Ladies and gentlemen, good evening and welcome to HDFC Bank Limited Q1 FY23 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 a 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 now hand the conference over to Mr. Srinivasan Vaidyanathan, Chief Financial Officer, HDFC Bank. Thank you, and over to you, sir. Okay. Thank you, Faizan. Appreciate. Good evening and a warm welcome to all the participants. We can get started with providing the context on the environment that we operated in the quarter so that gives the backdrop of what was going on. Much of this quarter has been about inflation and price surges, as you know. Energy and fuel have been at the center. Supply chains have been disrupted, which created a major demand and supply gap. As we progress further in the year, we'll keep a careful watch on the development. We see opportunities in the marketplace in the current environment, supported by dynamic fiscal and monetary policy. Activity indicators released during April to June quarter indicate that economic activity continues to hold up well despite global risk. GST collections, manufacturing, PMI, IIP, credit, rail freight, services, PMI, et cetera, et cetera, show robustness on opportunities in the economy. The RBI raised the policy rate by 90 basis points in the quarter, taking the repo rate to 4.9. The Monetary Policy Committee also voted to remain focused on withdrawal of accommodation in a calibrated fashion to ensure inflation remains within the RBI's upper band while supporting growth. Accordingly, we have responded with appropriate lending rate increases. Now let's start. Let's talk about the five themes at a high level, now. On the distribution expansion, that's the first thing, we added 36 branches during the quarter, and 250 more are in various stages of readiness to be rolled out. We have 15,618 business correspondents, an increase of 277 over prior quarter. Gold loans are now processed at just over 2,000 branches as against 1,340 branches in the prior quarter. It is well on the way to be a product offering in most of our branches. Payment acceptance points have grown to 3.2 million, a year-on-year growth of 42%. Wealth management is now offered in 357 locations through hub-and-spoke model. We have expanded to 141 new locations in the quarter. This is in accordance with our plan to take this to deeper geographies in over 900 locations in the current financial year. In commercial and rural banking, SME is now offered in 640 districts in our drive to expand the SME market share. Next, let's talk about a few comments on the customer franchise building. During the quarter we added 10,900+ people and 29,000 people over the year, over the past twelve months. Our people have acquired 2.6 million new liability relationships in the quarter, exhibiting a phenomenal growth of 59% over the same time last year, and 10% over prior quarter. They've also acquired 1.9 lakh MSC accounts in the quarter. On cards, we have issued 1.2 million new cards during the quarter, highest ever with a 47% growth over prior quarter. Total cards, card base now stand at 17.6 million. Moving on to next, our focus on the granular deposit. Deposits at INR 16,04,000 crore increased by approximately INR 36,000 crore in the quarter as against an addition of approximately INR 11,000 crore in last year June quarter. Deposits reflected a year-on-year growth of 19.2%. Retail deposits increased by approximately INR 50,000 crore in the quarter, up 19% year-on-year and 3.9% sequentially. CASA deposits recorded a strong growth of 20% year-on-year, ending the quarter at INR 7,34,000 crore with a CASA ratio at 35.8%. Term deposits grew by 18.5% year-on-year, ending the quarter at INR 8,70,000 crore. Next, moving on to advances. Total advances were INR 13,95,000 crore. Gross of sell downs, we grew 22.5% year-on-year. Our retail advances growth continued during the quarter as well. Retail advances grew 21.7% year-on-year and 4.9% quarter-on-quarter. Excluding auto and two-wheeler loans which faced supply chain disruptions during the quarter, the year-on-year retail growth, excluding these two, were 25%. Card spends have grown by 24% over prior quarter. Payment business advances, payment business loans has grown 27% over prior year and 4.4% over prior quarter. The bank has a market share of 22.4% in cards, 48.9% in card receivables, 27.7% in card spends, and 47% in merchant acquiring volumes. Commercial and rural banking, which drives our MSME and PSL book, continues momentum with a year-on-year growth of 28.9%. In the wholesale segment, with the rates dislocation, we let go assets aggregating to INR 40,000 crore-INR 50,000 crore. Despite that, the book grew 15.7% year-on-year. Lastly, on technology and digital. As promised, the bank commenced digital launches to enable smooth customer experience. MyCards, which is a microservices architecture that is stateless and deployed on cloud, making it highly scalable. This has emerged as a preferred service tool for our customers with a simplified login and self-service features. We now have over 2 million registered card users, a growth of 1 million over prior quarter. We had 33 million customer service addressed digitally during the quarter on this platform. This microservices architecture design principle de-risks and removes clutter on our digital platform and enhances customer service. Xpress Car Loan is an end-to-end digital service, which enables instant and hassle-free car loan disbursements for existing and new-to-bank customers. 