Ladies and gentlemen, good evening, and welcome to HDFC Bank Limited Q3 FY 2022 earnings conference call on the financial results presented by the management of HDFC Bank. 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 brief commentary by the management. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Srinivasan Vaidyanathan, Chief Financial Officer, HDFC Bank. Thank you, and over to you, sir. Good evening, and a warm welcome to all the participants. First to start with, the environment and the policies that we operated in the quarter were conducive for growth with good tailwind from monetary and fiscal policy. You all know about the activity indicators faring better in Q3, like the PMI, GST collections, railway rolls, et cetera, et cetera. You're also up to date about the CPI or the policy rate stance and the liquidity conditions. Now, in that backdrop, the equity capital market was robust in the quarter. Private issuers raising almost INR 82,000 crore. We were mandated for eight I POs. Indian bond market also saw total fund raise of approximately INR 1.87 lakh crore in the quarter. The bank maintained its ranking as one of the top three arrangers in the INR bond market. Now with that, let's go through five themes at a high level before we delve into the quarter financials. One, on the bank, balance sheet continues to get stronger. For instance, the capital adequacy ratio is at 19.5%, CET1 at 17.1%. Liquidity is strong, as reflected in our average LCR for the quarter at 1.3%. Balance sheet remains resilient. The GNPA ratio is at 1.26%. Floating and contingent provisions aggregating to INR 10,100 crore, helping de-risk the balance sheet and positioning for growth. Two, investments in key enablers are picking up in executing our strategy. We opened 93 branches in the quarter, 171 branches year to date, nine months period. To give additional context, we have added 525 branches over the past 21 months, that is during the COVID period, positioning us for capitalizing the opportunity. We onboarded little more than 5,000 people in the quarter, 14,300+ people during the nine months period. We have onboarded about 17,400 people over the past 21 months during the COVID period to get the people ahead on the productivity curve as the economy accelerates further. There is a growing interest on digital, and we have taken the steps necessary to ensure our customers have great and consistent experience in whatever channels they choose to bank with us. Key initiatives like a streamlined modern customer experience hub, allowing access to content across channels and devices will be introduced soon. We are also committed to continuously enhancing the digital experience for our customers through a fully revamped payment offering. We have taken multiple steps to ensure robust, scalable and secure technology setup is strengthened even further. Some key initiatives include capacity for UPI has been tripled. Net banking and mobile banking capacity has been doubled to manage 90,000 users concurrency, a significant step as most of our customers now rely on digital channels for banking needs. The bank has migrated four data centers in Bangalore and Mumbai to state-of-the-art facilities. The bank is moving to next level of disaster recovery with DR automation and implementation of hot DR active-active setup for key applications. Significant upgrades in network and security infrastructure to support our exponential growth in digital transactions. Our digital capability is coupled with rich data on customers' behavior. Take for instance the traditional retail products wherein close to 80% new loans go through a digital scorecard or automated underwriting. In Q3, we received a total of 244-245 million visits on our website, averaging 31 million unique customers per month. As per our analysis, we had 30%-70% more visits on our website with our public private sector peers. Close to 60% of the visits were through mobile device, indicating the mobile centricity of the footfalls. Three, on customers, acquiring new liability relationships is setting new high, preparing for broad-basing and deepening relationship in times to come. During the quarter, we opened about 2.4 million new liability relationships, 6.4 million new liability relationships during the nine months period of this financial year, exhibiting a growth of 29% over the same period last year. Four, our market leadership in digitizing the economy is setting new heights. In Q3, we achieved the highest ever issuance, with 9.5 lakh card issuances. Since late August when we recommenced issuance of new cards, we have so far issued 13.7 lakh cards. Credit card spends for the bank has grown 24% year-on-year, and debit card spends has grown 14% year-on-year. These spend growth reflect both increased customer engagement and economy improvement from a consumption perspective. In similar lines to our PSP partnership and to scale our business further, we have signed MOUs with two large payment banks for distributing certain products. This opens up further opportunity to scale among other places, growth in senior urban and rural areas, leveraging partner distribution access points and feet on street. We have further scaled emerging growth segments such as EasyEMI, consumer durables targeting our preferred customers through segmented sales and marketing. Consumer finance business has 1 lakh plus active distribution points. We have over 5 million customers with EasyEMI options. The bank merchant offering is scaling to provide enhanced value-added services across various segments. The bank has 2.85 million acceptance points as of December, with a year-on-year growth of 35%. The bank's acquiring market share stands at approximately 37% with a 19% share in terminals, processing about 300 million transactions per month. The bank has been focusing in rural locations and is investing in training and offering segment-specific solutions. Over 50% of new merchant sourcing is from rural locations. 5. Asset volumes are gaining momentum to reach new heights driven through relationship management, digital offering, and depth of products. In the wholesale segment, corporate continues to generate strong cash flows across sectors, resulting in fair degree of prepayments. Trade continues to be an opportunity for credit growth. Factoring, invoice financing, export financing, import financing are some of the products we participated in to grow. We are also making progress in MNC segment with our ambition to be the largest player in that space. Corporate banking and other wholesale loans grew by 7.5% over prior year and 4.4% over prior quarter. On the retail assets front, the momentum picked up observed during Q2 continued its stride in Q3 as well, witnessing a robust sequential asset growth of 4.7% and year-on-year growth of 13.3%, which has been on the back of a strong incremental disbursements during the quarter. Commercial and rural banking businesses saw robust growth this quarter, registering a sequential growth of 6.1% and year-on-year growth of 29.4%, reflecting underlying economic activity and continued market share gains. Now let's start with net revenues. Net revenues grew by 12.1% to INR 26,624 crores, driven by an advances growth of 16.5% and the deposit growth of 13.8%. Net interest income for the quarter, which is at 69% of net