Ladies and gentlemen, good day, and welcome to the Q3 FY24 Earnings Conference Call of the 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 the conference call, please signal an operator by pressing star then zero on a touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Souvik Roy, Head, Investor Relations, the Federal Bank Limited. Thank you, and over to you, sir. Thank you so much. Good afternoon, and a warm welcome to our Q3 Earnings Call. I wish you all a very Happy New Year. I'm sure you've had a chance to delve into our numbers. It's evident they are not just good, they are quite promising. This quarter, we achieved a historic milestone with our first-ever four-digit profit number, reaching an impressive INR 1,007 crore. Our NII, too, has soared to new heights, standing at an all-time high as well. The strategic expansion of our branch network remains robust. We added close to 65 new branches in H1, 30 of which materialized in the last quarter itself. Our commitment to growth, asset quality, and ROA is paying off quite well, and it's evident in our strong performance across these metrics. Both ROA and ROE, as you already see, are on a trajectory that aligns with our strategic goals as well. The listing of our subsidiary, Fedfina, in the last quarter was a standout success, and they do mark their best quarter ever. They just gave out their numbers yesterday. While we acknowledge a slightly elevated credit cost this quarter, it's essential to highlight that it has outperformed our earlier guidance, and we are sure that we'll navigate these dynamics quite well. Pleased to inform all of you that our entire senior management is on this call, and with this, I'll hand it over to our MD to share his insights and perspectives as well. Over to you, sir. Thanks, Souvik. Good afternoon, everybody, and once again, happy 2024 to everybody. The numbers and the highlights that Souvik pointed out certainly are noteworthy. I am particularly pleased that we did get to that four-digit number. Having been a fair amount of years on this job, at some stage many years ago, this looked like a dream, and I'm pleased that our bank has consistently worked our way up to get to this point, and this looks like a new base of which we will work to make sure that the periods ahead are only better. Business momentum for us has been fairly strong, along the lines we've been guiding for in the high teens, closer to 20. Some of our newer businesses are on course and traction is strong. Environment continues to be challenging for everybody, no less, for anybody. I think there is, there will be, there is, and it's likely to remain for a while in terms of, the cost of deposits being high, the traditional stronghold of banks able to grow savings that will, in a high interest rate environment, continues to be, sober. That said, our retail deposits are strong. We're still in the high nineties in terms of our deposits being retail in nature. Having said that, you know, the overall CASA, in particular, SA growth, and in particular, NRSA, is seeing a material change from its past period. Business-wise, credit quality-wise, growth-wise, market share-wise, I remain confident that the, momentum, the trajectory, the plans that we put in place are working, some better than others. Credit quality, in particular, like Souvik just pointed out, there was one account, which was about INR 70-odd crore, slipped in this quarter. It's been our highest per account slippage in a long period of time. Thankfully, this quarter, as in Q4, that account will get upgraded because the client had a fire in their factory, and that seems to have come through and they've sorted it out, so we are hoping that that account, too, will get restored. O verall, momentum for business, despite a challenging environment, still is intact. I do believe in Q4, we will repeat the same underlying business growth momentum, and that should, that should keep the structural changes going quite well. That said, Q4, there are some challenges in terms of the, impact of what may happen on the AIF and what may happen on account of, higher costs for provisions in pension. Those are things we are working through. But underlying business, granularity of business, business mix, productivity at individual level, our influence of technology, use of AI, our structural changes that we are putting in place, the business mix, retail, wholesale, within retail, the kind of business we want on the secured, unsecured, the new age businesses. I'm pleased that, that we haven't taken our eyes off, that traction continues. Through the cycle, there will be ups and downs in terms of interest rate movements. I think we are learning to weather that and still deliver our promised growth on return ratios, principally on ROA and ROE. I'm quite inclined to believe that the period ahead should reflect all this in the numbers, and the Federal story will continue quite impressively. With that, as my opening remarks, as always, me and the entire senior team are there, happy to take questions from any or all of you. Thank you very much. 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. Let's start. The first question is from the line of Mahrukh Adajania from Nuvama. Please go ahead. Yeah, hello. So I have three questions. My first question is on deposits. You did mention rising deposit costs, but there is a lot of talk about RBI being worried about loan-to-deposit ratios and having discussions with individual banks. And then in general, November, December was very tight for deposit taking, with CD rates also moving up. So, where do you see your LDR and in general, deposit growth settling in FY 2024 end and FY 2025? And what will be the impact on loan growth because of that and on margins? You know, because it's tighter than what we had expected, even in the Q2. So plus the all the talks about RBI. I think. That's my first. Yeah. Yeah. Yeah, no, I think, Mahrukh, the question you ask is in terms of how do we expect CD ratios to play out across for us or for the banking industry. It's clear that the regulators are probably looking at banks moderating their CD ratio. Banks like us, which have about 80, early 80s, maybe less of a concern. I think some players