60% of our loan decisioning through this service are processed in less than 5 minutes, with disbursements taking less than 30 minutes. Within a month of launch, Xpress Car Loan volumes has already reached more than 5% of our new car loan volume. HDFC Bank One, our customer experience hub, has been launched recently on multiple channels, email, social care, SMS, and WhatsApp, and enhances our customer relationship management using AI/ML and conversational bot, enabling round-the-clock self-service capabilities akin to human interaction. We are continuously adding features to our SmartHub mobile app and see a significant increase in its adoption across our customer base. We now have more than 1.15 million customers since its launch onboarded on this platform. In Q2, that is the current running quarter, July to September, we are poised to launch further digital initiatives such as PayZapp 2.0, customer onboarding journeys across more products such as FD, balance transfer, EMI, et cetera, implementing customer experience hub across additional service and sales channels such as phone banking and telesales. For enhanced customer service and relationship management, we've continued to work on developing applications for Q3 implementation. For instance, SmartWealth, revamping net banking, revamping corporate net banking, and launch of new mobile banking app in Q4. In Q1, we received a total of 231 million visits on our website, averaging 28+ million unique customers per month, which is a year-on-year growth of about 20%. Business growth continued to gain momentum across diverse products and segments, driven through relationship management and enhanced digital offering. Balance sheet remains resilient. Average LCR for the quarter was at 108% and was at 120% as of June quarter end. Capital adequacy ratio is at 18.1%, with CET1 at 16.5%, including profits for the current quarter. Let's start with net revenues. Core net revenues were at INR 27,181 crore, excluding trading and mark-to-market losses, which grew by 19.8% over prior year and 2.4% over prior quarter. Driven by advances growth of 22.5%, deposits growth of 19.2%, and total balance sheet growth of 20.3%. Net interest income for the quarter, at INR 19,481 crore, grew by 13.5% over prior year and 3.2% over prior quarter. The core net interest margin was at 4.0%. Based on interest earning assets, the net interest margin was at 4.2%. Moving on to details of other income. First, fees and commission income was at INR 5,360 crore and grew by 38% over prior year and were lower 4.8% over prior quarter after seasonally strong fourth quarter. Retail constitutes approximately 92% of fees. The rest of other income at INR 1,259 crore was higher by 5% compared to prior year. Trading and mark-to-market losses were INR 1,312 crore, primarily owing to spike in benchmark bond yields witnessed during the quarter. The mark-to-market losses come from our AFS, HFT, and Government of India securities, corporate bonds, and pass-through certificates. Prior quarter was a negative 40 crore and prior year was a gain of INR 600 crore. Other miscellaneous income of INR 1,080 crore includes recoveries from return of accounts and dividends from subsidiaries. Excluding trading and mark-to-market losses, total other income at INR 7,700 crore grew by 35% over prior year. Operating expenses for the quarter were at INR 10,502 crore, an increase of 28.7% over prior year due to a low base of prior year COVID wave two impacted quarter and increased by 3.4% over prior quarter. We added 725 branches and 2,329 ATMs since last year, taking the total network strength to 6,378 branches, 18,620 ATMs, and 15,294 business correspondents managed by common service centers. Core cost-to-income ratio for the quarter, excluding trading and mark-to-market losses, was at 38.6%. Moving on to PPOP, our earnings trajectory improved with continued retail growth. Our core PPOP grew 14.7% year-on-year and 1.7% sequentially. Our pre-provision operating profit was at INR 15,368. Now, coming to asset quality, the GNPA ratio was at 1.2% as compared to 1.4% prior year. Out of the 1.2%- 8%, about 18 basis points are standard, thus the core GNPA ratio is 1.1. However, these are included by us in NPA as one of the other facility of the borrower is in NPA. We'll talk about 1.28. We'll have to anchor with that. As you have seen in the past several years, agricultural segment has a seasonal impact in June and December time. GNPA ratio, excluding NPAs in agricultural segment and a one-off, was at 1.03%. Prior year was at 1.26%, and prior quarter was at 1.01%. Net NPA ratio was at 0.35%, prior year was at 0.48%, and preceding quarter was at 0.32%. The slippage ratio for the current quarter is at 0.5%, INR 7,200 crore. Excluding the seasonal agri and one-off slippage, the slippage in the current quarter was approximately 38 basis points, call it 0.4%. During the quarter, recoveries and upgrades were approximately INR 3,000 crore or 22 basis points. Write-offs in the quarter were INR 2,400 crore or approximately 17 basis points. There were no sale of stressed or written off accounts in the quarter. The charge-off rates across the products in June continues to remain lower than the pre-COVID levels for almost all of the retail products. The restructuring under the RBI resolution framework for COVID-19 as of June stands at 76 basis points, INR 10,750 crore. In addition, certain facilities of the same borrower, which are not restructured, is approximately 13 basis points or INR 1,850 crores. Thus that totals to 89 basis points. Provisions reported were around INR 3,200 crore as against INR 4,800 crore for the prior year and INR 3,300 crores during the prior quarter. The provision coverage ratio was at 73%. There are no technical write-offs or write-offs and branch books are fully integrated. At the end of current quarter, contingent provisions and floating provisions remained close to prior quarter at INR 11,100 crores. General provisions were INR 6,500 crores. Total provisions comprising specific, floating, general, contingent and general provisions were about 170% of gross non-performing loans. This is in addition to the securities held as collateral in several of the cases. Floating contingent and general provisions were about 1.25% of gross advances as of June quarter end. Now, coming to credit cost ratios, the total annualized credit cost for the quarter was at 91 basis points, prior year was at 167 basis points, prior quarter was at 96 basis points. Recoveries which are recorded as miscellaneous income amount to 23 basis points of gross advances for the quarter, as against 14 basis points in prior year and 26 basis points for prior quarter. Total credit cost ratio net of recoveries was at 68 basis points compared to 1.53% in prior year and 70 basis points in prior quarter. The reported PBT at INR 12,180 crore grew by 18% over prior year. Net profit after tax for the quarter at INR 9,196 crore after factoring in the trading and mark-to-market losses of INR 1,312 crore in the quarter grew by 19% over prior