revenues, grew by 13% year-on-year and registered a sequential growth of 4.3%. The core net interest margin for the quarter was at 4.1%. This is in the similar range of previous quarter. Net interest income growth is reflective of underlying shift from unsecured lending, essentially gravitating towards higher-rated segments in the COVID period. This is also represented in our ratio of net interest income to RWA, which is consistent at around 6%. Moving on to details of other income, which is at INR 8,184 crore, was up 9.9% versus prior year and up 10.6% versus prior quarter. Fees and commission income, constituting about two-thirds of other income, was at INR 5,075 crore and grew by 2% compared to prior year and 2.6% compared to prior quarter. Retail constitutes approximately 93% and wholesale constitutes 7% of fees and commission income. Fees excluding payment products grew year-on-year by 17%, and fees on the payment products decreased year-on-year due to lower fees on card loan products, cash advances, over-limit fees, reflective of a cautious approach to card-based lending as well as customer propensity. However, card sales, ANR and interchange have come out robustly, which positions us for future growth and the customer propensity to use card products for loans and revolver increases. In addition, during the festival period, we offered certain fee waivers to incentivize customer engagement. Fees and derivatives income at INR 949 crore was higher by 69% compared to prior year, reflecting pick up on activities and spread. Trading income was INR 1,046 crore for the quarter. Prior year was at INR 1,109 crore and prior quarter was at INR 676 crore. Some of the gains from investments were monetized in line with our strategy. Other miscellaneous income of INR 1,113 crore includes recoveries from written-off accounts and dividends from subsidiaries. Now moving on to expenses for the quarter at INR 9,851 crores, an increase of fourteen point nine percent over previous year. Year-on-year, we added 294 branches, bringing the total branches to 5,779. Since last year, we added 1,697 ATM cash deposit and withdrawal machines, taking the total to 17,238. We have 15,436 business correspondents manage the common service centers, which is higher by about thousand nine hundred, slightly over thousand nine hundred compared to the same time last year. Cost income ratio for the quarter was at 37%, which is similar to the prior year level. As previously mentioned, when technology investments are further stepped up and retail segments pick up further, we anticipate the spend levels to increase driven by incremental volumes, sales and promotional activities and other discretionary spend. Moving on to asset quality. GNPA ratio was at 1.26% of gross advances as compared to 1.35% in the prior quarter and 1.38% on a pro forma basis in prior year. It is pertinent to note that of the 1.26% GNPA ratio, about 18 basis points are standard. These are included by us in NPA as one of the other facility of the borrower is in NPA. Net NPA ratio was at 0.37% of advances. Net NPA preceding quarter was at 0.4%. The annualized slippage ratio for the current quarter is at 1.6, about INR 4,600 crore as against 1.8% in prior quarter. Agri seasonally has contributed approximately 1,000 crore to slippages or about 25 basis points annually. During the quarter, recoveries and upgrades were about 2,400 crore or approximately 25 basis points. Write-offs in the quarter were 2,200 crore, approximately 23 basis points. Sale of NPA about 260 crore, approximately 2 basis points in the quarter included in one of the categories above. Now looking at check bounce and restructuring and so on. The check bounce rate continues to improve in December across most of the retail products and is not only back to pre-pandemic levels but are also marginally better. Further, the early January bounce rate shows continued improvement. Similarly, demand resolution at 97%, 98% for most of the products is back to pre-COVID levels and in some cases better than pre-COVID levels. The better improvement, the improvement in bounce and demand resolution rates at aggregate level amongst other things illustrates the overall portfolio quality. The restructuring under RBI resolution framework for COVID-19 as of December end stands at 137 basis points. This is at the borrower level and includes approximately 28 basis points of other facilities of the same borrower which are not restructured but included here. To give some color on restructured accounts, 30% are secured with good collateral and with predominant good CIBIL score, which we feel is comfortable. Of the unsecured portion, approximately two-thirds are salaried customers and at about 40% are good CIBIL scores more than 700. The demand resolution is showing encouraging trends. COVID-19 restructuring has been an enabler for our customers to tide over the uncertainty in the last few quarters. Initial indicators suggest that most of these customers are now positioned to resume their payment with minimal impact to overall quality of the advances of the bank. As mentioned previously, impact of restructuring on our GNPA ratio can be 10-20 basis points at any given quarter. We talked about it last quarter and mentioned that. The core specific loan loss provisions for the quarter were INR 1,821 crores as against INR 2,286 crores during the prior quarter. Total provisions reported were INR 2,994 crores against INR 3,924 crores during the prior quarter. Total provisions in the current quarter included additional contingent provisions of approximately INR 900 crore. The specific provision coverage ratio was at 71%. There are no technical write-off or head office advances. They are fully integrated. At the end of current quarter, contingent provision towards loans were approximately INR 8,600 crore. The bank's floating provisions remained at INR 1,400 crore and general provisions were at INR 6,000 crore. Total provisions comprising specific floating contingents and general provisions were 172% of gross non-performing loans. This is in addition to security held as collateral in the normal course. Looking through another lens, floating contingent and general provisions were 1.27% of gross advances as of December 31. Now coming to credit cost ratio. The core credit cost ratio that is the specific loan loss ratio is at 57 basis points for the quarter against 76 basis points for the prior quarter and 116 basis points on a pro forma basis for prior year. Recoveries which are recorded as miscellaneous income amount to 25 basis points of gross advances for the quarter against 23 basis points in the prior quarter. Total annualized credit cost, credit cost for the quarter was at 94 basis points, which includes impact of contingent provision of approximately 30 basis points. Prior year was at 125 basis points and prior quarter was at 130 basis points. Net profit for the quarter at INR 10,342 crore grew by 18.1% over prior year. We'll give you some balance sheet items, color on some balance sheet items. Total deposits amounting to INR 14,45,918 crore is up 13.8% over prior year. This is an addition of approximately INR 40,000 crore in the quarter and INR 1,75,000 crore since prior year. Retail constituted about 83% of total deposits and contributed to the entire deposit growth since last