are probably at the higher end of the spectrum. That said, I think most of us or the regulators may be comfortable around 80, so we have to work through that over a period of time. There'll be a glide path. I think the issue is not about growth, it's the ratio that is important, and we are not sort of overheating the market. Probably that's the direction that we are guiding banks towards. I can't quite guess what they see at an aggregate level. We only see our numbers. Cost of deposits certainly is something that all of us are dealing with. We have to learn to construct our business models with this as a reality, till it changes otherwise, right? If the interest rates remain where they are and liquidity is kind of tight-ish, I do believe we will see this kind of environment prevail for some more time. Our own direction for ourselves is get closer to an 80% CD ratio over the calendar 2024, and which means we have to rebalance our mix of business, where we amplify, where we tone down. You know, it's not just one dimension, it's not just C or D, it's C and D, and also the kind of C, kind of credit, right? The risk weights to have been adjusted. So what it may result in margins, which may see challenges. I think we have to construct the P&L differently from just looking at NIM as a sole driver. Growth should be intact. NIMS may not be the highest, but I think you have to figure out your other income, you have to look at efficiency and ensure that the credit quality is intact to make sure the return ratios are intact. So banks like us, which have been guiding for 1.35% to 1.4% ROA, thankfully, we are almost there. Now, how do we sustain that and keep improving on it? So I don't think there is one silver bullet to say I will do this and sort this out. I do believe that, we, at least for ourselves, are quite clear. We don't want to get spooked by NIM by itself. We want to make sure that we are on course delivering our ROA on trajectory. Ultimately, ROA, ROE are good drivers to determine strength, health, and consistency of a franchise. I am reasonably confident on both those counts. We are on course to delivering what we had set out to do. Most recently, when we raised capital, we had talked about being closer to 1.4% ROA at the end of 2024. We seem to be on course for that. Got it. But that would mean that deposit rates would rise from you, correct? Deposit rates rising from here, hopefully for not a material increase. It seems more or less in that space. Yeah, some buckets, some tenors, you could see increase, but I think blended rates going up may start moderating. Because it's an issue for the system. Yeah, Mahrukh, I've been wrong. Mahrukh, I've been wrong before on this count because I think these are moving parts. We are still a 1.3% player. A 10%, 7% to 8% market share player can, can change course. If SBI or HDFC and/or both choose to play market differently, there can be the narrative can change, but I think we are fluid enough to readjust quickly. Got it, sir. M y second question is, you did mention that you're working out on your wages and your AIF, but your employee expenses did go up around 10% Q-o-Q. So have you factored in anything of the wage agreement, either on pension or provision, or that will be separate over and above this? No, we have. You know, if you remember at the last call, we had said we had started planning for 15% from November 2022, but looks like it may be 17, so we have done a catch-up. So we don't want to be lagging on that count. Okay, so this is for both wages and pensions, right? Some element of pension, in fact, will come through in the quarters ahead. That is something that we will evaluate as the quarter plays out, between Q4 and early part of next financial year. We don't know when the final agreement is signed. So those are elements that are indeterminate at this point in time. What we have done is the wage increase part, we have factored in. Got it. And, in terms of AIF? AIF, I know there's a representation from the banking system to the regulators. I think, today's news, news flow suggests that they may look at it differently for banks. So I can't quite comment at this point in time. Okay. But any exposure you would like to give out? No, we do have an exposure. I don't know, you know, it depends on what the filters and what the carve outs are, the impact will vary. Okay, sir. I'll come back for my third question then. Thank you. Yes, welcome. Thank you. Our next question is from the line of Suraj Das from Sundaram Mutual Fund. Please go ahead. Am I audible? Yes, you are. Yeah. Hi, thanks, sir, for the opportunity, and congratulations on a good set of numbers. Just one question, sir. In terms of NIMS, so if I see your yield on advances, that has been pretty stable on a Q-o-Q basis over the past two, three quarters. However, at the same time, I think incrementally, your focus has always been on the, you know, higher-yielding segments. So despite, you know, your incremental focus on the higher-yielding segments, your overall yield on advances is not going up. So just wanted to check, what could be the rationale? Are you becoming more risk-averse on your existing book, on the core book? Or, I mean, is it the duration that is, you know, changing the whole game? Or, I mean, what could be your reading into that? I think I agree here. T he fact is higher yielding is relative, right? Relative to our other books, these are higher yielding. Certainly, these are not in the teens. The rate of interest charged is not in the high teens. So to that extent, higher yield, but lower, higher than our other books. So I don't believe this will be a single driver. Please look at us in the direction of growth and in, as we keep building these books, when the markets open up and interested opportunities come for us, we will be able to, get a higher, higher momentum on that. So I would not look at this saying just because we are doing those businesses, automatically the business momentum shifts and NIIs starts ramping up, because that would mean defying gravity. You cannot play, you know, price out of the market. And with our risk appetite, we are not inclined to grow by flexing our risk. One of our, thankfully, our strengths across long