year. That is, after taking the charge for INR 1,312 crore grew by 19%. Now, some highlights on HDBFL on an Ind-AS basis. HDBFL opened 29 branches in the quarter, taking it to 1,403 branches spread across little more than 1,000 cities and 1,008 towns. Branch addition continues to supplement the digital investments. Customer base grew to 9.8 million, with 7.7% additions during the quarter and an increase of 35% over prior year. The uptick in disbursements in March quarter was sustained in the quarter ended June 2022 at INR 9,000 crore, though disbursements in Q1 are traditionally lower as compared to March quarter. This disbursements reflect a growth of 130% year-on-year. The total loan book as on June end stood at INR 61,814 crore, secured loans comprising 76% of the total loan book. Net revenue for the quarter ended June 30 was at INR 2,194 crore, growth of 13% over prior year and 2.4% sequentially. Cost to net income for the lending business was at 37%. Provisions and contingencies for the quarter were at INR 398 crore as against INR 422 crore for prior quarter and INR 870 crore for quarter ended last year same time. Stage three as of June end stood at 4.95% after factoring in 1.18% impact of new RBI guidelines issued in November, reflecting sustained healthy collections. The PCR on secured and unsecured books stood at 48% and 92% respectively. Profit after tax for the quarter end of June was INR 441 crore as against INR 89 crore for last year same period. Earnings per share was INR 5.58, and book value per share was at INR 125. The company remains well capitalized with a capital adequacy ratio of 20% and well positioned to sustain improvement in disbursements across segments and flows. HSL, HDFC Securities Limited, has a wide network of 216 branches across 147 cities and towns in the country. HSL has increased its overall client base to 3.99 million customers as of June end, an increase of 41% over prior year. The total reported revenue for the quarter was at INR 432 crore as against INR 456 crores in prior year. Net profit after tax was at INR 189 crore against INR 251 crore for prior year. Earnings per share in the quarter was INR 119.5, and book value per share was at INR 1,061. In summary, over 152,000 employees across the bank dedicated their tireless service to focus the customer engagement, product delivery and service, providing highest standards of banking experience. Which results in the quarter's number of advances growth of 22%, deposits growth of 19%, core operating profit excluding the bond losses of 14.7%, delivering a consistent profit after tax growth of 19% after factoring in the bond losses of INR 1,312 that I alluded to earlier. Again, from a return on asset point of view, 1.8%, excluding the impact of the trading and mark-to-market, it's slightly over 2% with an ROE of 17%. Earnings per share reported in the quarter is at 16.6, INR 16.6. Book value per share increased in the quarter by. Book value per share increased in the quarter to INR 450.6. With that, can I request Faizan to open up the line for questions, please? 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 limit their questions up to two per participant. If time permits, you may join the queue for any follow-up. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mahrukh Adajania from Edelweiss. Please go ahead. Hello, sir. Sir, my first question. Hello? Yeah. Can you hear? Can you hear me okay now? Yes, sir. Yes. Okay, go ahead. Yeah. Yes, sir. My first question is on your CRB loans, of course, the QOQ growth excluding Agri has been good at 4%. However, we've been talking about doubling the book in three years, so that would probably require a higher run rate of growth. How do you see the outlook panning out for growth in CRB? And also if you could throw some color on, you said that you probably gave up some corporate loan growth in the commentary. What was that about? That's my first question, then I have two more. Okay. First, let's talk about the CRB loans that you talked about. The CRB loans had a robust growth of call it 28%-29% year-on-year in the quarter. We do have aggressive plans across various segments in CRB, both on the MSME side, as well as on the agri side. Right? On both sides that we have a significant plan to grow. This growth, I think we talked about this maybe a month ago in another forum that that growth is predicated on one, geographic expansion. We want to be present in more districts in the country, to be able to capture the supply chain and the distribution chain flows. Right? That's part of what we are trying to do. To be present everywhere so that we capture all of the chain, distribution chain, supply chain, right? Not just a part of it that we work with various other wholesale clients. We are able to capture in wholesale, not part. So that is part of what we are doing. The second aspect of that is also in terms of agri. Again, physical distribution expansion. Moving from about 1 lakh villages that we do today. As a step, we want to go to close to 2 lakh villages. Right? That's again, part of how we want to operate and get to. There are enough opportunity. We see that they're good and that can come only by where we put our sales people, we put our relationship people in the local place where the customer is, right? That is part of the distribution. The second thing is the relationship management, right? Which is in addition to having a physical, we also want to have our relationship map, because most of the CRB is about relationship management. We are expanding more, adding more people into that so that we could get the right kind of a relationship to have that, both from acquiring customers and as well as broad basing the products that we could deliver to them. Yes, look, we're confident that that segment is poised for growth. Again, we are not talking about it in isolation, right? This is going to ride on the country's macro growth, right? That means we need the tailwind of the country growth also to be going up. With the MSME being almost a third of the GDP participation, that is where we are focused on doing that. From a market penetration point of view, again, I think we told you how that growth is going to come from last time somewhere we talked, which is, we have only about 20%-25% penetrated