believe that momentum should be sustainable into FY 2024 and probably beyond. I had guided at the beginning of this year, financial year, we would be looking to grow 18%-20%, both on advances and on liabilities, I'm encouraged to see that momentum is well in grasp, and we've had a reasonably good start to the financial year. Normally, I resist giving commentary on the environment and the economy, and neither am I an economist, but I thought this time, since we are the first bank to declare results, maybe I will just take the liberty of giving a couple of points in specific to the market and the environment as we see it from the ground. The credit growth opportunities, particularly for a bank like us, still is intact and growing quite well. Even through the early part of July or in Q2, we are seeing demand sustain, credit opportunities to grow are there. Our choice has been that we don't want to dominate with only one business. As I've said for long, we will have the retail mix, the wholesale mix between them, how it should be, and within those businesses also where the opportunities are. We're seeing that sustain even in Q2, and I believe that should continue as we go into FY 2024 and beyond. On the liability side, I do think, and I would think many in the industry do concur, the worst of the rate war is probably behind us, and it did help that the INR 2,000 withdrawal aided us all with some additional, both deposit growing opportunity and provided some much needed respite for that part of the bank. In particular, for Federal, the remittance business, which remittance and the NR deposit business, which was kind of muted in most parts of FY 2023. Towards the back end of FY 2023, we started seeing it pick up. You may have seen our slides as well, the market share that had come off has come back to us now. Likewise, NR deposit share, particularly the rupee deposit share for us, is growing, and we are seeing that momentum come back in. It's an interesting dynamic. The period post-COVID, we saw some behavioral changes. I was quite, you know, we're watching it quite closely to figure out if there is a sort of a long duration change, or is it just a, you know, behavior correction? It appears to be the sort of the rubber band is back, and growth on that front seems to be coming back up. The last point, which is important, which I think we over the last, particularly in the last three weeks of June, we had an opportunity to go out and meet many current or prospective investors of the bank. We did share our business plans and our commitments and our, our guidance, so to say, on how the year will shape up. I do think on those points that we mentioned, the first quarter has pretty much stacked up on most of this count, whether be it growth or be it on the outlook on margins, the near-term impact and the longer term outlook on margin, the business mix, and the steady overall credit cost that we will anticipate. So I do. I just want to reinforce our Q1 in the context of the environment we are operating in, we remain quite confident that the growth momentum we saw will sustain in FY 20224. The margin outlook is playing to what I think our model had suggested. As most of us know, that Federal Bank reprices T+1, so the impact on advanced gain was in earlier, so was the impact on margin compression. Between Q4 of last year and Q1 of this year, I think we have seen the impact play through. I did mention in my calls with the earlier today in some of the in media interactions, that we believe that the compression we saw should start turning the way, you know, there should be margin expansion that will come through because the tail end of the rate increase on deposits have played through, the yield expansion on both credit and also the business mix is beginning to show through. Our belief is that what we had said last quarter, that the full year margins will be somewhere around the 3.3%, we will see that pick up from Q2 onwards. In short, we have begun the year reasonably well, on guidance on most of the areas that we spoke of when we spoke in May 6th, I think after the Q4 results and the conversations I had subsequently with many of our, you know, investor analysts who are keen to understand this better. Our outlook for FY 2024 remains reasonably intact. We believe 18%-20% credit growth is okay, possible. The margin, we said, will be a year of two halves, the first half being softer and the second half picking up. I'm now encouraged to believe that in the second quarter itself, it will start picking up. Lastly, the credit quality and the credit costs are certainly going to be in and around the number, which we had talked about 40 basis points plus or minus. With that, let me just mention that we are as usual, the entire senior team is there, and all of us are happy to take questions or clarify. I'm happy to open it up for questions. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Naysar Parikh from Native Capital. Please go ahead. Yeah, hi. Thank you for taking my question. The first question is, you know, we are obviously growing the retail high yield book, strongly. Can you just talk a bit about how is the credit performance in that book, especially given the slippage rate has gone up, further, you know, in the quarter to 1.9%? Just can you highlight the reasons for that and give some numbers of 6 MOB 30+ for, you know, gold loans or MSME personal loans, et cetera? The retail assets that are growing in the so called high margin businesses. Another point out, they are early, so there is really no, not much in terms of slippages or even SMA positions at this point in time that is uniquely different from our normal trend rates. If you are referring to the slightly higher slippage on retail this quarter, I think we had mentioned that in the past, the moratorium on the March 31, 2021 book of retail, which is the COVID restructuring. A large part of the retail restructuring COVID moratorium book ended in March 31, 2023. Those, their demand would have been in Q1 of this quarter. Of the 250 odd crores of retail slippages, close to 30% of that is from the restructured