year. CASA deposits registered a robust growth of 24.6% year-on-year, ending the quarter at INR 6,81,225 crore, with savings account deposits at INR 4,71,000 crore and current account deposits at INR 2,10,000 crore. Time deposits at INR 7,64,693 crore grew by 5.6% over previous year. Time deposits in retail segment grew by 8.3%. Time deposits in wholesale segment decreased by 2.8% year-on-year. CASA deposits comprised 47% of total deposits as of December end. Total advances were INR 10,60,863 crore, grew by 5.2% sequentially and 16.5% over prior year. This is an addition of approximately INR 62,000 crore during the quarter and INR 1,79,000 crore since prior year. Moving on to capital which I covered at the beginning. Total, according to Basel III guidelines, total capital adequacy is 19.5%. Tier I 18.4%, CET1 at 13.1%, which I covered previously. Now, getting on to some highlights on HDBFSL, this will be on Ind AS basis. The total loan book as of December 31 stood at INR 60,478 crore with a secured loan book comprising 74% of the total loan. Conservative underwriting policies on new customer acquisition, which was implemented during COVID-19, continues to be in place and will be reviewed in due course based on external environment. Disbursements are 6% Q3, growing 9% quarter-on-quarter and 11% year-on-year. For the quarter, HDBFSL net revenues were INR 1,982 crores, a growth of 15%. Provisions and contingencies for the quarter were at INR 530 crores, including INR 92 crores of management overlays against INR 1,024 crores for prior year. Profit after tax for the quarter was INR 304 crores compared to a loss of INR 146 crores for the prior year quarter and a profit after tax of INR 192 crores for the sequential quarter. As of December end, gross stage three stood at 6.05% flat sequential quarter. 80% of the stage three book was secured, carrying provision coverage of about 41% as of December end and is fully collateralized. 20% of the stage three book which is unsecured had a provision coverage of 84%. Liquidity coverage ratio was strong at 222% and HDB is funded with a CASA balance of 5.9%. Total capital adequacy ratio is at 20.3 with the tier one at 14.9. With markets opening up and customer accessibility improved to near pre-COVID levels, we believe the company is well poised for a healthy growth from here on subject to any impact on further waves of COVID. Now a few words on HSL, again, on Ind AS basis. HSL Securities Limited with its wide network presence of 213 branches and 147 cities and towns in the country has shown an increase of 58% year-on-year in total revenue to INR 536 crores. Net profit after tax of INR 14.6 crores in Q3 with an increase of 58% year-on-year. HSL's digital account opening journeys are running successfully. There has been a significant increase in overall client base to 3.4 million customers as of end December, an increase of 30% over prior year. In summary, we have reasonably overcome the effects of pandemic over the past 21 months across broad counters of balance sheet P&L and human capital. While the effect of the latest COVID-19 wave is not clear, which we'll have to watch out over the next few weeks to see where it turns, we are confident of navigating through this, applying our learnings from past waves. Our growth is accelerating, leveraging on our people, product, distribution and technology. The quarter results reflect deposit growth of 14%, advances growth of 16%, cost after tax increased by 18%, delivering return on asset over 2%, earnings per share in the quarter of INR 18.7. Book value per share increased in the quarter by INR 19.4 to 414.3. With that, thank you very much. With that, may I request the operator to open up for questions, please. Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the attached phone telephone. If you wish to remove yourself from the question queue, you may press star and two. All questions are requested to you, thank you, while asking your question. Ladies and gentlemen, we will wait for a moment while the question queue is assembled. The first question is from the line of Mahrukh Adajania from Elara Capital. Please go ahead. Hello. Congratulations. My first question is on credit costs. With the total credit costs, including contingencies, have come below 100 after many quarters, around three years. Now, assuming that there is no further COVID wave, is that the new normal we are likely to see over the next few quarters? Yes, Mahrukh, thank you. I hope I can, yeah. Excuse me, sir. I'm so sorry to interrupt. May I please request you to speak closer to the phone, sir. Your audio is not clearly audible. Sorry, I moved my chair, but it's okay. Yeah. Mahrukh, thank you. Yes, valid question and appropriate. Thanks for asking that. See, we're coming from a COVID cycle where our bookings have been, from a retail point of view, benign. Second, from a wholesale point of view, which we have shown a very highly rated cautious, right? We come through the cycle and now starting to get to retail. The recent vintages, when you look at the recent vintage performance, they are far superior both to entry level scores and the customer profile in terms of how we opened up and started, they are superior. Right? Whether this is a new norm, I would not say that this is a new norm, right? This is you have to look at credit cost normally over a cycle or a period of a few years, you have to look through a cycle. That's how you need to look at it. If you look at our NPAs, 1.26% can bounce around at any time, 10, 20 basis points up and down. Two quarters ago, 1.47%, now 1.26%. It can go up and down within a small range. That's where it can come. From a credit cost point of view, well, we have not given a particular outlook. As such we have averaged in the past, call it, 1.2, 1.3 thereabout. That's the kind of range at which the total cost of credit, total provision, that I thought I'd come up with. Current quarter is at about 95. So that we call it, little lower than that, right? In a broad range, if you think about 100-150 basis points, that's where, go back to pre-COVID, that's the kind of range at which we have operated. Right? And if the credit costs are lower, then, you know, the way we look at it is it calls for experimenting a few things. It calls for opening up for policy. There is a policy reaction that comes in, right? There is always the pull and pressure between the business and the credits that happens. I wouldn't take that 50 or 60 basis points steady credit cost or the 50 bps or a total cost of 95 basis point as a good standard for long time to come. This is the current quarter where we are. Okay. Thank you, sir. My next question is on fees. You did mention that payment and credit card related fees declined, but I mean, if you could give more color, was there any one-off or promotional expenses which won't recur so that we know or we can, you know, get a clear outlook on the trajectory in the next few quarters? Okay. Yeah. Now again, a good quick question. Thank you. See the fees, INR 5,000 crores that we reported is 2%, right? In the past, we have done pre-COVID, if you think about it, before there were waivers and so on and so forth, we have done 20-odd% also. We have consistently said the way to think about the fees is somewhere where it should settle, is mid to high-teens kind of place