in the banking system itself. So the rest of them are outside of the banking system. They need to move in here. This is part of our both physical as well as the RM expansion strategy is to capture them and bring them into the banking system. On the CBG, on the wholesale loans, you alluded to something which I didn't get. What was the question on the wholesale? No, you said that, you know, 40-50 is, or maybe I heard it wrong. You said 40-50 thousand- Oh, okay. Correct. Loan was given up because of competitive rates or something like that. Very, very good. Good point. Yes, I did mention that, so that I know that you'll pick it up and ask. Which is, I think there was a rate dislocation in the quarter, sometime around starting May, right? When the rates started to move up, there was a rate dislocation. Immediately after, our bank and so others started to move up on the rates, right? We did that. As we move up on the rates, there were some customers who were offered lower rates by certain other market participants. We do not want to cut back on our rates to keep them, right? We said that's fine because we do have a relationship. We do continue to have relationship with those customers, the 40, 50 thousand who went and took. We continue to have, except that we didn't endeavor by price to keep increasing those shares, right? We said that's fine to let go. Let somebody else can take it at a lower price than where we do. That is what I alluded to. Okay. Sir, was that PSU banks or private banks? Broadly it was across everywhere, so like I'm not going into the details but. Okay. Okay. Across the bank. Okay, sir. Okay. Sir, can you please quantify the slippage figure as in, the absolute amount if you can? I think I gave that 7,200 Sorry. 7,200 or something I did mention earlier. That's the 50 basis points or 0.5%. Got it. Sir, how much of that would be from restructure? I didn't give that. I alluded to that, the slippage amount has got an agri and the wholesale one-off, which contributed almost a little more than 10 basis points. Net of that it was 40 or 38 basis points I alluded to. Some of them, not the agri piece, but the other pieces are part of the restructuring. Got it, sir. Sir, my last question is on this merger dispensation. We did see a press release on RBI approving the merger and it said with terms and conditions. Were there any dispensations, and if not, when would one hear about dispensations applied for, and also any clarity on HDFC Life stake? Two things you asked. One is about the conditions of the dispensation. The no objection from RBI is on our application. The conditions, I think we mentioned somewhere, the conditions are, for example, I'll give you some nature, right, of some of those things, how you can think about. When the merger happens, the banking regulations shall apply across all the portfolios and all the business lines, right. That's part of those are the kind of giving you flavor of some of those conditions. That's one. You know, there are some entities that will merge, and the licenses of those entities that will merge will have to be surrendered, right, and then intimated to RBI. That kind of those are some examples. When we apply and get approvals from various other authorities, we need to take those approvals to get back to the regulators with those approvals, right? When we go to shareholder, whatever is the shareholder resolution and the approvals, we get it back to the regulators. You can see that these are some. I'll give you some flavor of how to think about those conditions. You alluded to what about the dispensation of the glide path of the portfolio. That's not what it is, right? That is something separate and that is handled as an item different from the application per se. Got it. Continue to work with the regulators on that aspect. Got it. Got it, sir. Sir, my last question is on EBLR repricing. Basically your reset for retail and corporate loans will be what, three months, one month? Three months or six months. Mostly I think it's three months. Got it, sir. Sir, that was very, very helpful. Thank you so much. Thank you, Mahrukh, for asking these. Thank you. The next question is from the line of Hardik Shah from Goldman Sachs. Please go ahead. Hi sir. Congratulations for a good quarter. My first question is on the MTM loss. Can you share some color on AFS mix modified duration and under what circumstances one can use the IFR? Okay. Hardik, thank you. Thank you for bringing this up. See, the AFS book, broadly you can think about it as that, three components, right? Broadly three components. One is the corporate bonds, the other is the participation certificate, primarily, priority sector lending participation certificates. The third one is the Government of India securities, right? These are three broad components which are there. Most of these, the other aspect that you asked about is, the modified duration and how you think about it. See, about, for two years you can think about it as the general of the duration. That's the time it takes to pull to par. Right? It's from that sense, we expect that in a couple of years we drift back, right, over this time period. The other aspect of the investment fluctuation reserve and what it means to these things, right? The investment fluctuation reserve is an appropriation of profit to set some reserves up. We have investment fluctuation reserves which have slightly more than 2%. At the discretion of the bank, at some point in time, we can utilize it, but we have not chosen to utilize the investment fluctuation reserves. Because it's slightly more than 2%, right? That it has to be, I think, regrettably 2%, so there is no point in dipping in. Given that this pulls back to par in a couple of years' time, right? We're quite not comfortable to pull down the reserves and use it right now. Mm-hmm. Got it. Thank you, sir. My second question is on the growth side. Growth on retail has been impressive. What are your thoughts on it, on its sustainability given the inflation concerns that you alluded to at the start of the call? Okay. Again, another good point. Thank you. I think the retail growth ever since we came back with the credit policy, getting back to pre-COVID level, if you see over a period of two to three quarters, having quite good. The