portfolio, and that's the reason for the slight uptick in retail, but it was within our overall 40 basis point that we had visualized as credit cost. In terms of incrementally, at this point in time, we are also acutely sensitive to the question you ask and the narrative that's going on in the market. We're not seeing any trend shift because the book is secured. The unsecured book is just growing. At this point in time, hasn't shown any adverse outcome, any differently from what we have faced in any of our credit books. Got it. The second question was, you know, on the liability, on the deposit side. you know, from a geography perspective, can you give a split of what% of that would be semi urban, rural? you know, is that area of semi-urban, rural, is that a focus, and are we seeing growth there? Secondly, just 1 data point, what% is outside of Kerala, in the deposits? Let me give you some of the details. First is, about 70% odd of our network is in semi urban, rural, across India, right? In fact, unfortunately or fortunately, Kerala doesn't have anything which is rural. Kerala is a very urban, semi urban market. But our large part of our network, particularly the incremental, 800 branches that are outside of Kerala, are in, at least 70% are semi urban, rural. Bulk of the growth that is coming in, therefore, you could attribute to geographies that are fairly widespread across the India. The non Kerala, the biggest immediate geography is Tamil Nadu, where we have 200 branches. Out of that, I think the city of Chennai and the city of Coimbatore collectively have about 50 branches. The baaki 150 branches are in, sort of, spread in... We are there in every district in Tamil Nadu. Likewise, we are working to be in every district across the country. Of course, the incrementally of our incremental deposits, say about 15% or so, has been coming from fintechs, which are coming from 18,000 PIN codes. We have about close to INR 800 crores-INR 1,000 crores of deposits come from all our fintech partner accounts that we have originated, and that's coming from 18,000 PIN codes in India. India has 19,000 PIN codes. It's coming from very distributed geographies. There was a question. Sorry, I missed the other part of the question. Could you just expand on that? Sorry, I missed it. Yeah, how much, like, deposit, what% would be outside of Kerala? 45% of the deposits is outside Kerala. 40 to 45. Is that number different for incremental deposits? Yeah, incrementally for the last two years, because of the expansion outside, that's where it is. The stock is, where Kerala is bigger. Rate of growth of deposits outside Kerala has been higher than the rate of growth inside Kerala. Okay. Thank you so much. I'll come back again. Thank you. The next question is from the line of Anand Dama from Emkay Global. Please go ahead. Yeah, thank you for the update. First, is basically, was there any- Sorry to interrupt, sir, but the line for you is not very clear. We request you to please use the handset while you're speaking. Yeah. Am I audible? Yes, this is much better, sir. Please go ahead. Yeah. I was asking that, was there any interest reversal on the NPA in the current quarter? There would have been, right? Our slippage is about INR 495 crores, so correspondingly there would have been interest reversal, right? Last quarter was INR 454, so about INR 40 crores extra. To that extent, there would have been reversal of about INR 10 crores-INR 15 crores. Okay. What basically gives us the confidence that the second quarter onwards, basically we will see a margin expansion? The yield on advances, I think we've shown that, has gone to 9.20%, if I remember right? 9:21. 9.21%. Our model suggests this quarter will go to 9.27%. The cost of deposits, which is at 5.34%, looks like she starts moderating, so the spread will open up. Basically, in that case, you mean that the yield expansion will happen in the second quarter as well, sir? Yes, we are expecting that. Yeah, that should be on a higher side, right? Because then only basically our spreads would increase. Yes, the trend line, particularly the June, July bookings, are suggesting that. Okay. When we made our calendar, sorry, FY 2024 opening and shared our updates and our outlook, it was designed with this, and I did recall distinctly saying it'll be a year of two halves, with the first half being soft, softer, and the second half picking up. Now, I'm encouraged to say that first quarter, and then we think the pickup will be in second quarter, because the model is reflecting that. Sure, sir. Thank you. Thank you. Thank you. The next question is from the line of Gaurav Kochar from Mirae Asset. Please go ahead. Hi, good evening. A few questions. On the INR 164 crore miscellaneous income that you. Sir, sorry to interrupt, we are unable to hear you, sir. It's not very loud enough. Yeah. Is it better? Yes. Please go ahead, sir. Yeah. Sorry. I was asking, what is the breakup of the INR 164 crore miscellaneous income that we have? There's a whole lot of this thing, there's recovery from written off accounts, there's revaluation of investments, which is there. Can you just give a breakup of this INR 164 crore and maybe corresponding to this last quarter breakup, Q4? Venkat, do you want to go? Sure, Shyam, I can go ahead with that. Even broadly, in terms of the breakup, there were profit on sale of investments, recoveries on assets previously written off, that was about INR 25 odd crores. Dividends from subsidiaries, we had about INR 15 odd crores. Profits on revaluation of investment was around INR 12 odd crores. PSL, this is the first time we have been net sellers of PSL, so we had a gain of about INR 52 crores, which came in from the sale of PSL in this quarter. This is a broadly the breakup of that other income. Okay. INR 52 crore PSL investment profit of INR 12 crore, dividend of INR 15 crore and another INR 25 crore of recovery- From the return of assets, and then profit on sale of investments was about INR 30 odd crores. Okay. Okay. Sure, sure. This PSL profit of INR 52 crore, do we expect this to recur in the coming quarters also, or this is like