Bank of Baroda Ltd

NSE:BANKBARODA

Earnings Call Transcript

[Operator]

Good evening, everyone, and welcome to the analyst meet for Baroda's results for the quarter ended 31st December 2024. Thank you all for joining us. We have with us today our MD and CEO, Debadatta Chand. He's joined by the bank's executive directors and CFO. We have a short presentation that we will take you through, followed by the Q&A session.

I request Chand sir to please speak forward.

[Debadatta Chand, executive]

Thanks, Firoza. Again, good evening to all on call. So let me introduce the management team. I'm D. Chand, the MD and CEO of Bank of Baroda and interacting with all of you for many quarters now. With me, Mr. Lalit Tyagi, he's our executive director. He looks after the corporate credit, the international banking and also treasury for the bank. With us, again, Mr. Sanjay Mudaliar, he is Deputy Director, looking after the entire IT operation of the bank, and including the retail asset of the bank. And with us Mr. Lal Singh, he is executive director looking after the recovery, the agri and MSME vertical and also the HR function of the bank. And again, with us the management team Beena Vaheed, Senior Executive Director, looking after all control compliance function and including the retail liability of the bank. With all of us again the CFO of the bank, Mr. Manoj Chayani, and he's interacting with you for maybe 2, 3 quarters now.

So with this, Chayaniji, over to you for your presentation and thereafter, I'll go for my opening remarks.

[Chayani Sundar, executive]

Good evening, everyone. And as you know, it's always a privilege to interact with you, and we are ready with our financial highlights of Bank of Baroda for the quarter ended -- 9 months ended 31st December 2024. Since we are meeting in the new year for the first time, wish you all and your family member a very happy new year 2025.

Coming to the financial highlights. The bank has posted financial total business volume of INR 25.65 lakh crores as of 31st December 2024. If you look at the advances side, the global advances has grown by 11.8%, which consists of domestic advance of 11.9% Y-o-Y growth and international 11.2%.

Segment wise, if we analyze, we continue to grow our retail, its organic growth of around 20%. Agriculture is growing at 13%. MSME at 14%, which is better than the previous quarters. Corporate at 7%.

And if we look at the retail or the system, we have seen a smart growth of around 16.3% in mortgage, 16.6% at home loan, education at 17%, auto loan at 21% and personal loan continuously, we are moderating the growth. And as of December, we have grown at 24%.

Deposit remains constant for the banking industry at large, however the bank has grown deposit at 11.8% Y-on-Y, with CD ratio is a little elevated to 84.24%. But the 2 noticeable aspect is that our CASA has grown Y-on-Y of 6.5%, which is better than the other peer banks and we could maintain our CASA ratio around 40% as per our guidance. Bank enjoys a robust profitability and we have posted operating profit of INR 7,664 crore for the quarter with 9.3% Y-on-Y growth. And continuously, we are pushing the profit after tax more than INR 4,000 crores. And this quarter also, we have posted a profit after tax of INR 4,837 crores with a Y-o-Y growth of 5.6%.

Return on asset, continuously, the bank has posted for the tenth quarter of worth more than 1% as against guidance of more than 1%. And return on asset is 1.15% and similarly, there is a robust return on equity of 17% as of 31st December 2024.

If we look at the 9-month period, operating profit has grown by 6.3%, profit after tax 12.6%. Return on assets has improved from 1.15% to 1.7% and return on equity, as we said, it is 17.03%.

Yield on advances 9 months ended, it has grown from 8.44% to 8.46%. However there is increase in the cost of deposit from 4.85% to 5.09%. As a result of which, the net interest margin of the 9 months has come a little from 3.14% to 3.08%. However, this is both as per our guidance, lower end of the guidance of 3.15% plus/minus 5 bps that is 3.10% to 3.20%.

Bank enters a robust asset quality, healthy asset quality with gross NPA trending at 2.43%, which has reduced by 65 bps Y-o-Y. Similarly net NPA also reduced from 0.70% to 0.59% and provision coverage ratio is robust at 93.51%.

One of the key parameters is that slippage ratio, we could improve to 0.90% against our guidance of 1% to 1.25%. And we enjoy a very healthy credit cost of 0.30%, which has again improved from 0.39%. If we look at 9 months period, the slippage ratio has come to 0.81% and credit cost is 0.47%.