periods of time, both our credit costs have been intact, as also our portfolio has been pretty high quality. So even as we start doing businesses with like credit card, personal loans, microfinance, commercial vehicles, which are relatively higher yield, we are not growing that by flexing or dropping our credit standards. To that extent, even in those segments, we are picking the better customers. Certainly, there will be a pricing pressure, and we believe that in that segment, we are getting better pricing than doing businesses which are lower in price. So will yields pick up materially over time? Yes, it will, but not instantly as the share of these businesses go up. We also believe as cost of funds come down, which I think is not very far from now, we will see that benefit coming through. Yes, there are some things that we have to redo in terms of fixed rate and floating. We're working through that. So are we thinking about what FY 2025 will look like? Yes, the teams are working on many plans, and our desire first is to ensure that the NIMS, composition may vary, but the NIM number that we are currently at is protected, preserved without much violation. Right. Okay. Sure, sir. Understood. Thanks. Thank you. Thank you. Our next question is from the line of Madhuc handa Dey from MC Pro. Please go ahead. Hi, I have two questions. You explained the reason for the higher corporate slippage, but anything that you want to call out on the retail slippage, which is also sequentially tad higher? Madhu, it's only a tad higher, right? If you look at three quarters, it's been 190, 200, 204, 194, 213. So it's not materially off. Second, as the denominator is growing quite handsomely. So really there is nothing unique to call out or add to. I don't know, Ashutosh, Shalini, if you want to pipe in, you may also want to. Yes, Shyam, I think, as Shyam mentioned, the denominator is also growing quite handsomely on the retail side. So the small shifts that we see as natural, as part of the business growth that we've had, nothing to call out specifically on retail slippages, Madhu. Okay, hi. I have a slightly longer long-term question, which is more for the banking sector, and also definitely relevant for your bank. As we see now that this deposit growth and deposit cost problem is getting more structural. I mean, banks are really competing with the capital markets to get that saving, and there is a definite struggle out there. Should this continue, banks will either have to compromise a bit on the margin, or if they are not willing to compromise on the margin, it will result in higher credit cost. And in any case, this scenario points to higher cost-to-income ratio as banks are going for branch expansion, et cetera, et cetera, to garner that deposit. Which means structurally there is going to be a pressure on ROA. Do you think this scenario could play out? And in that case, where do you see your ROA settling, maybe in two years down the line? Madhu, thank you. That's a good question, and I just want to reflect back on a few quarters back where I had pointed out, it is, almost impossible to believe the 2%, 1.8% kind of ROAs will sustain forever, even for the best-in-class. And that's not my job to guess, but that's for them to defend. I do believe for banks like us, getting to 1.4%, 1.5% is a good milestone, and from there, we have to fight our way up. But the reasons are that with the capability set increasing materially in banks like ours, the arbitrage opportunity of somebody creaming away the share is not going to happen. Structurally, even in the West or more advanced markets, if there are any that you can call that, margins tend to be lower. ROAs around this kind of numbers is where the best-in-class are. Which means efficiency, which means other income, which means credit standards have to be, sacrosanct. Which is a model we've followed for long. We've been faulted for it, but we've followed for long. We've not been a very high-margin bank, but our ROAs from 0.7% to 1.4% has come in five financial years. I think we are at a place where we can defend it quite nicely. For the capital we have, 1.4%, 1.5% ROA makes us, I think, a good, solid franchise. That is like, 1.5% is now the aspirational ROA that you're working? We will work towards it over the next 18 months. Thank you and all the best in this journey. Thank you. Next question is from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead. Yeah, hi. Good afternoon, everyone. So three questions. First is again, taking forward from the CD ratio that you talked about will want to moderate to 80. So will this have implications on loan growth, or do you think Federal Bank has the ability to raise as much deposit as such the same 18% to 19% loan growth? So Nitin, I think the ability to grow deposits, we've demonstrated for long periods of time. Even through the hardest of times, we've been growing even as we did in the Q3. The cost of that deposit is something that we have to be thoughtful about and decide where we want to draw the line. At this juncture, we haven't altered our 18% kind of credit and deposit growth capability and plan, and I do think we will be able to hold that. Right. And, related to it, I, I was, like, looking at the slide 23, wherein, we talked about the growth through partnerships. So across most of the unsecured segments, we are growing very well, both in number of accounts and balances, but since franchise, the account opening run rate is nearly flat over past many quarters. So while the account balance has, almost doubled Y-o-Y. So what is limiting us to step up the account opening run rate here? I think it's the effect of learning. We started this partnership-led new account opening about two to 2.5 years back. We have learned a lot in terms of so that we can cut wastage between us and our partners. We were at some stage doing maybe 13,000, 14,000 accounts a day on the savings side. We've brought it down to 4,000, 5,000, and the good news is, we are able to sort of filter out either waste or fraudulent efforts or whatever other combination. So I'm happy that our ability to sort of narrow down and get the right base is improving with each passing month. And balance growth is a function