is where it can settle, all right? Normally. This quarter, if you think about excluding the payment products, it is at about 17%. Payment products has been unusually low. There are a few things to think about on the payment products. One, as I alluded to, we offer certain fee waivers to incentivize customer engagement, right? So that's one thing, which doesn't need to recur every quarter, but it can happen every other quarter depending on what programs we run, right? But that's part of running the business and that's part of growing the franchise, right? So that's one thing to think about. Second, even from a cards point of view, from a credit, I think I alluded to, in terms of how customer behavior from a late payment point of view, right? Is that the customers are paying very much on time, so that is reflected there too. So the opportunity that we used to get from a late payment doesn't come through. If customers used to take cash advances, that is on the lower end. They say the cycle has to turn little more on that, and then you'll see some cash advances coming through, right? From a policy point of view, until recently we were tight on the credit limits, right? There is a credit limit. Over the credit limit, there is some fees that will come. That is also lower because from a policy point of view, we've been cautious on that, right? As we speak now, the policy review has taken place and we are getting to business as usual subject to another wave of what is that and so on, right? That is one aspect that you think in terms of the impact. The broader context is required in terms of what is the overall, right? If you think about the customer itself, particularly I'm talking about the payment products, the card customers, right? The credit line utilization is at a low. It's only at the pre-pandemic level. While the spend levels are up 24% and the interchange is quite robust and good. We had a good momentum on that. But the credit line utilization has got much more to go to get back to the pre-pandemic level. That's one thing on the people who are spending. The things are stable. If you think about this, they are all saying what is happening to the revolver sides, right? That is also at about 0.7-0.8 of the pre-COVID levels in terms of the revolving on cards. So there is much more room for people to get into those revolver sides, right? That's part of what the strong quality of the book that we use today, right? So that is part of what some of the fees that come are also muted, which are connected to that. I'll give you another perspective to think about on the card customers itself, right? On the customer's liquidity. Deposit balances. You know, most of our card customers, you know, have liability relationships with us, right? We have good amount of liability relationships. Card customers contributed almost 4x in pre-COVID, right? If you exceed the ANR of cards, which is the card loans on books, at an aggregate level. At an aggregate level, the liability balances on the card customers were typically 4x. Right now it is 5x. Which means customers are sitting on a good amount of deposits and liability balances with us. So this is the economy has come down and now, with the huge amount of liquidity and cash in households with people. Now it is starting to pick up on growth. And this is part of the cyclical growth that we expect that to come back to reversion, right? From a long-term point of view, mid-teens to high- teens is what we have said in the past that that platform should expect, from a card fees point of view. Thanks. But how, in your assessment, how many quarters would it take to reach that long term? See, it depends. It's combination of both, the environment, the economic activity in the environment, and the customer behavior to get on with that. It could be two, three, four quarters. I would expect that. I don't want to venture to predict exactly what it is because there's no exact science that tells where it is. But typically that is what you would see, that it takes for an annuity model to operate. Similarly, the same thing applies to if you think about the PPOP, it is very similar, right? Whether - as the loan growth gets back, the PPOP should more or less mimic the loan growth. That is what historically we have shown. That is where historically we have performed, right? That is the kind of what the loan growth is, the headlines. That's what more most of the lines operate, tend to be similar, as we go along. Okay. Thanks. Thanks a lot. That's helpful. Thank you. Thank you. The next question is from the line of Alpesh Mehta from IIFL Securities. Please go ahead. Hey, thanks. Thanks for taking my question and comments on the recent set of quarters. The first question is about the reconciliation between the on the restructured loans. What we see in the notes to accounts, that works out to be around INR 22,000. Now we see 1.37% works out to be around INR 17,000. How do you reconcile both these numbers? Okay. Well, you see what you said. When I see notes to accounts, the total number works out to be around 18,000 loans. Uh-huh. There would be a R1 number. Both put together is around INR 25,900 crores. Notes to accounts also mentions that the double counting between R1 and R2 is around INR 2,700 crores or something like that. The net number works out to be around INR 23,200 crores, whereas our comment shows that it's around INR 17,200 crores. That is a gap of just around INR 6,000 crores? Okay. Got your question. See it is based on what the template, right? Somebody signed the template and we fill the template up and put up there, right? That's something different. It's a good point that you raised, right? The INR 25,000 crore, what was there is what we've granted as a restructuring in R1 and R2. When you add up, that's what it is. If you eliminate the double count, it is like INR 22,000 crore, right? This is originally as granted in several points in time. That means whenever it was granted at those points in time, right, what was the number? That is what we see there. Last September, we reported INR 18,000 crore, right? Last September. Currently, we say 1.37, that is INR 17,500 crores or so approximately. First, what the eighteen thousand four hundred to seventeen thousand five hundred, the movement, they call that about INR 900 crores of movement, but half of it is moved to NPA, half of it is a net of various recoveries and adjustments. That is part of what from September to December things have moved, right? Between the 22,000 to what we reported in September, 18,000, that is the net of whatever happened before September, which is between what happened to NPA, what happened to various recoveries and adjustment around that time, right? As we speak in September. That's part of. I think some of you picked up the number of what was originally granted, but what was outstanding as of September is INR 18,000, and now it is INR 17,500. Okay. Srini, just correct me if I'm wrong. If I look at the September disclosure, right, the R1 plus R2 minus the double counting, as per the notes to accounts was around INR 22,500. Of which there were NPAs and the amount repaid of the R1 amount that you mentioned in the notes to accounts. That number was around INR 20,400. Whereas as per your disclosure in September was INR 18,200. The INR 2,000 crores was the