SMA book, as against [indiscernible] 0.47%, it is 0.49%, it is at a similar level, and we enjoy a healthy collection efficiency of 99%.

Also, we are having a robust capital base of CRAR trending at 15.96%, this is excluding the profit for the current year. If we include that, then the CRAR is improved further 17.34%. And CET1 up 1.38% as of December, will improve to 13.77%.

That's all from my side. Chand sir, over to you.

[Debadatta Chand, executive]

Thank you, Chayaniji. And once again, good evening to all of you. And as the CFO said, happy new year to you, all your team members. And let me make some of the qualitative comments over and above the presentation made by the CFO. And if we look at the numbers that we have announced for this quarter, this is again consistent to the numbers we have announced in the earlier quarters.

So the point here is that we are looking at a very sustainable business model wherein the growth in book, the growth in profit are something a strong, robust and consistent. The growth, as has been said, as I guess a 9% to 11% deposit guidance and 11% to 13% advanced guidance. Our deposit growth is 11.8% and the advance growth is 11.8%. This is 1 quarter where the growth of advances almost equal to the growth of deposit.

As you know, the quarter also has, I mean, underlying market condition of a tight liquidity and also a tight deposit market, wherein there are still elevated cost structure on the deposit side. We also said earlier one of the concept of slightly retailizing the bank's book more and typically, we call it a RAM and the corporate, RAM is retail agri and MSME. If you look at the percentage of RAM in December '24 over December '23, it has improved 200 bps from 57.9% to 59.9%. As the retail continue to grow at 20% quarter-to-quarter for many quarters now.

On the agri and MSME as compared to the September, we added almost 200 bps growth in December over September. The percentage of growth in agri and MSME is almost 2% higher than the growth that Y-o-Y growth we had in September. So we will continue to focus on the retailization story and would work on making a diversified book so that we have margin accretive measures so that we improve the margin and the profitability going forward. At the same time, a higher diversified book and a lower RWA density book, right?

On the CASA front, a noticeable thing that as the CFO said, our growth is 6.5% this quarter. And again, just to remind that our growth in September was 7%. And earlier also, we said that we continue to focus on the retail side of the CASA and also on the retail term by innovative product in the market, trying to improve our service standard, adopting more and more digital part of the entire journey. So that's significantly giving us positive outcome. And both the quarters the growth has been -- all you know the system growth on the CASA front, and we are very satisfying placed at a growth of 7% in September and 6.5% in December.

The growth in operating profit, the key focus of the bank is how we again structured the operating profit as a core theme of optimizing that. If you look at the growth this time, the operating income growth is 9.2% and the operating expense growth is contained at 9.1%. The operating profit growth is 9.3%. And the net profit for this quarter is 5.6%, whereas the 9 months is 12.6%. So considering that, the major profit metrics of the bank is quite strong, robust, sustainable, and we're working to maintain also going forward.

On the margin side, earlier we guided the market 3.15% plus/minus 5 bps. Let us also make one accounting change that happened also during the year. There was a change in the accounting from penal interest and penal charges. So that impact is almost 5 to 6 bps lower. With that also, the bank would achieve a 9-month 3.08% margin, which is slightly lower than the lower band of our guidance earlier. So going forward, our operating guidance for the margin for the full year is to 3% to 3.10%, that means 3.05% plus/minus 5 bps with upside upward because of the change condition that you are looking at for this quarter, particularly on the liquidity side and also on the rate expectation on the monetary policy that we have going today.

So that continue to be something that we are quite mindful how to operate at a margin guidance, which again, coming on the strong side. The book is calibrated keeping the margin and the ROA guidance. So in that way, you would have seen our growth is strong and robust for this quarter, too.

Asset quality, as the CFO said right, the GNPA and net NPA trending downwards. The slippage cost and the credit cost has been much lower than the guidance we had given, but we will continue to retain the guidance at the same level.

On the digital, again, we are working. Recently, there was an IBA Digital Conclave wherein the bank could win winners in 2 segment of the digital technology awards and also runner up in 2. So continue to be digital as a key focus on the business model that we have and continue to have.