of also vintage on the book, and as we keep getting the better quality and seasoning them, this should continue. Okay. And sir, if you can also comment on the co-lending strategy there? Any changes in underwriting that you have made while working along with FinTech, given all the ongoing noise around the unsecured loans? I think our co-lending is still starting off. I don't know, Shalini, Harsh, do you want to point out? There's nothing much to call out in my view, but Shalini, Harsh? So, yeah, Nitin, on co-lending per se, honestly, nothing much. We've done some work on the microfinance side, which Harsh can speak to, but on the others, we're reviewing what the partnerships available are from a co-lending perspective and getting the technology, operational aspects kind of worked on. The other part of, I think, what your question was, is when we do underwriting, when we do, you know, fintech-led partnerships for credit cards, personal loans, are there any differences from an underwriting perspective? Clarify completely, the underwriting criteria are entirely as laid down by the bank in accordance with the bank's risk appetite and completely governed by the bank. We have, we have not done anything on the risk appetite side to change how we work with partners, Nitin. Harsh, I don't know whether you want to add on something on co-lending? Covered it, Shalini. Just one point. We have obviously started co-lending, as Shalini also mentioned. The credit standards and stipulations or filters remain just the same. We are, at this point of time, experimenting to see how scale works over here. We tried microfinance for a few reasons. One, we can cover deeper geographies. Secondly, the manpower cost in the co-lending part is something which we can leverage on with both sides. With NBFC having low cost structures over there, we can leverage on that. So that's how we are looking at doing it, and as per the scale and size, we decide whether to deepen, and how we take it forward. Right. Thanks. And so the last question is on the management succession. Given the recent communication from the RBI, so how do you plan to approach, like, shortlisting two more names? Will, will we be open to external candidates? Will we be hiring an external search firm? And because the time that we have is still limited versus the planned succession that happened at some of the other large private banks. So how do you look at that? Yeah, I think, the board has already commissioned a search process. I think our, exchange announcement also sort of reflects the regulatory letter. So there's a very effective and active search process using a top quality search firm is on. And we believe in the next two to three months, between our internal candidates and an external option, the board will choose the most preferred list and send it to them. Okay. Right, sir. Thank you, and wish you all the best. Thank you. Thank you. Our next question is from the line of Pritesh Bumb from DAM Capital Advisors. Please go ahead. Hi, sir. Good evening. So one question from my side is on the risk weight side. You touched upon it, but when I look at the credit risk, which has gone up this quarter, how much will be from the changes from RBI and how much will be from the regular business growth, which we are having in the unsecured? If you can quantify what changes have- I think when it comes to, if I remember right, about 35 odd basis points, largely driven by the change in the regulatory standards reflected in the business we are writing. Damodaran or Venkat, you want to add? Venkat? Hello. Can you hear me? Yes, Venkat. Yeah. So credit risk moment has been increased, has been around INR 10,000 crore, of which nearly 75%, INR 7,200 odd crore, is driven by the regulatory change. That's in the absolute value terms. I think it's in the slide number 20. Sure. So, that will be predominantly because we have a slightly higher NBFC book, right? So that's because unsecured is relatively low. NBFC both put together. That's the November 16th regulation. Yes. Got it. Okay. And second question was, in terms of other income, what would be our breakup from this trading gains? I believe we will have about INR 80 to INR 90 crores from Fedfina proceeds. Yes. Okay. Fair enough. Thank you so much. Thank you. Our next question is from the line of Gaurav Kochar from Mirae Asset. Please go ahead. Yeah. Hi, good evening, team. So a couple of questions on, Sorry to interrupt, sir. May we request you to use your handset, sir? You're not audible, sir. Is it better? Yes, sir. Yes. Yeah, sure. Thanks. Good evening, everyone. Just on the provisions, slide number 16, I think there is... Can you explain the INR 112 crore reversal on standard asset provision that we have taken? And also there is a INR 62 crore, provisions for other purpose. So just wanted to understand these two line items. Yeah. Venkat, you want to go? Yes, sir. Yeah. So you're referring to the standard asset provision reversal, right, Gaurav? Yes, INR 112 crore reversal. First, what is that? And second, there is a INR 62 crore provided for other purpose. So is it the AIF provision that is lying over there, INR 62 crores, or what is that INR 62 crore? No, that 62 is not related to AIF. Like Shyam said, the AIF impact will, we'll take it based on what comes through in Q4. That's a different one. Gaurav, I'll share the details with you separately. Okay. I don't want to take the time of others in this. On the 112, we have reviewed the restructuring provisions which we had. RF1, since all of them have now started repayments and all that, we had assumed a certain percentage of slippage in that, and the actual has turned out to be much lower. So based on that, there's been some reversals which we have done, but that pertains only to RF1. Okay. So now, cumulatively, what would be the provisions that we are carrying on restructured book? Around 20- odd percent. Okay, 20%. Got it. And second question is on the wage revision. So we would have done some backlog provisioning, as Shyam sir also pointed out, too. Can you quantify what was the one-time hit in this quarter? INR 50+ crore, I guess. Sorry, INR 50 crore? Yeah, I think higher than 50, right, Venkat? It's a catch-up of the past