difference between the amount which was reported as of September and your result date. Is that my understanding correct? Correct. Various other recoveries and other things that came until the reporting date. Okay. And right now also is a similar situation wherein you have not reported the NPAs and the repaid amount out of R1 and R2. So the as per the notes to accounts, it could be around INR 23,200 crore. But after the recovery NPAs everything and the repayment et cetera, it's around INR 17,000 crore mark. This quarter. The number. This quarter notes to accounts simply calls for, this is again mandated, right? Calls for reporting only R2. As originally granted, this is reflecting INR 18,000 crore or something in the notes. INR 18,000 crore is not the outstanding, right? It is INR 17,500 crore outstanding. So whatever was mandated to show in the notes, that's what we showed. But both, when I talked and I gave, the 1.37, that is the INR 17,500 crore. Which is R1, R2, whatever is the restructuring outstanding on the balance sheet, that is the number that you are mentioning? That is correct. That is correct. Okay. The second question on the can you just give some qualitative comments related to the tenure of this book? You mentioned as one of your comment that 10-20 basis points would be shifting to gross NPA at any given point in time. There could be a situation that almost 25-30% of this book can flip over a period of next one year. So when we are talking about 10-20 basis points of that particular quarter or over the tenure of the book. For example, if it's around 1.37%, then out of this 1.37%, only 20 basis points can flip into NPA category. I just wanted to clarify that point. Okay. See, by the way, there is no particular science of 10, 20 or something. This is based on what our analytics comes up to say, based on what experience we have seen, based on the customer profile which I alluded to say, for example, the one that I gave, about 40% are secure, right? Fully collateralized and we with a good CIBIL score, which we feel very comfortable with, right? On the unsecured portion, we said about call it roughly about two-thirds or so are salaried customers where we feel quite comfortable, right? On the balance, where we keep watch, about 40% or so are good CIBIL scores. CIBIL score more than 700 or so, right? So based on various these kind of analysis, that's where we if you said we feel comfortable that 10-20 basis points at any particular point in time, that can be within our tolerable range, right? And from a restructuring point of view, generally the restructuring it can run up to two years, right? And again, if there was one year of a loan left and the two years granted, now the person will start it from over three years to go. Okay. Again, just clarifying what I heard is almost 15%-20% of the book can flip as per your analytics. Is that the number correct now? That 10, 20 basis points is of 1.37%. It's around whatever that 7%-15% of the book can flip based on your analytics of the customer data that you have. No, I don't want to venture into extrapolating the 10-20 basis points into various time periods. Yeah. Yeah. Got it. Got it. Okay. The second question is related to the credit growth. Historically we had a multiple, X multiple of the system credit growth that we always used to guide about, but as just an indicated number. Now when I see at the system level because of the consolidation in the larger segment, within the PSU banks, the system may be growing at X%, but the private sector banks are growing much faster than that. And some of our larger peers are also growing at a significantly higher rate than that of the system. How do we see our credit growth? Do we still maintain that X percentage that we used to talk about in the past? We can have a better opportunities to grow much faster and gain market share. Secondly, your comments on the three specific products. One is payment products. Second one is the commercial and rural banking which is growing very fast at around almost 30% Y-o-Y. And lastly, corporate and wholesale banking since we have developed quite a bit of capabilities over the last two years and grown this book aggressively as a share of overall loan book. So these are my questions. Thank you. Okay. No, thank you. Long question, but I'll try to be as short and crisp as possible. You know, if you think about the loan growth and the market share, one thing is that, you know, our loan growth is consistent, right? Consistently growing, including during the COVID period. One has to look at it not one quarter, two quarters, but over a longer period of time. One has to look at how we are growing rather than the one period. Essentially looking at the consistency of growth over a longer period. For example, you can take a two-year growth, right? A longer period. That includes the COVID period too. We have grown at 35%, right? But call it high teens annual, that kind of a growth rate as well. You can go back to a five-year period between 2016 and 2021 or something like that. Again, about 2+, that will be more than double, call it high-teens type of growth. That's what we had at that time. One has to evaluate in the current circumstances one also has to evaluate based on incremental basis, right? What we have grown. We believe based on an incremental basis, we have a share of more than 25% or so on an incremental basis, right? From what has happened. You know, if you think about it, INR 1.79 lakh crore in the past 12 months or INR 3.25 lakh crore in 24 months, right? And again, we focus on appropriate products. We touched upon the categories of commercial and rural or wholesale and retail. Yes, at some point in time, we did grow good amounts of wholesale with a good demand. We were there for the customers to support them in terms of the wholesale, very highly rated. Now we see a lot of prepayments happening. That's about 7.5% year-on-year we see in the wholesale. On the commercial and rural, enormous opportunity and very fast growing. You know, about a third of the country's GDP is contributed by that kind of a segment, right? We want to participate more vehemently in that group, in that segment, and we will continue to bounce on that one. On the retail, we were subdued, rightfully so from a policy point of view. We are back, and that is what we are seeing in the sequential growth at 4.5% or so. So Net-net, I mean, coming back to the same summary, which is, now one quarter or two quarters doesn't establish what the growth is. It's about the consistency of growth and over a period of time. And that's how you must look at it in terms of our growth and we will continue to capture market share. And again, in a balanced portfolio across secured, unsecured in retail, across commercial and rural and wholesale. Across various product segments, customer segments. Thank you. The next question is from the line of Aakriti Kakkar from Goldman Sachs. Please go ahead. Yeah, thanks. Hi, Srini. Good evening. Rahul here. A couple of questions. First one on the asset quality bit. Just wanted to confirm, was there any new restructuring that you did in this quarter? No new restructuring, but part of that net change that I gave you, INR 500 crore is a plus and a minus net of INR 500 crore, which is whatever was in the pipeline that came through that