a one-off? No, unlikely to recur at scale. There will be some, but it's not at this scale. Right. Typically, we can. What we should note is that we have now moved to a situation where we are able to generate more and sell and make income out of it. Probably, hopefully every year, Q1, because Q1, if we sell, is where we maximize for the full year. We should start. Right Seeing this recovering on an annual basis, may not be on a quarterly basis. Sure. Understood. On slide 14, where we give the breakup of the new businesses or so-called high-yielding businesses, the share of that in the overall advances, and there's another chart, what is the share of revenue from these businesses? I think the revenue includes the revenue of treasury, miscellaneous income, everything, right? Here, in this case, and the interest income would also include interest income on your treasury book or cash, which may not be the right picture. Like, what would be the core income shares, let's say, of these high-yielding? Typically, one would assume that the revenue share from these businesses should be much higher than their overall share in advances. That same is not reflecting out, right? If you look at the average, 33% is the share in advances, but on the revenue, it's just 30%. Optically, it looks different, but if I were to exclude the treasury and, you know, the non-advances related income from the denominator, probably the share of revenue of these items would go up. Just wanted to understand, you know, what would that number be? If, let’s say, the share in advances is 33, what would be the like to like income share? This wouldn't have a treasury income, in this. I don't know where you're reading the part of treasury income in the high-yielding part. Okay. Here in the clarification down, you've given revenue is equal to interest income plus non-interest income. Right. Here I'm assuming that interest income includes. Some fees and other stuff, not treasury related. That will be the fee related to these businesses. Okay. In this interest income line, are you only taking interest income on advances, or you're taking interest income, total interest income? Only on advances. Okay. In that case, sir, then why the revenue share is lower at 30%? Typically, these are higher margin products, so the yield would be higher. The share of these on the overall book should be much better than 30%. Also, you'll have to look at the period at which this grows in terms of average during the quarter, or is it more towards back ended. There are different factors which come into play in the income numbers. Venkat, cost of origination will be there in the first year. Yeah, the first year it will be there for some of the products. Yeah. Sorry, sir, this is just revenue, right? You've also considered cost. Is it net of that or it's only the? No, not the. In some products, we will have to do the net, whereas in some of them, the cost is shown in the expense line. That's based on the accounting. Okay. It's not very clear, sir. Maybe I'll take this offline. Yeah, I can give you the details, separately, which products we net off, what cost element. Mm-hmm. Okay. It's gross and then cost is shown separately. Sure. The idea was that if these are high-yielding, typically they should fetch more on revenue. Despite being 33% of advances, ideally, the revenue mix should be much higher. The same is not reflecting in this chart. I thought, maybe you know, in the denominator, there is other income also included. Sure, sure. I'll take it offline. I think the observation is valid. We will put out an explanation to everybody to see, not only the Mirae folks. Sure. We'll put out to everybody. Sure. Sure, sir. The last question, what would be the incremental cost of term deposit? You mentioned that, you expect the cost of deposits to trend down in this quarter. Just wanted to understand, what would be the incremental cost of term deposits and what would be the stock cost of term deposits? Venkatraman Venkateswaran, you have it? Yeah, it should be another probably around 10 basis points increase from where we are currently, right? Yeah. 6.4, 6.5, 10 basis points movement. Okay. You're saying current stock is 6.5 and incremental is 6.4? No, the other way around. Okay, stock is 6.4 and incremental is 6.5. Okay. Sure. Helpful, sir. Thank you so much. Thank you. Thank you. The next question is from the line of Kunal Shah from Citigroup. Please go ahead. Yeah. Yeah, thanks for taking my question. Firstly, with respect to yield repricing, no doubt, repo has got repriced at T+1. Last time you were highlighting that there could be benefit of LCLR repricing, plus, the proportion of high yielding is actually moving up. Is there maybe on the, either on the business banking, commercial banking, we are seeing some competitive pressures with respect to yields? On account of which, there is only like seven, eight, this kind of a sequential rise. Now, indeed, yes. I mean, I, we are as a business model, not willing to go at segments that are willing to pay you price, but has risk associated higher. Our model has always been where we'll get competitive price, but try to get more business from the customer. We are seeing that play through in all our full engagement. You're seeing our fee income steadily improve as you've seen this quarter also. Our model of the bank is to ensure that we go after the better-rated segments in every better-rated customer in every segment, be comparatively priced. We may not enjoy very high margins on that count, but get good credit quality and fee income increase. Therefore, the ROA expansion that we have seen will sustain. Sure. Even in terms of, like, going forward, despite the proportion of high yielding expected to inch up, we will not see too much of improvement on the advances side because of maybe moving towards the better-rated our customer segment. The margin expansion will be there. That's why we said the, it's roughed out, and we believe it'll go up by, you know, maybe seven, eight basis points in this quarter, the quarter that succeeds, and that sustains from there on. It is not going to go