period, for the last 2 years or 18 months. Yeah. 18 months. Yeah, that's the catch-up. Okay, so going forward, INR 690, INR 693 is what you reported. So INR 693 minus INR 50 odd crores would be the run rate going forward. Slightly higher, because some element of that which pertains to the quarter also, Gaurav. Yeah. The last quarter was 626, if I'm not mistaken. Correct, correct. Yeah. You should add INR 650. Yeah, it has impact for that quarter as well. INR 650-ish. Got it. And, and, other, other question on recovery. So there is one account I, I guess you have, the ADAG group exposure, which, which is, which has been in the news for resolution. So is that account resolved in this quarter or that resolution will be in Q4? Right. Anybody's guess, it's not in any number as of now. We hope it is in the Q4. Okay, but what is the total exposure you have to that group? The NBFC part is about INR 100 crore. The other account is about INR 180 crore. Okay. Put together INR 280 crore. Yeah, in that zone, but they come with different structure. Sure. Understood. Just lastly, just to clarify, the Tier-I that you have mentioned does not include the nine-month profit? No, that's not added. All right. If we add the 75%, assuming 25% payout ratio, the total CRAR would be over 16%, 16.15%, 16.2%. Got it. Perfect, sir. Thank you. Those were my questions. Thank you. Our next question is from the line of Param Subramanian from Nomura. Please go ahead. Yeah, hi. Thanks for the opportunity, and congratulations on the quarter. My first question is on the unsecured piece. Shyam and team, has there... Hello? Please use your handset, sir. Yeah, just... Is this better? Yeah, please go ahead. Yeah. My first question, Shyam, is on the unsecured. So after this RBI increase in risk weight, has there been any rethink in our thought process when we are talking about scaling up the unsecured piece from, say, about 5% to, say, 10% of the book, over the next two, three years? Because that was something that we highlighted earlier. And also there are some media reports saying that we're, we are scaling down the partnerships in, say, credit cards. Is that just a one-off case or, you know, are we sticking to our guns as far as unsecured is concerned? Yeah, that's my first. Param, I think two things. The media has, probably greater intuition than what, we actually have on this matter. They have correlated, two events and made a story. The line cut was specific to a particular program where we believe it was higher than the normal utilization. So the line is like a normal line, line intervention in any unsecured program. At this juncture, given the size and shape of our unsecured and the growth and the early indicators, we haven't revised anything on the, on the directional cap. But, you know, if we were to get to 8% and things were not moving well, we could revisit, but at this point in time, nothing has changed. Our growth continues to b ut we haven't dropped any filters. In fact, we are only tightening it to reflect the times, but our growth rate of 40% to 50% on the low base continues. Perfect. That's clear, Shyam. My other question was on the margins again, picking up from our previous question. Now, see, the unsecured has now scaled up to like, you know, 4.5% to 5% of the loan book. And this business is like, ideally it should be more than double the margin of your existing book, right? So why is it not exactly reflecting in a margin uptick, or when does it actually start, you know, reflecting in our, you know, headline margin numbers? See, I know I'm not very popular in saying this: unsecured doesn't equal to very high, extraordinarily high margins, higher than our normal run rate, because the revolve rate in this is about 30%, the EMI is about 30%, right? Right. So if you're growing INR 100, only 30 is revolving, and another 30 is EMI, the balance is zero revolve. It's a transaction account. So I would encourage not to extrapolate all growth equal to all high yields, equal to all high margins, and therefore, the overall should happen. As the book gathers size and stabilizes, I think this will start reflecting a higher yield, but I think it's another year, year and a half away from a scale point of view. Perfect. Okay. And just one question on your core fees. You show a decline in the loan processing fees this quarter. So, is there anything to read into that? It's showing slight decline, Param, but please look at the quarter two, quarter one, and quarter three. It's more like quarter one. Quarter two has exaggerated because we had two very good corporate bank transactions, which gave us higher fees. Otherwise, it's normalizing around INR 150 crore. Perfect. Very helpful. Thanks a lot, Shyam. All the best to you and your team. Thank you. Thank you. Thank you. Next question is from the line of Rikin Shah from IIFL. Please go ahead. Thanks for the opportunity. Had a couple of questions. First one, in this quarter, there seems a meaningful difference between the gross and the net loans, probably attributable to IBPC. So just wanted to understand the thought process of doing more IBPC in the quarter. And secondly, in the earlier remarks, you mentioned that you would want to get closer to 80% CD ratio in this calendar year itself, versus 83%. But in the same breath, we are holding our loan growth guidance of 18% to 19%, whatever that would be around that. How do you bring down the CD ratio? Would you be meaningfully accelerating on the deposit growth from the current levels? Because that is what it would imply. Thanks. You're right. We are hoping to make sure that happens. You know, don't hold us. If it's 18% becomes 17% on credits and 19% on deposits, that is also a formulation we are happy to live with. The mix in the 17% will vary. How do we get higher, relatively higher yield businesses? That's how we will ensure that we get closer to the 80%. T he first part of your question I missed. I mean, I can't quite recall. What is the first? The IBPC. So, in this quarter, there seems there was around INR 4,500 crore of IBPC done. So just wanted to understand the thought process behind doing this. This seems to be a larger number than the usual one, right? Harsh, you want to point, you want to