To sum up on the guidance, we keep the deposit guidance the same at 9% to 11%. The advance guidance continue to be 11% to 13%. The slippage ratio continued to be 1% to 1.25%. The credit cost continue to be the guidance of less than 0.75%. The margin guidance is 3% to 3.10%, that is 3.05% plus/minus 5 bps with a condition that we think can come can be positively upward also, which can typically take us to the upper band of the guidance, which would be the lower band of the guidance earlier. And in spite of the fact that the penal interest penal charges impact is almost 5 to 6 bps for the full year.

With this, again, thank all of you for joining on the call. I'll open for question and answer. Over to you, Firoza.

[Operator]

Thank you, sir. The first question is from Rikin Shah.

[Rikin Shah, analyst]

Am I audible?

[Debadatta Chand, executive]

Yes, Rikin, please go ahead.

[Rikin Shah, analyst]

And just a few questions. The first one is on margins. The domestic advanced unit has declined again very sharply in this quarter. And what explains that because the corporate loan growth has also kind of slowed down versus the last quarter run rate? And in your opening remarks, you mentioned that there could be an upside risk to our margin guidance of 3.05%, which is the midpoint. How would that maybe kind of come through? Because if the rates are cut right, of course, your MCLR book is higher. Why would that be an upside risk to your guidance? So that's my question number one.

The second question is on asset quality. The personal loan GNPA ratio in the last few quarters has been rising. And despite that, we have seen almost 7% Q-o-Q PL growth in this quarter. So what is the thought process there? Of course, your retail slippages have moved down, so that's a bit more comforting. And the second part of the NPA would be gold and as even they have slightly moved up, of course, from a very low base. Any color you would be able to share on that? So that's my second question.

Thirdly, it is on SMAs. Last quarter, of course, we had called out a couple of accounts because of it, it was elevated. They have -- they seem not to have been rolled back. Do you expect them to see a rollback in the coming quarter? .

And lastly, your slippage credit cost guidance, you're kind of holding it up despite your 9-month performance, reasonably below that. So anything to read into it? Do you expect any kind of further deterioration? Or should we expect the current run rate to kind of maintain. Those are my 4 questions. And just 2 data keeping questions, like always, the total number of employees and standard restructure count would be helpful.

[Debadatta Chand, executive]

Rikin, actually on the margin side, there is no upside with what I said outside bias. So when I say 3% to 3.10%, what I'm feeling is that we try to have an upside bias, that means we will try to achieve 3.10%, not a risk to that, right? So that's a clarification I want to give point one.

On a personal loan, you are right, actually. If we look at the GNPA that we announced for the personal loan -- the book is called let's say, INR 32,000 crores. And the GNPA for December and September, there is almost a 0.5% increase on the GNPA. In terms of amount, it translates to INR100 crore per quarter. My fresh slippage for the full quarter is INR 2,500 crores, that's insignificant in that way. And you rightly said that because other segment of the retail is much lower benign slippage, so this is getting adjusted actually in that manner.

So there is no concern per se. Actually, the quality of the book have improved significantly when we stated 1.5 years back that we're going to moderate on the growth in the process actually, we improved the underwriting standard. So there is no concern. Similarly, gold loan, if you take the absolute amount in terms of the 0.71% to 0.80% the amount translates to INR 36 crores. So that also insignificant in that way. So the normal slippage guidance is INR 2,500 crores normalized basis for quarter-to-quarter and that continue to hold on that.

You also talked about SMA book roll back. Yes, there is -- already actually we rolled back. Lal Singh can you just throw some light on this SMA book at 0.49%.

[Lal Singh, executive]

SMA book is, including restructured, around [ INR 28,400 ], which is 2.48% of the total loan book.

[Debadatta Chand, executive]

So I think just to add to what Lal Singh sir said, actually, slightly you're looking at 0.49% to 0.45% in the last quarter, right. And that is higher than the 0.23%. So a couple of accounts profiled accounts, it was there, which was more technical or the -- I mean, what you can say, temporary liquidity mismatch out of that already pulled back as of today. So if I look at the [indiscernible] SMA that we have declared, actually it is not 0.49%, now it is 0.19% because all these accounts have been pulled back by this time. So there is no concern with regard to the SMA, right?

[Operator]

[Operator Instructions] The next question is a question from Rakesh Kumar.

[Rakesh Kumar, analyst]

Can you hear me?

[Debadatta Chand, executive]

I can hear you. Please go ahead.