back, you know, go to, you know, 3.8 or 3.7 in a hurry. Okay. Sure. Last time you highlighted that the bulk deposit increase was largely due to CDs, most of it is unwind in 1Q. Again, if we look at it, in fact, there is still, like, 17%-18% sequential growth seems to be there in the wholesale deposits, while retail seems to be relatively low at less than 2% odd. Maybe, and maybe in the deposit cost unwinding, we are expecting because this proportion could actually come up or, maybe what could be the proportion of the wholesale, maybe if you have to look at it, two quarters down the line, two to three quarters down the line? See, at the peak, we were 95% retail in the, you know, so the RBI definition of retail deposits, that's come down to about 86%, 85% now. This will be the baseline, but in 85 and 88 is where retail deposits will be. Okay. We see benefit of this reflecting the cost of deposits. Maybe is there any unwinding of wholesale which is giving us the confidence that cost of deposits should be lower in Q2 compared to that of Q1? Otherwise, cost should actually rise upwards only. We did mention, I think I did mention even today, so did Venkat. The Q2, our overall cost of funds will move up from, I think this quarter was 5.30 something, it'll go to 5.40, but the yield on advances expansion will be higher. That's how the margin expansion. Okay. Okay. Got that. Lastly, in terms of fees, maybe excluding the Forex, when we look at it in terms of, processing fee and all, there is a decent level of, correction. Should we see maybe what we highlighted in terms of, that being one of the incremental delta to the, ROAs? We are equally confident in terms of, yes, maybe given this kind of, product segments and the process which is happening, we should be able to sustain this, overall momentum on the fee side? I think, yes. No one off of those. Yeah. If you see slide 19, where we have given the mix and fee income, it is distinctly pointing out the areas, and many are volume and scale related. They are not one off or unique to a quarter, other than the PSL one, which Venkat spoke of. They are all transaction, and we think that's sustained, right? We are confident that momentum will play through. In fact, we are pursuing fee as a share of assets closer to 1%. Okay. Got it. Okay, thanks a lot, and all the best. Yeah. Thank you. The next question is from the line of Arvind R from Sundaram Alternates. Please go ahead. Hi, sir. Thank you for taking my questions. Like, this was already discussed, I still would like to understand, like, the CASA plus retail term deposit has been coming down, even though, like, in other peer companies, banks, CASA has been coming down, CASA plus retail TD has been fairly stable. Like, what gives you confidence that we will be able to bring it back up? I know, like, I wanted to understand, like, how much of this 7- 8 bits is attributable to, like, high yielding segment, why I'm asking this is, like, as the repricing is already been done, like, by now, like, hereafter only the mix change will contribute to higher yielding, higher yields? That's my question. Yeah, I think you're right. Mix change and incremental volume coming at pricing higher than what it was traditionally, which is what I said, we're extrapolating the last 45 days kind of run rates we are visualizing, and that's how the yield on advances expansion will happen. On the mix of retail deposits, I mentioned, the rate is between 85% and 95%. We were at 95, we are close to 85. There were probably banks which were at 70 and stable at 70, 75. We were already at a high, so it's likely that we had to support our credit growth in an era where deposit costs were higher, we had to get term from retail customers. These are retail customers' term deposits. We have not done bulk borrowings in the market. Okay, sir. Thank you. Like, if I see core fee income to average assets, that is actually fairly been stable. Maybe in the first quarter it is slightly lower because of the seasonality in the first quarter. But you are talking about, you know, it is, like, fee income actually inching up, but it is primarily due to treasury income. I mean, you know, treasury gains and PSL income, right? This is not, these are all not recurring for every quarter if you want, right? No, you're right. I think this INR 535, which is the core fee income, is the number that I'm also referring to, because those, the rest tends to be, you know, sort of choppy. This is growing at about 20%-22%. Like the higher yielding segment of, like, of, you know, like, I understand, like, it is 33% as of now. Do we have any, you know, medium-term target in terms of like, you know, like reaching 40% or 50%? Well, no, I'll tell you where we have. I think we mentioned last quarter also. The overall book of the bank, we wouldn't want these segments to cross 10% of the overall outstanding of the bank. There are three guidelines: retail, wholesale, 55, 45. Unsecured as a part of the total portfolio, not more than 10%, and no segment will be more than 15% of the bank. Mm-hmm. Okay, sir. Just one more thing, like, could you give me, like, a little more color on MSME segment? What is the usual average ticket size and, you know, maybe like, what could be the yields, like, if you can give something like that, and, like, whether it is predominantly working capital, or term loan kind of thing, and what kind of sectors do you usually give to? Like, is there any exposure to any particular sector or geography? Harsh and Shalini, do you want to go? Maybe Harsh and Shalini on this? Sure. Yeah. I'll take it. Shalini, do you want to go ahead? Harsh, go ahead. Go ahead, Harsh. Yeah. Okay. MSME for us goes across all verticals. They come at the higher end of the MSME are in corporate banking and up to the lower end, which is in business banking. All three verticals have it. In terms of the things we're looking at, the sectors, we are usually sector agnostic. Some of the places where we are very comfortable at is FMCG, suppliers, vendors and supply dealers to some of the large OEMs. Some of the sectors which we are looking at is like chemicals, white