December quarter was close to 4.5%-5%. The March quarter was close to 5%, similar rate. The June quarter is 5% sequential, right? Year-on-year has now crossed the 20% mark, right? The year-on-year because of the base, right? Because we kept going down and now we're starting to build up. Sequential momentum is there. Within the retail book, if you look at the one that I called out for the vehicle segment has been hampered by various supply chain issues, right? Despite that, it did grow well. We did have quite a good growth. If you put that to the side and give more time for that to grow, the retail, excluding that vehicle segment, grew by almost 25% year-on-year, right? It's again a solid growth. The other aspect of how to think about the environment and the growth, right? We do see good amount of demand across most of the products from unsecured product to secured product to mortgage product to home loans and across everywhere we do see that, including the gold loan and so on. I think we published that list of various products and the growth rates, so you can see that it's balanced across. Card loans. Let's talk about the credit cards, the last I do want to mention. The card loans do have very good spend. I think 24% or so sequential spend increase. Again, discretionary, if you look at the discretionary spends have gone up even more, right? Most, this growth in the card spend is driven a lot by discretion. I think you can take it as also seasonal in the summer months or holidays months. A lot of travel, entertainment, hotels and so on and so forth. They're all coming back to life and you're seeing pickup, huge pickup on that. The second aspect of the spend is that is the spend translating into loans, right? And which to some extent it is, but to a large extent it still needs to come more, right? It is still not fully there, card, from a loan growth point of view. It will take some more time I think, while over prior year or the prior quarter sequential, this 4.4% is the sequential growth rate in payment products. For it to pick up and go further, we'll have to wait for people to utilize their credit lines fully. The credit line utilization on cards is at, I call it, 70%-80% of the pre-COVID level. A lot of credit line utilization still left to go. And the liquidity in hand from the customers is also there. These customers from a relationship point of view, about 5x our customers have, for the INR 80,000 crore of payment balances, payment business balances that we have, 5x that we have liabilities from a similar customer segment. We do see that people have good amount of money and line utilization to happen. We expect that, with the pickup that is taking place right now, we need to give some more time for that to do. Similarly, on the revolve rates, you didn't ask, but I'm sure another person will be thinking about asking, so I would allude to the same thing. The revolve rate pickup also has not happened yet, right? First the spender needs to happen, which is happening now. Two, three quarters we are seeing spend happening. Spending translating into loans slightly picking up sequentially 4.4%, right? Picking up. The next thing is that the line utilization happens and then comes the revolving, right, to come with that. We have a few quarters away before it gets there. Got it. As a follow-up to that, sir, what are your thoughts on the sustainable revolve rate going forward in the industry? As the economy starts to pick up and people spend, which you are beginning to see. Discretionary spends you are seeing. It is happening. Once the discretionary spends happen, you will see that the people will get back to the previous. See, over a period of two years, both either in our bank or in some other bank, people were, call it for lack of some other word, chronic revolvers, right? That means habitually revolving for more than six months, nine months out of the 12 months have come down because either they are having a bad score in the bureau or they are having a bad score with us and they have utilized their limits, so we are not... We have tightened the limits. They are not given because we want to be cautious. We need to wait for the things to come back and then they will start to spend and revolving will start. We're quite confident that the customer base that we have and the type of spend that they do. We'll get back to what we have seen pre-COVID from the spend habits and the whole kind of attitude on that. Got it. Sir, last question on deposit rates. You've been taking the rates higher, so how should we think about this in the next few quarters as how much hike the bank would consider taking and how is the competitive intensity increasing on that front? The pricing, we're talking more about the time deposit pricing, because the other, CASA has been stable. The time deposits we have only slightly increased over the last one to two months. We're not taking it up all the way what has happened. The way we think about that pricing is there are two elements to it, right? One, the customer you're able to get to the right kind of a customer to have the deposits and what is the price sensitivity of the customer to get those volumes in. That's always a kind of what we do, engaging with the front line who in turn engages with the customer. We get that intelligence and discuss in ALCO to say how we are able to get those volumes at what kind of a price point that we can get. The second aspect of our determination of the price is also competitively pricing, right? Competitively pricing means looking at certain other banks to see that, you know, we are relevant in the market and we don't want to be price leaders by pricing up anything. But at the same time, we have to be competitive, right, within certain range. That is our. These are couple of considerations we do, and we discuss it in the ALCO as a team and decide how we want to pitch ourselves to the customer. Got it. Thank you for your time, sir, and congratulations again for a good quarter. Thank you, Hardik Shah. Thank you. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead. Yeah. Hi, Srinivasan Vaidyanathan and team. Thanks for taking the question. Firstly, again, just coming on with respect to the RBI's approval, so any indication with respect to HDB Financial Services? When we look at it in terms of the scheme of arrangement it says it has approved, so would we hear further with respect to HDB Financial Services and HDFC Life or it's more or less there within the arrangement scheme, yeah? Okay. Good. Thank you. The other question it was asked, HDFC Life I didn't address. I didn't address it along with this. Kunal, on the HDB, first, the RBI approval is the no objection to the scheme of amalgamation that has been filed, right? The scheme of amalgamation doesn't have a role for HDB there. HDB is a subsidiary, existing subsidiary of the bank and continues to be there, right? The scheme of amalgamation does not have anything to do with HDB. That's if anything we need to do, it's a separate conversation, it's a separate process and so on. It's not combined with the scheme. We file the scheme and the scheme does not have anything to do with HDB. HDFC Life is currently a subsidiary of HDFC Limited, and it is envisaged that on merger, that it'll be a subsidiary of the bank. There are two things in this, right? One, in, as a, as a RBI regulation, a bank holding life insurance has to be 30% or below or 50% or above. Currently, HDFC Life holding is about 47.8% or so. There's a two-plus percentage point increase that is required. That is part of another kind of a regulatory approval that we have sought, that we can go to 50%+. Whatever the regulator finally tells us, we will have to comply with that, right? That's part of what we are waiting for, and it is just a continuous dialogue that happens to see how we can get to more than 50%. Either we get or HDFC Limited will get to 50%+ before consummation of the merger transaction. That's on HDFC Life. Sure. There are no timelines in terms of when can we expect. The process is still on, the communication is still on. That is correct. Yeah, that is correct. Okay. Sure. Secondly, in terms of the overall PSL or maybe as we look at in terms of the buildup towards the merger. A couple of points. One is in terms of the branch expansion, we have been highlighting that 1,500-2,000 odd branches could be added. Maybe we had not seen that much of a branch addition. When do we expect, is it post like consummation of the merger, do we see that run rate or we will start preparing for it from this fiscal and it will be more back-ended? Second related question is on the PSL buildup. Should we say that whatever PSL certificates were bought in FY 2022 and RIDF investments which have gone up from INR 9,000 crore to INR 45,000 crore, that was maybe with respect to the earlier requirement and we will start building up further to meet up with the HDFC Limited's merger. How should one see that, yeah? Okay. Well, thank you again for that. Branch buildup that you asked about. Yes. This quarter the branch buildup was lower, 36 or so, but we have about 250 branches in various stages of getting to be implemented. We are not going to wait for anything. The branch buildup is an organic process. Irrespective of any kind of outcome, branch buildup is the right thing to do for the bank from a growth point of view. That is where we have embarked on and we see opportunity. Branch has got, I think we talked about it again in the past. Branch has got two aspects to it, right? One, you have a branch which develops the brand in the vicinity of where the branch is and draws in customers through brand attraction. The second thing is the branch is a congregation of a sales force, right? If you don't have branch, you're gonna have a sales office. We can call it that. We're gonna open X thousands of sales offices. We'd rather open X thousands of sales because the kind of travel that sales relationship manager need to do to, in their outreach to meet a customer or a prospective customer, we want to keep it to one to two kilometers rather than to four, five or six kilometers. It gets in better productivity and gets in better influence to consummate that transaction, right? That's part of what we are emphasizing. The branch build up will happen. It's not waiting for anything. It's a question of a process to get that implemented. It's in progress to happen, right? Even in this financial year, you will see some substantial branch accretion that happens. The second aspect that you touched upon is the PSL, right? You touched upon the RIDF on PSL. See, PSL, there are several strategies to grow PSL. Organic build up of loans, PSL eligible loans, is the best method to do because it gives fantastic returns. It gives great returns. Going through our credit filters, and because of tried and tested credit filters, it gives you the best returns that you can and the returns far more than the average of the market. We are quite enthused to do PSL organically to the extent it comes through our credit filters. In the past year and two years when we have had muted retail to some extent, right? The PSL component is also lower because you did not get that retail as much. As we are now opening up more retail and going, you see that the PSL comes back organically. Still, it's only one of the components because we don't leave other components on the table. We want all of them. For example, organic is one where I think we have said that it is little more than, call it, in 30%-35% or little more than two-thirds to 75% we get through organic. There are other tools that we always use, and we want to continue to use them. One is the PSLC certificates. We get that too. The other one is the RIDF is also something where there's always a trade-off that is done, right? What is the organic that you can build within your credit filters? And if you go outside of your credit filters, what sort of a credit cost are you going to end up? And so thereby what returns? What is the cost of the PSLC? What is the cost of RIDF? And so this is always an equation that happens almost in a quarter, a few times that you balance this to see where is the break even and which is the right way to go about, right? That is how decisions are done. When we didn't do retail, we have done more of the other things that will happen. When we do more of retail, there will be more of organic that comes in. That's how you think about the PSL. Sure. PSLC, what we bought INR 100,000 crore, maybe with HDFC this, that there is a scope for this to go up substantially from