[Rakesh Kumar, analyst]

So just coming back to this margin number and the credit number. So we had a sharp fall in the recovery on the written-off number. And if I look at recovery coming from NPA, that number is broadly similar. There is not much of a change on a sequential basis. So what I think that your recovery number on the written of book as kind of like dented your margin number. So firstly, what is the recovery on written off number is going to be for fourth quarter and going ahead? And is the recovery number, the interest income accrual numbers going into the interest income line, was that number INR 300 crores to INR 350 crores that we lost this quarter?

[Debadatta Chand, executive]

No. Sorry, just to clarify, last quarter, the recovery from written-off that was a one-off, which is also clarified last time. Because of that, the amount got boosted. Our normalized run rate for recovery out of written off is almost INR 750 crores to INR 800 crore. And if you look at Q3 of December '23 also it was almost at the same level. This quarter is almost at the same level. And going forward, we'll maintain the normalize. There may be a possibility of a one-off in a couple of quarters, but that would be add on to that.

So the fall in the recovery in written off is the last quarter, I'm talking the Q2 -- Q3 over Q2. It is also supported this time by the higher treasury income and also one tax element of the interest on the tax refund. So that clearly negating bit of the fall in that manner. So in that way, the bank's book is well balanced in terms of taking any impact because of the recovery on return of account. Last quarter, it was one-off. Otherwise, the normal rate is the level that we have -- I mean, this quarter, the number is.

[Rakesh Kumar, analyst]

But just to know that what is the interest income accrual that we would have done in second quarter because of the recoveries, NPA recoveries and TWO recoveries. What that number was?

[Debadatta Chand, executive]

I think, we'll update you roughly around out of that INR 500 crores, INR 600 crores, that is what actually there was a one-off, so obviously, there was interest income or written back on the matter. So I mean, on the interest income, the impact suppose because of one off is not there this quarter, almost to the extent of like INR 300 crores, INR 350 crores kind of a number.

[Rakesh Kumar, analyst]

Impact is there, correct. So that is what I was estimating that INR 300 crores to INR 350 crores is the impact that we have this quarter.

[Debadatta Chand, executive]

Yes.

[Rakesh Kumar, analyst]

And secondly, the fee income. So fee income is pretty strong and asset quality is also pretty strong. So on fee income, if you can highlight some of the things that why it happened? What are we doing? And why did we achieve this kind of a strong number on core fee income, sir?

[Debadatta Chand, executive]

So you're very right actually. Earlier also, we announced that we started some kind of an internal kind of a thing, which we talked about fee and flows kind of number. And the idea was to strengthen the core fee income. See, the recovery of written off other than the normalized run rate can be one-off at some point of time. Treasury income is also highly dependent on the market condition.

So the core fee income, if you look at the core fee income this quarter, the growth is 12.6%. And that is where we want to optimize that. There are challenges in terms of -- because some of the core fee income going shifted like a moment you go for a normal physical transaction to a digital transaction on the fee goes off. But there are challenges to optimize. But clearly, as a management, as a bank, we are clearly focused to optimize on the core fee income.

So this quarter, the core fee income, leaving apart the treasury income or the tax refund interest, the tax refund, the core also has gone up by 12.6%. That's something significant. See, the numbers that we are looking at the book increase is almost 12%, 11.8%. The operating profit increase is almost 9.93%. The operating expenses is contained at 9-point something. So I think somewhere we had to have a stability of all this income. And that is what actually we have -- if you look at the core fee income this quarter, the growth has been good, but we'll be trying to focus more on that and try to optimize more also going forward.

[Operator]

The next question is from Piran Engineer.

[Piran Engineer, analyst]

Congratulations, sir, on the quarter. Just firstly, on the previous question, a clarification is INR 300 crore, INR 350 crore lower interest income. If we adjust for that, our margins would be about 10 bps higher. Is that a correct understanding?

[Debadatta Chand, executive]

It is actually -- last time as I said there was one account which was a one-off in terms of the recovery of the NCLT resolution. And significantly, the recovery was full in that case, putting a positive interest income impact of roughly around INR 300 crores, INR 350 crores. So there is a normalized -- that is what we said that what is the delta that changed last quarter vis-a-vis this quarter, and that is about INR 300 crores, INR 350 crores. And thank you very much for congratulating the bank. The bank would again try to have one -- I said initially to have a stable, sustainable kind of a growth both in terms of book and also in terms of the profit number.