goods, all those vendors over here. MSME is quite broad-based across sectors, across regions. This is on the MSME side. We are comfortable in terms of growing it through the supply chain initiatives also, which again qualify as supply, MSME. Vendors and the dealers of the large corporates is what we are tapping on and going ahead. If I can just add to that, on the lower end of the MSME, which is the business banking kind of segment that we call business banking, typically somewhere in the range of anything up to about 5 to about 7.5. Ticket size. Sorry, yeah. Yeah. That would be the ticket size for the MSME, for the lower end of the MSME. In this, we follow really a catchment approach. It's driven, it's very much a branch-centric business, and the catchment area of the branch is what becomes the target customer segment. Industry agnostic, grow where India grows. As you notice, we've added more branches, for example, in Tamil Nadu, Karnataka, Telangana, et cetera, because we're seeing growth opportunities over there from a B2B segment. MSME kind of spans across all of these areas, and we get the benefit of PSL across all these areas. Within that, we've segregated it to see the lower end of it. The lower ticket sizes is primarily branch-driven, secured, term loans, working capital, both, a mix of both, but serviced typically by the branch. That's really what it is, you know. I mean, the MSME under B2B, for example, the ticket size would be about INR 10 to odd lakhs, average ticket size, about 10.5 to 10 yield, et cetera. To your broader question, you know, MSME for us, and you'll see it in slide 14, actually spans across business banking, corporate, commercial banking also. Yeah. Some data is there on slide nine, 14. Yeah. Okay. Just two points I'll add. On the working capital and term mix, we are about, roughly about 55%-60% on working capital. The balance is the term size. The average ticket size, if I look at the medium and the small category of the MSME, it would be in the region of about INR 15 odd crores or INR 15-17 odd crores. Micro would obviously be smaller, what Shalini had covered. Okay. Thank you. Thank you so much. Thank you so much. Thank you. We have the next question from the line of Jai Mundhra from ICICI Securities. Please go ahead. Thanks for calling. Yeah, hi, good evening, sir. I have this more on the same question on margins, but I wanted a few data points before that. If you can help me with the blended savings account cost for us, maybe for this quarter and last quarter, and the loan mix by benchmark, so fixed, BPLR and MCLR. Which you can get her to apply now. Yeah, Venkat, go ahead. Shyam, I, while I have the numbers for the in this detail, so I'm just thinking whether we should be giving that level of details in the call. No, sure, whatever we can, and, then they can interpret from there. 3.2% for the savings and blended. Sure, sir. I mean, just for comparison, if you look at last quarter... Sorry, if I can just come in on the savings account piece. I, you know, like, given the overall kind of blended number, but a very large part, you know, we at the lower end, we really offer only 3.05%. We do have it on the power- you'll see it in the public domain as to what our... Right. Kind of thresholds are and what, not very, not very extravagant in how we pay for our savings account, Jay, yeah. Right. Also, just for your other question in terms of comparable, it will be around similar levels last quarter also, Jai. Sure. Sir, the loan mix by benchmark? Yeah. The repo link is around 49%+. fixed is 27%, and the MCLR is about 14%. Right. Now, sir, the question is, if you see, the, let's say, on both, yield side as well as cost of deposit slash cost of funds, the yield, if I see our reported yields, in the last two, three quarters, there has been a sharp, let's say, deceleration in the pace of yield expansion. 49 basis point rise was there in third quarter. That decelerated to 35, and this quarter has been 8 basis point. While the loan mix may change, and hence, let's say it remains at similar levels, the cost of deposit, as you said, that the incremental TD is still outpacing the outstanding TD cost, and the cost of deposit may still remain firm. It looks like the margin expansion, of course, it could be because of the capital raise, if that happens. Or is there any organic mechanism also to sort of help NIMs? Because the high yielding product-. Let me just interrupt and say, in my calculation, when we have spoken, we have not taken capital increase whenever we do that into this conversation when I guided for 7, 8 basis point improvement. Trust our mathematics, and this is the final answer to this. I don't need any more conversation on this. Sure. No, no, that is. Don't try to cross question management's capability to calculate, guys. No, no. It's not that, but anyway. I'm putting a final word. I have not calculated capital raise in this conversation that of adding 7, 8 basis points. If capital raise happens, when it happens, it'll add its own value, but that is not in my conversation. Right. Right. Okay? Okay. You can now do your mathematics. Yeah, yeah. Sure. Next question, please. Yeah. Sir, just a small question on PSL. I see that the CV, proportion of CV, which contributes to PSL is 69%. Is that the, I mean, is that a broad number to be taken or there is some, you know, some, let's say, one-off here? I would have thought that the CV proportion to PSL would have been much higher. Just a small observation. It's actually 69% the presentation, Harsha. It's 69%. It is roughly about, because we also classified once we get whether there's a few certifications, which we have been getting, and it's closer to 76% now. It typically hovers around 75%-77%. A large portion of the school buses also, which we finance, come under commercial vehicles, but they don't qualify under URC because schools don't qualify under that. Given all of that, roughly about 70%-80% would remain under PSL. Right. Also, of this, about 15%-20% would be micro. Right. Right. Understood, sir. Yeah. Thank you, and all the best, sir. Thank you. Thank you. The next