talk about that? Yes. Two things on the IBPC side, we are looking at IBPC not just from a point of view of asset management, but from a resource mobilization point of view. So we saw opportunities of raising funding at a reasonably attractive cost through the IBPC sale assets, which we have clearly leveraged on. Secondly, between the various categories of PSA, we will look at doing swaps on IBPC, which helps us in yield accretion without diluting any standards or anything. It's more like a treasury management and a fundraising opportunity, and also leveraging on the PSA book. The two areas. Got it. Perfect. That answers both the questions. Thank you so much. Thank you. Our next question is from the line of Manav Mehta from Axis Securities. Please go ahead. Good afternoon, sir, for your wonderful call today. So I wanted to ask you that, what is the new innovative product line that the bank is aiming for? Sorry, you are very feeble, my friend. Mehta, could you please use your handset? Hello, can you hear me now? It's still feeble, but clear. We will strain ourselves to listen. Hello, could you hear me? Yes. Sir, I wanted to ask you that the bank is always aiming for some innovative products in the field of fintech or credit cards. So what is the current innovation that the bank is aiming for, keeping in mind that the bank has tie-ups with OneCard and Scapia and other brands like that? Give us two weeks, and you will see it in the media. All right. And sir, could you give us a brief about what it would be about? It will be in the area of ease of payment for clients and, yeah, it'll be quite cutting edge. All right. Looking forward. Thank you. Thank you. Our next question is from the line of Kunal Shah from Citigroup. Please go ahead. Yeah. Hi. Thanks for taking the question. So firstly, Shyam, after long, we are seeing that, the cost of deposits are almost like 30 to 40 basis points, premium. We are at 7.5%. Otherwise, we have been neck and neck with some of the leading banks, earlier. But still in terms of the traction, maybe if you can highlight, how the traction has been, and would there be the need to further increase it, given the intensity from other banks as well, to go beyond 7.5%, as you want to maintain, like still 18% to 20% kind of a deposit growth? Like I mentioned earlier in the call, Kunal, in certain buckets, certain tenors, based on our outlook on rates, we will be competitive. Over the last 18 months, we've been on term, quite competitive and benchmarked against the better banks. We're certainly not competing with the small finance or some of those banks which pay disproportionately higher. But amongst the leading banks in the country, we benchmark. In one or two buckets, we try to be more attractive so that we can make based on our like, liquidity profile, we try to get in those places. That will continue. Okay. No, but the only thing was maybe earlier, given that we are now at 7.5%, given in this bucket of one to three odd years, maybe generally we used to be at- One or two tenors, one or two tenors, we will be, you know, like a 15-month bracket or 500-day bucket, we will be quite compelling and in the better, better paying so that we get share, and our view on interest rate and our book build will reflect that. Okay. Sure. And secondly, with respect to the NBFC exposure, post this entire increase in the risk weights, how much have we been able to pass it on in terms of the higher lending rates? So how much we would have asked for the NBFC? And finally, what has been the effective increase post the risk weight increase in lending rate to NBFCs? Harsh, you want to come in? Yes, I'll go ahead. Two things. One is on the stock, the other is on the flow. On the flow, in general, in the industry, we are seeing an uptick of anywhere between 30 to 35 basis points to 40 to 45 basis points, depending on rating bracket, where the costs have gone up for NBFC. This obviously is a non-PSF, non-housing category. Even on the existing side, we have managed to reprice some of our existing book. Obviously, there have been pushbacks, but that's also being done. So the fresh origination is clearly about 30 to 35 basis points higher, and it, depending on the rating also, it could be even going up to as high as 50 basis points. Okay. Because the question was, given that we also have, like, 11-odd percent, but still maybe in terms of the yields, it has not yet reflected. Would there be, like, maybe it would come with a lag or something? How should we look at it? Yes, like I mentioned, for the new, exactly, like what I mentioned, it typically will apply for the new origination, new dispersal, number one. Secondly, please also note that this does not apply for HFC. It does not apply to PSL category. A significant portion of our NBFC lending actually qualifies for PSL and is done keeping PSL in mind. So I think the risk rating over there has been less, but it will be there, but it's been largely, also being managed because of it being PSL or housing finance companies as well within the NBFC category. Okay. Thanks, that helps. Yeah. Thank you. Thank you. One more, one or two more, and we can wind up, please. Thank you, sir. Our next question is from the line of M.B. Mahesh from Kotak Securities. Please go ahead. Hey. Hi, just in continuation to Kunal's question, also the changes that you have done, you would have done on the personal loan side as well, on the unsecured portfolio, what kind of interest rate changes have would you be doing there? Shalini, you want to come in? Yeah. Hi, Mahesh, and I think so effective December after the advance notice, we've done it. The existing stock, we can't do anything. It's a fixed rate book that we have. But the flow has on personal loans, it's graded by CIBIL scores. It varies according to the risk profile of the customer. But broadly speaking, about anywhere between 75 to 125 basis point increases have been passed on effective December on the under personal loan book. Credit card book, as Shyam mentioned in response to an earlier question, the revolver rates are a very small percentage, and you know, revolver rates are already at a high interest rate, so we haven't really touched that. But the EMIs is again calibrated by