here on because INR 80,000 crore has already gone up to INR 100,000 crore last year. Maybe with this requirement, I think there will be more and more maybe purchase of PSLC which could happen. See, PSLC again, as I told you, these are the three, four elements that happens, right? PSLC, RIDF, organic PSL growth, and we do participation certificates, right? There are several components happening and we have to balance the cost versus the returns that each one gives. There is no one particular target. If you ask me, do you know whether this INR 100,000 crore is going to go to X or Y? There is no predetermined formula that we operate. The formula is which gives you the best return. There is what is the break even or indifference point between various instruments. That is what drives the decision. That is, as you know, it's a dynamic decision because the price in the market is dynamic. It's not a fixed price. That is how that is determined periodically. The outcomes is what you are seeing. Sure. Thanks. Thanks a lot. Thank you. Thank you. The next question is from the line of Adarsh from CLSA. Please go ahead. Hi, Srini and team. Couple of questions. On the expenses side, you have indicated investment in branches and how we see people ramp up also in various countries. Any sense on that? Sorry to interrupt you, Mr. Adarsh. The audio is breaking from your line, sir. Please check. Okay, let me try once, otherwise I'll take it offline. Just on the cost side, any sense, you know, it clearly is you're in investment mode in branches and employees. Any path towards cost income over the next couple of years? Okay. Good, Adarsh. Thank you for asking. One thing, while we normally desist from giving forward guidance on anything, let me talk through so you'll get an idea of what previously we have talked and our thought process, so you'll factor that in. One, from a top-line point of view, the growth is picking up, right? You've seen that over a period of time. The top line growth. I meant the volume growth was anyway there, but the mix is also you will see that this quarter and similarly last quarter, the mix is also changing to get that, the top-line revenue, interest income or non-interest income growth component also moving up. You're seeing that come up. Right? That gives you little more kind of confidence and an opportunity to make the right kind of investments that you want because you want to feed that from a growth point of view. That's one. Two, from a balancing point of view. The second thing that also goes in our process, are you there? Yes. You are there, Adarsh? We're not able to. Yes. Adarsh is connected. Yes, yes. I'm here. Keep going. Okay. All right. Yeah, because suddenly we lost the screen, control screen. That's why I asked. Yeah. Okay. The second thing is in terms of the credit situation, right? We've come after a pandemic credit kind of a scenario. As the credit gets benign, right, which is already you're seeing some benign credit environment. When I say credit benign means I meant from a credit cost, right? So benign. That is part of what you have seen us make those investments. Making investments in people, when the credit cost has been below what we have seen historically before the COVID. We've taken the opportunity to make those investments in expanding both people technology as well as on branches. These are the two considerations, right, that we have always given, right? How to make those investments for the future by using the credit benign conditions, and how to make use of the opportunity of the top-line growth so that you can balance the expenses. Now, coming to the last aspect, which is the crux of what you are saying, what is the cost to income and how we should think about, right? If you go back to the pre-COVID, our cost to income has been 39.6%. The full year before the COVID, 39.6%, right? You can call it 39%, you call it 40%, right? We've always said that as the retail picks up, retail is an upfront cost and the top line comes with a lag and comes over a two to three year period, right? You put the cost in and it comes over a two to three year year period. That's the nature of that retail. Once you want to grow retail, that is the way it happens. You're seeing that pick up. We have said that even through the COVID period when we wanted to spend, we did not have the opportunity to spend. We've been saying that we have been waiting for that opportunity to spend to get that retail back up, and now that is chugging along. The cost to income on an overall basis, call it 40% or so, which is the pre-COVID. Quarter-to-quarter variations will happen, right? If you ask Sashidhar Jagdishan, I think he's told in the past in certain other meetings that quarter-to-quarter variations can happen because it's a question of timing. Over a period of a year or two years, if you see, you can touch 40%. Over a medium term, three to five years, this is something as a forward guidance normally which we don't do. From a cost to income, what we see as an opportunity, we said it will get to the mid-30s%, right? which is what we said pre-COVID, but this COVID has put a halt to that, changing the composition of the product mix as well as our spend mix. As we get back to normalization and execute, we should get back to that kind of a trajectory over time. Sorry to interrupt, Mr. Adarsh. The audio is breaking from your line. On asset quality, Sashi agrees with me. Safe to say that things have trended absolutely in the right direction. Yes? Yes, yes. Yes. Exactly. What is the risk that, you know, credit cost will come out of line? Looks like it's most of the segments reach their ambitions in some foreseeable future. You're talking about the credits, right? You're talking about the NPA? No. I agree, it has been quite good if you see at an aggregate level. It has got a component of the business as usual, which is extremely benign because we originated with a very tight credit conditions. It has also got a component of the restructuring, some of them who could not, to whom we have given the opportunity to redeem themselves, to come back to normal life, right? Some of them have taken that opportunity on the restructuring and used it to come back to normal life. Some of them who still struggle get into NPA. Combined, on a combined