question is from the line of Mahrukh Adajania from Nuvama. Please go ahead. Good evening, sir. So my question was, firstly, on deposit growth. Of course, it looks very good right now. It's on a sequential basis, even for the sector, it's higher than loan growth because of the possibly because of the 2,000 note deposits. A lot of bankers point out that this is not permanent slow, right? Papers also point out that the FM has asked PSU banks to focus on deposit mobilization, given HDFC Bank's merger. Given all this news flow, do you see a situation, possibly when growth picks up in the second half, that banks may have to hike deposit rates through special schemes, even though RBI does not hike repo rate? Or does liquidity look like comfortable and sustaining? If PSU banks start attractive schemes, you know, they had started attractive schemes for deposits even in October last year, like that. I think that, the challenge is an ongoing challenge. I mean, it could be PSU, it could be another private sector bank. I think, if credit expansion happens, deposit automatically follows, Mahrukh. You know that, right? Credit creates deposits. I don't believe we will be in a situation of no deposit creation, but only asset creation, then there is a fundamental problem. I do think the deposit. For us, I mentioned, we are seeing marked and quite defining changes in the deposit momentum and in particular to the non-resident deposit momentum in the last 45 days. Quite meaningful. I don't believe, I don't believe in the positive direction. I don't believe it will. I mean, nothing is easy, right? Our business is not like you can sit back and believe it will come to you. There will be competition, but I think the deposit, certainly at a price, it will be available, whether it will be at all CASA or whether it will be retail term and CASA, that's, as long as the wedge between savings and term is not very distinct, then you will see saga. If savings and term is 400 basis points gap, you will see deposit grow in the form of term. We've seen that for long periods of time. I can see that slowly compressing. Okay, sir. My second question is on loan deals again for this quarter, that is for the first quarter, that the mix has changed very favorably, right? The growth in, of course, on a low base growth in CVs, MFI has, credit card has been very, very strong. Even so, yields may not have risen at the pace of the change in loan mix, and that's because of competitive pressures in those price segments, is it? Partly that, partly, you know, it's the growth could have been more at the second half of the quarter, so you didn't get the full benefit of it in the quarter. Yes, it's a combination. I don't believe it's just one. It's a combination of all of this. Okay. Even in the CV business or the microfinance business, while they are higher yield than our average, we are not going after 24% or 36% or 28%. We are still, if our run rate is 12, we'll go at 14, because we don't want to go into riskier of the nature, at least in the early days, till we understand these businesses much better. Sure. Sir, in general for the sector, there has been some, even based on sectoral data, some moderation in growth in mortgages, in home loans. Is it just seasonal or what is your take? We've also been talking about it, but I think you may have seen our numbers, it's still been consistent and growing. Mm. We are seeing pressure on pricing in the segments we operate. There is a real fight for, you know, taking share. In home loans, there is no cost, there is no foreclosure or nothing. People can move with gray, gay abandon. We have to worry about that. Yet not seen any... We are, our home loans are quite concentrated in five, six geographies. We are not very deeply into every part of the country in home loans. In those geographies, we haven't seen any slowdown. Shalini or Shalini Warrier, if you're on the call, you can add. I think, you're right, Shyam, we haven't seen any slowdown. There is competitive pressure on pricing, particularly new sourcing in some of the metros that we kind of compete in, Mumbai or Bangalore or Chennai or Delhi, et cetera. There is that pressure on pricing. We are being quite disciplined about pricing. We look at the overall relationship, look at other aspects and do it. Momentum per se, haven't seen any concerns touch with. Okay, thank you so much. Welcome. Thank you. We have the next question from the line of Saurabh Kumar from JP Morgan. Please go ahead. Sir, just two questions. One is, you know, how would you think about OpEx growth, especially employee cost growth, this year? Should we see any operating leverage come through? The second is on, again, on NIM, sorry. Basis your guidance of 3.30%-3.35%, fair to say that your second half NIM will be touching 3.50%? First quarter, 3.15%. We think second quarter onwards, it will start picking up. I'm not even venturing into talking about last quarter as yet, but we still think the full year NIM will be closer to 3.30%. Okay. Okay, on the OpEx, please, on the employee cost? Okay, Venkat, do you want to comment? I think people cost is pretty much running on course, Saurabh, because whatever the increments and the expected raises have been factored in, that's on the people cost. On the operating expenses, it should be more like a single digit or early double digit kind of growth, but Venkat can expand on that. Yeah, I think on the OpEx, two parts, the staff and the other OpEx. Staff cost, what we have seen is the impact of the yield moments for the pension gradually provisioning, which is actually a liability, which we have taken in. That will move subject to the yields moment during the next few quarters. We also in Q1, we traditionally see a slightly higher uptake on staff cost, on leave encashment, leave travel and all that stuff. That has come in. I don't expect staff cost moment to be very high from now on. On the other OpEx, you've seen between Q4 and Q1 also, there's been a slight increase. Large part of it is variable business related. There's impact of some flow-through depreciation coming through for projects which have