CIBIL scores, all of which went into effect in December. The impact will probably come in this quarter because we only had one month's impact, and it's a small book even now, Mahesh. Just one additional question: If your partnerships slow down growth by any chance, would there be any impact on the fee income line that you have today? Partnerships on the liability side are slowing down, not on the credit side, and liability side is less fee, more balance build. Okay. Just one final question then, Apologies, it's not slowing down, it's filtering out, because slowdown suggests that there's a problem. It's a lesson and a learning using analytics. Okay. Yeah. So just to add to what Shyam is saying, on the liability side, based on the history that we've had now for about 18 months, we've been able to understand what's the profile of the customer, what's the kind of usage on debit cards that we see, what's the kind of usage on UPI that we see, and what the kind of balance build-up we have. That, coupled with the fact that MOB, you know, savings account book grows on MOB has helped us. So yes, we've calibrated through- the-door population for the savings account perspective, but, Mahesh, no, I will not likely to see any impact on the fee income side. Yeah. Okay. Shyam, just one last question. If you speak to your branch managers or the regional managers, and you ask them, "Why is, why has deposits not grown of your customers?" What is the usual response that you get today? Because you can keep increasing interest rates, and everyone can keep increasing interest rates, but if deposits itself is a problem, how do you, how do you mobilize that? I think, I'm sure Shalini and others will give you even more nuanced answer. The share of deposit per customer that the branch is getting, they are trying to maximize that. In a very competitive environment, just love and affection and relationship alone won't work. You know, that gives you some edge, so some pricing benefit or something, because now the customer is faced with opportunities from a range of banks and small finance and whatever the other players who are trying to lure with 8% and 9%, right? So to that extent, the branch manager or the branch staff needs some ammunition beyond just relationship. So we try to provide that, and we demand of them get a higher wallet share per customer. And we track to see that that is happening. Will we win every case? No. Do we win more cases? Yes. Okay. Done. Thanks. So just to add to that, a quick one, Mahesh, I think, the way to look at it is, as we look at it, is term deposits difference to CASA. In term deposits, honestly, it ends up being a price issue more than anything else. Any amount of relationship management can compensate for small differences, but not likely to compensate for material differences when it comes to it. From savings account perspective, there is obviously, you know, the stock market. Other competing kind of investment opportunities have grown materially in the last 12-18 months. So that, coupled with, you know, the whole digital technology and the ease of investing, the ease of moving money around, has meant, you know, people are optimizing their cash management. This is happening for small corporates, this is happening for individuals. I think we need to look at each of these differently. No easy answers, but we're working through this. Sure, ma'am. Done. Thanks a lot. Thank you. Yes, our next question is from the line of Saurabh from J.P. Morgan. Please go ahead. Hi, sir, just two questions. So one is, you know, what in, on your, on the OpEx side, how much do you think you can pull back from this 2.3 odd percent that you're running at today? You know, can you get back to the 2%, or should we assume that it should stabilize at a higher level? And the second is just on the NRE deposits. So I understand your market share is intact, but broadly, what will explain this lower growth? Is it just higher yields outside, or is there anything else that is impact? Yeah, I'll give you mine. Shalini and Venkat can also add in each of these points. On the OpEx part, the nature of the spend is changing. We are, in some sense, quite pleased with the size of spend because technology costs, which are sub six, is now- Operator, your request has been initiated. If you'd like to cancel this request, please press star zero again. Getting some efficiency that is building up is getting reprioritized into these costs, which probably is a good cost, given where we are in the cycle. And I don't believe you will see much come out because there are certain regulatory costs of compliance, cost of technology for compliance is increasing quite materially. Like, for example, if we book more accounts, the VKYC costs are also every, it's done by employees of the bank, right? So these are all slowly the cost creeping. Will it all disappear? No. But are we trying to accommodate that cost by using technology, which means the technology cost is going up? Yes. On the part, this other part, sorry, slightly blanked out. Shalini, the second part? NR deposits, some NR deposits. Yeah, you wanna go? I come in later. Yeah. I think to some extent, what you know, what I said to Mahesh earlier, the NR customers are obviously having a lot of choices. One is I think you alluded to it, the fact that investment opportunities in their country of residence have become a lot more attractive. There are a lot more opportunities, and the interest rate arbitrage has kind of narrowed down, particularly on US dollar deposits. If you look at some of the banks in the Middle East, paying US dollar deposits, which are probably equivalent to what we're paying. So that plus the opportunities for investment in stock market, real estate, et cetera, has gone up. So again, this is a little bit of a structural shift that is happening in the savings piece. We've identified the fact that if we are, you know, on FCNR, for example, we've gained market share, but it's obviously, you know, at a certain rate. So, whatever resident opportunities are there, the NR seem to have even more opportunities. You know, that's really what's happening out there on the savings side. But I think the underlying point, Saurabh, is that