[Piran Engineer, analyst]

No, no, no problem my pleasure. Sir, just 1 or 2 more questions. Firstly, on our borrowings. In the last 2 quarters, it's gone up from roughly INR 90,000 crores to now INR 1.3 lakh crores. Can you just help us as to what are these borrowings? Are they more refinanced [indiscernible] because we are growing on MSME? Or are there more infra bonds? And ballpark, what would be the cost of these borrowings of the entire borrowings, sir?

[Debadatta Chand, executive]

You said all of that actually part of the borrowing and clearly, the borrowing is to substitute on the deposit cost, otherwise, right? So Mr. [indiscernible] can you just slightly update more on this?

[Unknown Executive]

Yes. So thank you very much, sir. So in fact, last quarter, we raised infra bonds to the extent of INR 5,000 crores. Put together, this financial year, we have raised infra bond to the extent of INR 15,000 -- and we also tap time to time the competitive refi from some of the domestic specialized institutions. Put together that and the market borrowings have elevated. As MD said that when that option is available and cheaper, and all of us know that deposit side, there are some limitations in terms of managing the cost. So we balance it out with that.

[Piran Engineer, analyst]

Understood. Understood. And sir, just lastly, on gold loans, there is a lot of talk about agri gold loans below INR 2 lakh should actually be collateral free and not -- you can't take gold from the farmer. So can you just probably clarify these rumors that whatever this news that is going around as to whether this is what the RBI wants collateral up to INR 2 lakhs? And also in regular consumer gold loans, a lot of talk about refinancing at the end of it, doing EMI payment, 75% LTV throughout the loan rather than at disbursement. So maybe if you can just share some light on what is -- what's the RBI thinking and what is the conclusion, that would be very helpful.

[Debadatta Chand, executive]

See, as long as it's not a guideline, it's normally difficult to comment on that. Actually, there are matters which are again not crystallized. So we have not framed stance on the matter. But Lal Singh sir, anything you want to update on this on the gold loan side, agri gold?

[Lal Singh, executive]

Thank you, sir. In fact, there is no such guideline till date. But yes, on MSME, there is a guideline that up to INR 10 lakhs, we can't take any collateral that is -- that may be land building or gold, whatever is there. So those we are adhering to.

[Debadatta Chand, executive]

On the retail gold loan, you have some question, right? So what is that?

[Piran Engineer, analyst]

Basically, RPI has expressed some concerns on things like bullet repayment on maintaining CV of 75% throughout the term of the loan. And there was a meeting of the gold lenders association with RBI a couple of weeks back. So some updates, even qualitative this time that some updates would be useful, sir.

[Debadatta Chand, executive]

Actually, as far as the retail gold, my book is almost hardly INR 6,000 crores. So it's not a very significant amount therein. But then some of the conversation we are not aware as of today, but our business is a compliant business as of today. Mudaliar sir, you want to add on this?

[Sanjay Mudaliar, executive]

No, sir. In fact, since the details are not available, I don't think it will be appropriate to give any comments at this stage.

[Operator]

Next question is from Mahrukh Adajania.

[Mahrukh Adajania, analyst]

Sir I have 2 questions. Actually 3 questions. Basically, firstly, on your credit cost, right? So you had explained that you had made higher specific provisions last quarter and floating provision of INR 2 billion, and that's why we understand that this quarter the credit costs are lower, but they are at 38 basis points. So is this a new normal now where do you see your credit costs settle in the -- in fourth quarter or maybe over the next 3 to 4 quarters? What should we build in, like 40 basis points, 35, what is the number? That's my first question. And I...

[Debadatta Chand, executive]

Okay. Let me [indiscernible] first one. There is not any new normal. The only normal is that the credit cost would be below 0.75%, right? So that is point one. Point two is a case where, yes, the credit cost is also linked to the asset quality. And as of today, when we look into the SMA book, the stress book, we are quite comfortable as of today with regard to the asset quality. So in that scenario, I don't think anything like 9 months credit cost is 0.47% right? So maybe a band between 0.5% to 0.75% would like to end in the full year. But again, it all depends upon the forward, what you can say, emerging facts and figures that would come to us. But then the full year, it will be below 0.75%, that is what fully we are convinced on, right?