was about INR 500 crore or so that new debt payment, but that was not a new granted application. Whatever was in the pipeline that came, but then the pay downs and other things that happened. So net-net it is at INR 17,501.37 crore. Understood. Thanks. The second bit is on the slippages and, you know, credit costs. I think Mahrukh also asked this point. Question on the credit costs also 95 basis points and slippages also are one of the lowest that we've seen in the last few quarters. Assuming no pandemic impact, do you think this could be a new normal over the next few quarters? And then i n that context, how do you plan to build up the ACR buffers from here? Shall we continue to see more and more provisioning coming through? Okay. No, really good question. You touched upon another aspect of what Mahrukh also touched upon. But you know, as a bank, we don't give one particular outlook or a forecast in terms of how to look at a credit. But all I can point you to is historical to say that in the recent COVID time period, we operated 1.2%, 1.3% kind of thing. If you go a little before the COVID period, 100-120 basis points somewhere where we operated. Currently including the COVID, the contingent provision is about 95 basis points. Yes, for over a period of time, again, when you look at it, we should revert to that kind of a what was the pre-COVID mean, type of a mean reversion should happen towards there, right? Current quarter is reflective of what we have booked because the recent vintages, call it the 18 months or 15, 18, 21 months type of vintages that we have booked, across various segments, right? Across various segments, they are of a very good quality. Retail book, you know, is typically two years on an average retail book. It is of a very good quality. Our innovation lab is working on several things, including opening up new to bank, right? That means what previously that we had about call it 80% of existing to bank the personal loan or call it two-thirds to 70% existing to bank card loans. Now our innovation lab is making progress towards using alternative data from the market to see how new to bank could be as efficiently scored and pass through the muster on the scoring models to get it. So yes, I wouldn't ask you to project based on the current quarter. If you think about it from a pre-COVID norm what it is and that's the kind of the second aspect of the question on the building of the provisions and so on, right? See, our buildup of the contingent provisions goes back several quarters and much before the onset of the COVID, right? For example, if you look at June 2019 or so, when we initiated a build of our contingent provisions, that was the argument of countercyclical provisions then, right? At that time, the contingent provisions were less than INR 1,000 crore, right? Today it's built up more than INR 8,500 crore, right? Or about 70 basis points of gross advances or 80 basis points including provisions. Whichever way you look at it, right? What it does is that it makes the balance sheet much more resilient for any shocks, uncertainty pandemic can bring. What does such resiliency do? It supports good execution on the front line for our growth, including making several experiments in our labs as I alluded to. That's how we should think about. We evaluate it quarter to quarter. There is no pre-planned type of how this runs. We take it as it comes in a quarter and evaluate it. Got it. Srini, just two more questions. The other question was on the credit card or the payment product profitability. You laid out a few points, why it was muted this quarter. But when you think about the structural profitability of this product and also what regulators are thinking, any thoughts as to how we should think about what are the components that would still remain remunerative while the components which could witness, you know, some pressure. You pointed about the fee waivers, you know, the late payment fee, et cetera, you know, sort of coming down. How should we think about more from a one to two-year perspective? Good question, right? We'll come to that, the regulatory or any other thing that we'll come to that. From an overall buoyancy point of view, see the first aspect of a card is about the spend. The spend is quite picked up, 24% or so year-on-year growth, right? That is something that has happened. The next thing as the spend goes up, the credit line utilization needs to go up. As I said, the credit line utilization due to the spend coming down over a period of the COVID came down. Now it needs to go up, but still credit line utilizations are about 0.8 of the pre-pandemic levels. So that should start to go up. Then along with that gets to the revolving and so on and so forth, as it relates to the top, right? From a fee charging point of view, there's various fees. The penal type of fees or incentive type of fees or loan origination kind of fees, those are routine and will happen, moves on as volumes come up, right? Any other type of fees that there can be a regulatory constraint also comes with a cost, right? That means you need to think about not just the fees, it's also you need to think about the cost that goes with the fee. For example, if there are certain fees that goes up, there has to be a certain cost also that goes up, right? What are the type of costs that can go up? You see that there is a balance between what you earn on the fees and what you spend on the expenses, call it the rewards, call it the cash back, call it the sales promotion, the marketing promotion. They all have some linkages across the P&L, right? From top to bottom. These are the kind of linkages. One cannot look at it only in isolation as a structural change, right? There's no such structural change. If there were to be a structural change, one has to look at it across all the P&L lines in terms of what is discretionary and what supports what, right? Then accordingly one has to model. From an aggregate sense, the cost profitability model should remain intact irrespective of whatever. Got it. Last question on the digital strategy. You know, you've announced a partnership with a few entities. So can you just talk about this partnership with FinTechs from the entity that you're looking about, and how does it sort of feed into your digital tool strategy to acquire and retain the customers? Also from operating leverage point of view. That is the last question. Thank you, Srini. Okay, thank you. I know this is more of a. It's a key question and getting talked about everywhere in terms of partnerships and how we think about and the cost income and so on and so forth. Maybe it's the time I'll take two or three minutes or so to describe, right, how we think about it. You can see whether it fits in with what you're all thinking. Right? See, in a bank you like to look at things in three different kind of activity, call it like that, right? One is the customer acquisition, the second one is the customer servicing, and third one is relationship management. This is the continuance of how one engages with the customer and works on. The various FinTechs and the partnerships that we are all talking about is on the front end there, on the customer acquisition side, right? We have several channels for acquisition. Branch, we have a virtual relationship model, we have a feet-on-street