structurally, the non-resident behavior post-COVID has changed, and we've said that in earlier calls, so I'm really emphasizing. Remittance part is okay. We are holding up quite well. In fact, we're gaining share. The behavior of that converting to deposits has changed. Some of them Shalini explained, and we are sort of flexibly, fluidly readjusting to gather that and gain share. It's not like we are losing, somebody else is gaining. It's just that the structure has changed. Just want to add points to the cost question, Saurabh. Another way of looking at it is how do we make the cost which we are incurring, and these are costs which we believe is right investment. How do we make it more productive? For example, we are investing in new branches. We have opened 65 branches in the nine months. Last year, we added 75 branches, and we believe adding branches in the right locations is to our advantage, given we need to get deposits and various other reasons. Now, we are taking steps to ensure that we get the break even for these branches faster than what we used to see in the past. For example, one data point is last year, of the 75 branches we opened, 41 of them have already, you know, touched break even in less than one year, which is a significant, you know, productivity enhancement. Similarly, on the staff, OpEx, staff OpEx, staff cost line, how do we invest in tools which will make some of the regular operational processes more automated, technology driven, and then the existing people are able to absorb additional work which comes through, so that we don't have to add more people as we grow in the future. So the combination of all this will continue. We will invest in branches, we will invest in technology. It's a question of how do we make sure it pays us well in the coming years. Okay. Thank you, sir. Thank you. Our last question for today is from the line of Pranav from Rare. Please go ahead. Hello. Yeah, Pranav. Yeah. So, sir, what is RBI exactly alluding to saying that we should improve, like, banking should improve credit to default ratio, and what is the mechanism that it can do it by? Yeah, I think they are saying not improve. They're saying not improve, as in reduce your CD ratio. Yeah. Yeah. I think they are indicating the credit markets are probably overheated or certain segments are growing at much higher speed than they would like it. So I think they are asking banks to apply caution in some fashion and readjust their business models. I don't think it's a generic statement. I think they're working bank to bank, to my, to my knowledge, and their guidance could vary by bank to bank. It's getting interpreted as everybody should reduce the CD ratio. I don't know if that's a universal truth. I would think they are guiding banks to bank based on each bank's asset liability profile, credit profile, mix of credit, and probably credit quality. So that's my interpretation. I can't speak with authority, but I sense that's how they are viewing it. Right. Sir, last question from my side. Out of the total customers that we have, active customers, how much is the percentage, penetration from personal loans, and how you view growth in existing customer in personal loans vis-a-vis, say, microfinance growth in, little bit a newer category of loans in terms of risk-adjusted return over a cycle? Personal loans, Shalini will comment, but all our personal loan growth is pre-approved on our pre-approved or pre-qualified on our way. Only when we do partner-led personal loans, it's pre-approved, pre-qualified on their way. We don't do new to category, fresh, unverified DSA source personal loans. Shalini, is that right? Yes, Shyam. So, as just to kind of elaborate what Shyam said, in all our partnerships, we work with the partners to do a pre-qualification of their base to meet our risk criteria, and basis which the offer is made to the customer. If the customer takes the offer, it goes through the underwriting process. Our entire organic book is also grown on the basis, on the back of pre-approved offers to our existing customers using scorecards and, you know, a range of metrics that are there, including a lot of CIBIL and other related stuff. So we don't do open market, if I can just frame it that way. We don't do open market sourcing for personal loans or credit cards, Pranav. Yeah. Right. So, won't it be less risky to say, triple this book rather than, say, double the microfinance book? This is a new category. I think it's not a- I don't think either. Sorry, Shyam, go ahead, yeah. No, no, you said it. Please go ahead. No, I think both of us were going to say the same thing. So Pranav, it's not an either or an or. Each of these have meet a certain customer need, have a certain risk profile, have a certain distribution mechanism. So we've got to make sure that, and that's in the kind of the foundation on which we've built our book, right? It's more diversified by geography, it's diversified by product type, it's diversified by kind of security. So, you know, it's neither, we will do personal loans, we will do microfinance, Pranav. Okay. Thanks a lot. I think, Vishal, we should call it because I have another meeting to enter, please. Yes, sir. Thank you. Ladies and gentlemen, that was the last question of our question and answer session. I would now like to hand the conference over to Mr. Souvik Roy for closing comments. Thank you so much, and, you know, we all appreciate your time and attention. You know, I'm sure you know, our results reflect, you know, the kind of dedication our management has towards sustaining this positive momentum. And thank you, you know, for all your questions, and I'm sure we look forward to more personal engagements going ahead. It's result season, so I'm sure you're going to have a long evening ahead. Thank you again for joining and for staying with us, so- Souvik, on a lighter note, some of them must be dialed into two calls. I'm told HDFC call has started. Quite possible as well. Yes, before we sign off, wish you all a very happy new year again. Thank you. Thank you very much. Bye. Thanks, everybody. Bye, everybody. See you. Thank you, everyone. Thank you. On behalf of the Federal Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.