gone live over the last year. Other than that, there is no significant non-volume related costs which are likely to come through. Okay, got it, sir. Sir, on that, pension, piece, I mean, as it roll downs, the benefit is still that INR 250 crore-INR 300 crore, or? Sorry? The defined contribution. I mean, as your on the employee cost of the defined contribution share, you know, increases. Yeah, full year basis, yes. Roughly about INR 300 crores a year, full year basis. Okay, thank you. Thank you. The next question is from the line of MB Mahesh from Kotak Securities. Please go ahead. Shyam, hi. Just a few questions. One, on the demand environment, if you could just kind of briefly kind of highlight across the segments, how is it shaping up? I open saying, Mahesh, we are reasonable traction. We saw good traction in Q1. Even in Q2, just 2 weeks have passed, our credit committee has met four times. We are seeing reasonable momentum in most of our businesses in volume and at least new proposals coming in. I must admit, we are pursuing segments which are relatively on the lower risk spectrum, so to that extent, it will be a very competitively priced, but we are seeing good, reasonably good traction here, even now. Outlook for Q2 looks quite similar. On the second question on NR deposits, there has been some level of slowdown there. Some clarification on that? NR deposits, I did mention at the beginning of the call, and I'll just reiterate. In fact, we are reasonably happy to see that comeback of it in the second part of Q1 and the early part of Q2, and hope that sustains. We did see post-COVID remittances coming in, but not all of it translating into deposits, particularly the non FCNR. We are not a big FCNR player, our focus is on NR, NRE, savings and NRE term. That's where we have a large share. That share has gone up, in fact, from 8 odd to 8.3, 8 or 8.4% of India's NR deposit in that category is with us. We're gaining share there. What was a little behavioral change we saw is that remittances are coming, but not translating into deposits, as it did in the past period. We thought there was some structural change or whatever, post-COVID. Looks like those, either they were making investments or one-time, whatever, you know, commitments being fulfilled. That is beginning to build back. In the normal quarter, we've seen in the past as high as INR 2,000 crores-INR 2,500 crores of incremental deposit build. It fell off materially. We are seeing it come back to about INR 1,000 crores or so now. There's a build back coming. Okay, perfect. My last question is, for a 250 basis point increase in lending rates, the corresponding increase that we have seen so far is about 130 basis points. Where are you seeing the pressure on the lending side from a pass-through perspective? Across the spectrum, Mahesh, I think we've discussed this at length, right? We have seen about 130 basis point, and there will be another residual of another 10 odd basis points will come through, 10-15 basis points will come through. We did think that about 150 basis points is the maximum that can pass through. Again, going back to the segments that we are, I don't believe you can just transfer it entirely and expect... Because we are playing a you know, in a very competitive environment, right? Everybody is going after the best. Sure, sure. Perfect, sir. Ma'am, thanks a lot. Thanks. Thank you. The next question is from the line of Rakesh Kumar from B&K Securities. Please go ahead. Yeah, thank you, sir. Just a couple of questions. Firstly, with respect to, you know, the increase in the, you know, cost of deposit, which is close to around 20 basis points, quarter-on-quarter, but we haven't increased our MCLR. Correct me if we are wrong. I think last month, I'll go MCLR, Damodaran, if you're there, MCLR went up, right, last month? Actually, there was one reduction in between, due to minor reduction in the operating cost factor. You see, MCLR actually is driven by a formula given by RBI. Whatever is the number we are computing, accordingly it will come. We have increased MCLR quite very well, based on the increase in the marginal cost. From the original level, if you see, I will come back with the say, total increase from the date we started increasing the repo rate. I will come back with the number very quickly. There is a reasonable increase in our MCLR across this period. No, I was looking at the RBI number, which is giving MCLR at 9.35% in March and 9.05% in February, and 9.35% in June. I was thinking, like, you know, our ROE, so if you look at, you know, MCLR template, what RBI gives, so like, you know, OPEX to asset ratio, you know, your marginal cost, your ROE numbers. You are right. I think your point about MCLR, 9.35% going to 9.05%, coming to 9.35%. The pass-through is that, because the 9.35% coming down to 9.05%, like Damodaran pointed out, is not just cost of deposits, it's operation cost also. Some cost reduction happened, that also has been passed through. The formula dictates not just entire cost of deposits alone, right? Cost of deposit is one element of the MCLR calculation. I was thinking, sir, like 14% of loan, as you mentioned, is on MCLR and 49% on repo-linked EBLR, 27% on fixed rate. What is, where the remaining 10% would be, sir? Staff is about 5.5%. Base rate. base rate. Base rate, yeah. Base rate for currency. Sir, have we increased any spread on the fixed rate loans from March into June end? Have been like, you know, there is some struggle to increase the spread on the fixed rate loans. What is our experience there, sir? Only when it comes up for renewal, right? Harsh, do you have any experience? Let me clarify. Let me clarify, yeah. A fixed rate loan, technically speaking, we cannot change the spread, because by the very nature of it's fixed. Let me clarify, the number given as fixed by banker, it also includes short-term ones, which has been given. It's not that we are carrying a long-term or at a low rate or something like that. Fixed rate, the fresh one gets taken down at revised rates. Like to give you an example, in commercial vehicles, the loans had gone to as less