model, we have a physical DSA model, right? Then now we have a digital marketing model developed over the last three years based on analytics. Now we have a partnership model, whether you call it a FinTech partnership or any other type of partnership that you think about, that is another model. And we do get, I gave you some time ago in terms of regarding 2.4 million liability relationships. That's a key ingredient that comes in based on which every other product starts to work on that, right? That is the kind of inflow of customers. You get little more accelerated customer acquisition. At the end of the day, you measure the effectiveness of that through the better cost of acquisition. Which is the optimal cost of acquisition? That's where it gravitates to. Because branch brings in accounts, brings in relationships at a cost that is much better than the FinTech or better than a partnership. That is where things gravitate to, right? That part of the cost of acquisition model, that's how you think about that. Then certain other FinTech or a service or a mobile banking feature or various other things that goes in customer services. It is enabling customers to do things where it can be done on self-service or where it is done through a relationship management, how on a straight-through basis, on a paperless basis that we execute. That's where you measure that to a cost-to-income. Whether are you at an optimum level in a cost-to-income where you're able to support the customer's activity in an optimum manner. In fact, that is that you measure through how we are executing on that aspect of it, right? Now, on the relationship management, which is where the most of the money, right? Which somewhere in the past we have done, we have said, even last year I think we mentioned it. Call it about a third or less than a third, less than 30% of our customers provide little more than two-thirds of value to the bank, right? 30% of the customers are the ones where we have relationship management. At the end of the day, you can bring in any customers through any channel, optimum cost of acquisition. You service them through digital approach to any way. At the end of the day, the value, it comes through relationship management, right? That's what at least in our case, we have published that and we have talked about it in the past. It is about the relationship management that brings in. Now, there are certain things in relationship management. For example, in the relationship management we implemented, we talked about over the last 12 months actually during the COVID period, the analytics-based engagement with the customer, the next best action that we implemented, right? In terms of how it rank orders customer preferences based on product behavior and intent to purchase and that. The recommendations that come, we have for 20 million customers, we have recommendations that we have an engagement with them. Again, it is digitally driven, proprietary driven internally through analytics. Technology helps there, but the delivery is through relationship management. This is it can't be delivered through a mobile banking or an internet banking or a FinTech partnership or any other partnership can't be delivered, right? It gets delivered through because that's where the value comes through a relationship approach, right? That is something that the capability is coming from there. So that's, I probably leave it there. I have taken a minute or two more than what I said I will use on that. Hope that gives a perspective of how we think about. Yes. Yes. Thank you so much, Srini. We'll definitely take it offline as well. Thank you so much. Thank you. The next question is from the line of Saurabh from JP Morgan. Please go ahead. Hi. Good evening, Srini. Sir, just one question. One, this is on your net interest margin. So how should we think about the progression from here? The book mix clearly seems to be getting better. And if rates rise, you clearly seem to be better positioned. So would you expect that the NIM should go up from here? And in that context, to your earlier comment that PPOP will grow in line with loan growth, shouldn't ideally this growth be better? Okay. Saurabh, thanks for asking. Again, the key part of the part of the dynamic from the P&L to think about, right? Historically over a period of three years, five, 10, 15, right? We have seen all of those and you have seen too. The banks have operated in a band of call it 3.94%-4.45%, right? 4.4%-4.5%. That's the band at which. By the way, that is based on average assets, not interest-earning assets because we don't want to get confused with the denominator being what it is. Denominator in this case that I quoted the number is average assets because there is a process I think in the industry about using interest-earning assets, but that's a different matter. Okay, 3.94% to 4.4%-4.5%. That's the band at which we are currently at the low end of the band because the retail product where we see much, much more of yield coming, much more of a spread coming, and it comes with higher RWA, right? It comes with a better return with a higher risk rating on those, right? That comes there. We brought that down, and it's in the mid-40s, and it's starting to take its own legs and start to grow, right? One is that it needs to take its time to grow back to what it was, call it two years ago, right? That's the journey. The journey, if you look at the sequential, that we have seen about 4.5%, call it 18% or so is the growth on the retail portfolio, right? The next part of that could also be on the retail front itself, the mix of the retail front, right? Whether in the current rate scenario, what sort of loans that we take. It also depends on the segment in which we operate. In the recent past, we have had a good growth in retail. This quarter 4.5%. Last quarter also it was four something, right? So it's gonna take a few quarters for that to come back to life. Within that, as we came out of COVID and started to focus on this, we have five categorizations for the corporate target segment, where many of our high-yield products are targeted to, right? Category A, B, C, D, E, right? Category A, B, C, cat A, cat B, cat C is a kind of a very popular where we have had a good success to start with right now. We should have broad-based as we go along with that yield and the rates also going up. That is something to keep in mind. The other aspect of it is also the government segment. The government segment in our analytics risk analytics model can typically be a low risk relative to the rest and will come in a risk-based pricing model. It will come with a low, relatively lower yield than the rest. That is something also we are focused and continuing to focus on that also. At the end of the day, it will take few quarters for this mix of retail and within the mix of retail to be much more broad-based across all the segments within the retail that we are talking about to come up. That is one aspect of what we can think about the NIM coming up. The other aspect of the NIM is also about the rates itself, right? If you think about the repo rates, loans linked to repo rates, slightly under a third right now, right about 31, 32. Slightly under one third of our loan book is linked to a repo rate and about a little mid-single digit or so is linked to