basis, you are seeing that it continues to get benign and better. Right. Another one or two quarters, we should see it even more benign. Excellent. This is useful. That's it from my side. Thanks for answering the questions. Thank you. Thank you. The next question is from the line of Abhishek Murarka from HSBC. Please go ahead. Yeah. Hi, good evening, Srini and team, and congratulations for the quarter. I have two questions. One on NIM and one on OpEx. On NIM, when does the repo hike that happened in May, June, when does it fully translate into ease? Could it be by the end of August or September? Also if you can share the EBLR repo, non-repo and, you know, fixed and floating breakup for the loan book. That would be useful. First on the NIM, right? The repricing starts, right? It started in May, and there's a cycle, at least a three-month cycle, and some of them are six-month cycle in terms of what happens. That's on the NIM. It is not just that. It has also got to do with the deposit cost. Just the repricing on the repo or the fee won't just do it. It's also what happens with the cost of funds. We do expect that this, the tailwind of the rates going up helps, right? If you think about the second aspect on the NIM that you asked in terms of the fixed and the variable, about 45% of the book is fixed and 55% is floating rate, right? Some of them, call it about out of the 55%, 48%, which is call it 27%-28% of the total book is repo. A quarter, call it about 13-14% of the total bank book is fee book, right? That's the kind of from a mix point of view, pricing point of view, you can think that's how it moves on. Just extending that for the NIM outlook, of course, you would account for that there would be a, you know, certain amount of uptake in term deposit rates as well. Just generally, would we still expect retail and CRB proportions to rise in the loan mix? The expansion that you see in the fees sort of outpacing the TD uptake. Do we expect these two things to continue for the next, let's say, three to four quarters? Yes. From a NIM point of view, it is also rightfully you are focused on the mix because that is what makes it, right? Because individually things can go. If the mix don't come, it takes a little more longer time. The mix as we speak now is still at 45%-55%, right? Although the retail grew at 5% and the wholesale corporate was 0% and the CRB was 2.7% sequentially, the mix is more or less the same. One quarter doesn't take it. It takes a few quarters for the mix in. Last quarter, we put out the chart in terms of how long it took for the mix to come. Retail 55%, how long it took for that retail mix to come to 45%, right? There is a path. Year by year it showed how long it took, right? While on the way up, it could be faster because the rate of growth on the retail and the demand in the macro environment we see on the retail is higher. It could be faster. Yes, both the inherent demand we see in CRB and in retail is quite good and high. One other thing I want to be cautious and tell you too, just because we think we see good demand, if there's a great demand in wholesale, we are not going to turn down a wholesale loan just because that the NIM has to come up. At the end of the day, what matters in terms of the decision is, does it give good returns at the end of the day? ROA, ROE, does it provide the right kind of returns? If it does, it goes through, right? From an inherent demand point, because I like did mention this because in March the same conversation happened, and we saw the wholesale come in with a greater rigor for a growth in March quarter. When it came, I was not able to go back to say, "By the way, we talked about retail and CRB having a faster growth rate, inherent growth rate, but wholesale has come, so should I decline wholesale?" No. He said, "We should go with the whatever is the demand which is there. We like the customer, we like the credit, right pricing gives you the return, should go." That is the kind of a decision-making that happens. Inherently, retail and CRB are having a good amount of demand. Got it. Thank you. The other question is on OpEx. Can you share some, you know, sort of, you know, targets on how much you want to hire for the rest of the year? Also, what is your tech spend this quarter as a percentage of overall OpEx? Where is that trending? Okay. Yeah. Two things. One, in terms of the hiring, there is no predetermined that hiring depends on the productivity. We measure all products, all geographies, branches, non-branches, customer segments in terms of the productivity, which means the RN on the sales force to the customer or to the sales unit. It depends on the productivity that comes and continuously we drive the productivity up. We have a model, a best-in-class model, and we have a best to, and we periodically look at who and where it is suboptimal, and we drive the productivity. That's part of how we do. The people addition, we do as necessary to meet those opportunities. When the productivity is saturated, we do need to add to get more volume. We're not shy of adding because it brings in better volumes and better relationships. Your other aspect in terms of the technology, yes, I think in the past we have said the technology spend to total expenses 8%-9% or so. That's stable over a longer period of time. That's the kind of range in which it operates. Quarter to quarter it can move around, but more broadly that's where it is. It would be in that 8%-9% range this quarter as well? Quarter to quarter will be, can be different, but broadly that's where it goes. Yeah. Okay. Got it, Srini. Thank you. That was useful. All the best for the following quarters. Thank you, Abhishek. Thank you. Ladies and gentlemen, this would be the last question for the day, given the time. I would now like to hand the conference over to Mr. Vaidyanathan for closing comments. Okay. Thank you. Thank you for that. Thank you, thank you all, to all the participants who dialed in today. If you still have more questions or need any clarity, clarifications, feel free to get in touch with our investor relations team. We'll be happy to engage. Thank you. With that, we sign off for today. Bye-bye. Thank you. Ladies and gentlemen, on behalf of HDFC Bank Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.