below 7%. Today, the loans are being done well above 9%. These are for fresh ones. The stock remains at what it is. Similarly, a fixed rate loan done with a large corporate remains fixed for a tenure or the period for which it has been fixed for. Actually, sir, if we have not changed the, you know, MCLR and obviously repo rate has not changed, fixed rate book, there is like, you know, we have not done much. Whatever the increase in yield is there in this quarter is basically because of composition change.b Part is composition change, part is fresh booking as well. To give an example, if a fixed rate loan book, we have obviously constant maturities also. The lower end of the fixed rate, which was booked 2 years back or 3 years back, obviously comes off maturity. The fresh ones booked are at 1.5%, 2%, 2.5% higher than that. That is also the fresh is what we also add to that. It's not just the mix alone. I was looking at, you know, the NSFR data. That one's showing that, you know, the amount on asset side, which was coming for repricing, that number was quite low, actually. The number given in the March quarter number, NSFR disclosure. As per that number, you know, the repricing was scheduled in this quarter, or maybe for the six months. Number was not much. This is repricing talking about. Sir, as we update, our, March 2022, our MCLR was 790, one year MCLR, whereas it is, now at 930. There is an increase of 140 BPS across this period. You know, this is, this may again pick up based on the, change ups. It can go up or down, but, generally, the trend may be, slightly higher. Sorry to come back to this, sir, incremental TD cost and outstanding TD cost. Incremental TD cost, sir, is 6.4%, outstanding is 6.5%. Correct me, sir? The way it is worked out is slightly different. You need to take our latest cost of deposits that we are offering for different slabs, and the factor to which we need to multiply it is basically our historical book distribution across those buckets. Though we call it marginal cost, the formula is slightly historical and slightly marginal. The assumption is that your growth, incremental growth also, is in the same proportion for the different buckets. Okay. Okay. Okay. Okay, sir. Thank you. Thank you, sir. Thank you. Thank you. Thank you. The next question is from the line of Tanika Aggarwal from Green Portfolio Private Limited. Please go ahead. Sir, the question revolves around, like, can we talk about the overall road map? Sorry, we can't hear you, please. We can't hear you. Is it better now? Not quite. Maybe you have to... If you're on a headset or something, you remove that and- Miss Aggarwal, the line for you sounds mute, muffled. It's not clear. Oh, okay. Is it now better? No, it's still not clear, ma'am. I'll just get back in the queue then. Sure. Thank you, ma'am. We will move on with the next question, which will. The operator, Yeah, operator, we can probably close after two more questions, please. Thank you, sir. Yes, sir. Thanks. The next question is from the line of Bunty Chawla from IDBI Capital. Please go ahead. Thank you, sir. Thank you for giving me the opportunity. Small data point, if you can share. This quarter, retail NPA has been higher, so which segment under retail has shown this kind of a stress? Secondly, the restructured assets, as we have seen, it has declined, but still it's remained two and a half, INR 2,500 crores kind of a thing. As you said, almost two years moratorium, I believe all this portfolio has been completely out of the moratorium. How we can see the NPA pressure coming from these books? No, the restructured book is restructured standard. As you know, the regulations require it to continue to be 1 year of servicing before you can upgrade it. That's the period that's going on because the demand of the restructured book in Q1 that we saw, that is where I mentioned a third of the retail slippages is from. Restructured or the retail book is secured, home or LAP, so the slippages is from that one. Okay, okay. Sir, lastly, as you previous guidance was the 5-10 bits improvement in ROA should be there in coming years as such. What is the guidance currently? As we have said, the margin should be remaining stable as compared to last year, and credit cost should be also similar kind of thing. How one should see the ROA guidance going forward in next two years? We had said when we started financial year, we ended last year at 128. We said 78 basis point improvement in FY 2024, and a similar repeat in FY 2025. We maintain that guidance, sir? Yes. Yeah. Thank you. Thank you, and congratulations. Thank you. Thank you. We will take the last question from the line of Darpin Shah from Haitong India. Please go ahead. Sir, all my questions have been asked, just one. How much will be the outstanding provisions on the standard restructured book? Including management overlay, we have a significant sum not touched, you know, close to, I don't know if we've shared in the past, but a meaningful sum. Okay, thanks. Required us to have, if I remember right, 15% provision on the restructured book. At the peak, the restructured book was INR 3,600 crores. We had made that, plus we made a significant overlay of another 10%, you can do the math. We haven't touched that. Okay, that's all. Thank you. Thank you, sir. Thank you. Thank you. I would now like to hand the conference over to Mr. Souvik Roy for closing comments. Over to you, sir. Thank you so much, and thanks to all of you for joining us today. As always, we are committed to delivering value, and we continue to focus on our growth and strategies. As always, the management team is available to answer any questions that we may have skipped today. I believe we have answered all, and we, of course, appreciate your continued support, and we will keep, you know, in touch, and we'll keep updating you on our progress in the future. Thank you all, and have a great day ahead. Thank you. Thank you. Thank you. Thank you, everybody. Bye. Thank you. Thank you. With that, we conclude the conference. On behalf of Federal Bank, thank you for joining us. You may now disconnect your lines.