T-bills, right? And so which is if you go back two, three years ago when we were in the mid to high end of that NIM range, the complement, that means the composition of these two, they're very meager, right? They're very low. Call it, wouldn't call it single digit, but very low, it was. It has moved up and now the rate starts to move up, that is going to give something. Of course, as the rate starts to move up, so that will have an impact on the cost of funds too. But the cost of funds, it can come with a lag. On savings deposits, not necessarily, on the time deposits it can come with a lag, right? That's the kind of way you think about it, saying one is the rate environment and another is the mix of retail that can come and bring in that. Got it, Srini. So Ideally it should move up. That's what I was coming to, that if your NIMs tend to move up, shouldn't your operating profit be better than loan growth? This is the limited point I was trying to get at. See, Saurabh, it's a good point that you say, right? From at least my point of view, my perspective, I will tell you that you need to be continuously investing, right? When you make those continuous investments, then that is where you get to the long term. In a static book, what you say is right? If you look at it in the short term, say, "Hey, don't make any other change. Just allow these two changes. Change the mix on the loans and change the segments between retail, get to a higher yield segment." Should that be? Yes, it will be. You know that it is not a unidimensional model, right? It should be a dynamic model where you invest for the future. That's why I alluded to in my opening remarks that, about the branch investment, about the people investment, about the technology investment. You need to do that for the future. You don't see a return on it today. You will see the return on it in a couple of years' time, right? Because the branch maturity model takes anywhere from two to three years to be in a reasonable state and between five to 10 years to get to the robust state, right? Same with people productivity. You need to make those continuous investments on those. That is why the pre-provision operating profit or PPOP limiting kind of a lending growth rate, that's how historically we have been because continuously we have added branches. If you think about in the last five to 10 years, we've added 2,600 branches in the last 5-10 years. In the last one to three years, we've added 1,100 branches, right? And so that - these are the kind of investments continuously we do to model so that it is dynamically maintained for a longer term to come. Got it. Thank you, Srini. Thank you. Thank you. Thank you. Thank you. The next question is from the line of Suresh Ganapathy from Macquarie. Please go ahead. Yeah. Hi, Srini, I have a question on these, on the fees for the payments products. In the sense that are you seeing pressure on interchange fees? Are the MDR levels coming down? So the reason why I'm asking this question is that first, of course, you can just tell us what has been the experience. Secondly, from the new digital payments paper, I know it's always difficult to second guess what the regulator is thinking, but do you really think there can be further reduction with respect to MDRs on debit cards? Can there be something on credit cards? Can UPI be monetizable? I'm just asking all these questions because everything has got to do with the payment-related fees. If the regulator is thinking only in one direction, that's to bring down the transaction cost, then this is not gonna be one quarter phenomenon. You're going to be prepared for subsequent several quarters. How is the management thinking about taking care of some of the regulatory challenges here? Thanks so much, Srini. Yeah. Thank you. Thank you, Suresh. It's indeed important to address it and think about and say about what we think, right? There are two aspects to this. One is the experience itself in terms of what we see on the interchange or the MDR. There has been no pressure on interchange or MDR from a rate point of view, right? It has been quite steady and quite nice. That is something from our recent experience that has not been inhibiting our kind of a fee line. The rate is quite all right. Now when the MDR, we'll address that because it is easy to address. We'll come to interchange. See, MDR we don't make on a net basis, we don't make much. We don't make anything on MDR for that matter. That means, if it is an internal customer, that means we have an issuing card. Our MDR business pays interchange to the issuing card, right? And if it is a third party card, our MDR business pays interchange to a third party issuer, right? MDR business as such is pretty neutral, but we still very vehemently pursue MDR relationship or merchant relationship 2.885 million and continuously grow that because of the sandwich strategy, which is along with that comes the liability and comes the asset value, right? Which we liability we have already started and assets we are working on various models, and we have come to a reasonable value there. We still have to do a lot to grow there, but that's part of that strategy, so that MDR as such, there is nothing to take it away on MDR because there's nothing there to take it away. So that's one. Now coming to the interchange, it is being held steady. If there is any other pressure on interchange, Suresh has alluded to it earlier in some other context of the question, which is. See, the interchange in isolation perhaps should not be looked at. Interchange should be looked at in the context of what is the rewards that is offered on the card, right? What is the reward cost of the reward points, cost of the cashback points that are cashback cost which is there. Cost of the sales and promotion marketing type of costs that are there, right? So if you draw a P&L only on the sales, that means keep the revolvers to the side. Keep those people who do the cash advances and who do the limit enhancements or spend more than the limits and who habitually pay late and keep them to the side, right? And the pure transactors if you see and you draw a P&L on the transactors, it is like that MDR sandwich strategy. You keep the customer engaged because you've got a float on the liability side with the customer, and you're able to do certain things on the asset side of the customer. If the interchange for any reason, right, which we can't predict, but if any reason that has to move up or down, then you get the other levers on the P&L gets operated, right? Which is when you look at rewards, when you look at your cash cards, when you look at your marketing and sales promotion, and so you look at all of those and try to manage the P&L to profit. Okay. Okay. Thanks. Thank you. Yeah. Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Vaidyanathan for closing comments. Oh, okay. Thank you, Janvi. Thanks to all the participants for dialing in today. We appreciate your engagement, and if you do have anything more that we could help you from your understanding, Ajit Shetty and our investor relations will be available to talk at some point of time in the future. Please do stay in touch with us. Thank you. Thank you. On behalf of HDFC Bank Limited, that concludes this conference. Thank you all for joining. You may now disconnect your lines.