[Mahrukh Adajania, analyst]

Sir, my next question is on home loans. Obviously, your home loans are growing well. They have grown 4% quarter-on-quarter. But if you see some private banks, we are not being able to deliver growth of 4%, very few are delivering even 3% Q-o-Q. So is it that you are getting a lot of refinancing requests from private banks, what is your rate to the most prime customer that you offer?

[Debadatta Chand, executive]

See, there is no -- actually the numbers that we have given is the organic book. So there is no refinancing or anything from private banks on that matter. The numbers that we see is 20% or 19.5% on the home loans, 16.6% is the organic book. It's not like this quarter, we have a growth of 16.6%, right? They've been consistent for Bank of Baroda, particularly in the segment of home loans, we do have the right delivery channels, the right relationship measures, the right project approval. So that giving us a bit of a positive outcome for many quarters. So continue to grow there. I don't think there are elements which again can slightly put the guidance below what we are doing. But we are quite comfortable with the growth both in terms of asset quality.

In terms of the best, they are all card rate being defined in the website. I mean, the bias is obviously -- I mean, borrowers having a better CD score. So that's on the asset quality, we are quite mindful in terms of what is the book we build. In terms of rather actually on data we didn't share, the RWA density that we conclude for many of the products, including home loan is showing a positive outcome.

So in that way, we believe in good quality borrower. We believe in the right relationship manager. Actually, one of the important factor in the home loan segment is the time you take to give a sanction, right? So that is what actually we improved significantly in the last many years. So I think there's a sustainable growth that we maintain. And on the quality side, which is on much better side, actually, there is no concern as of today.

[Mahrukh Adajania, analyst]

But your best borrower would be getting at 8.5%, 8.40%, what would be the rate?

[Debadatta Chand, executive]

They are all card rate, ma'am. Actually the card rate defined on the website.

[Mahrukh Adajania, analyst]

Okay, sir. Sir, my last question, just one clarification that you did say that your recovery income that goes into interest on loans, it goes there, right, has come down, though the Q-o-Q growth in loans and interest on loans is matching. But okay, it's gone down from, say, around to around INR 830 crores to INR 500 crores, INR 550 crores. That's correct, right?

[Debadatta Chand, executive]

No, no. I'll just update you actually the conversation we had actually our normalized recovery out of written-off accounts is almost INR 750 crores to INR 800 crores. What had happened last quarter, there was a one-off in that recovery of written-off accounts. And because in that particular recovery, the recovery was substantial that we could recover the full amount. The positive impact because of that particular one-off is roughly around INR 300 crores, INR 350 crores on the interest income, which is not available this quarter, right? So otherwise, normal is going to be INR 750 crores, INR 800 crores that we're going to have for future quarters also.

[Mahrukh Adajania, analyst]

So the normalized reversal or the normalized accretion to interest income will also be then, what happened this quarter only, right?

[Debadatta Chand, executive]

No, that cannot be quantified. Mahrukh, that cannot be quantified. The reason being many of the recovery you are not recovering the full amount to get benefit of the interest reversal, right? You may recover your principal out of the recovery. But last quarter, there was a one-off case where the recovery was full that included the reversal of the interest income and also the full extent of the principal. So the delta that we made last quarter, that was the point of discussion, not on a normalized. Normalized, It may give some reversal of the interest income. It may not give any reversal of the interest income.

[Operator]

The next question is from Kunal Shah.

[Kunal Shah, analyst]

Yes. So a couple of questions. Firstly, on the international slippages and international margins. So again, this quarter, we saw a decline last time you indicated it can still be managed at 1.9% to 2-odd percent. And given the global rate environment, do we see pressure over there? Or is it on account of maybe the slippage in the -- it's a small number, but still like INR 200 crores slippage, which is leading to lower NIM in the international market?

[Debadatta Chand, executive]

See, one in the slippage another in the margin. The margin is stable actually. If you look at the 9 months margin on international, it is 2.02%. And this quarter, it's at 1.83% slightly when the reset of pricing happens in the international book, both on the advance and also on the deposit, there's a lag clearly. So a lot of refi transaction happened on the asset side, which again not passed on to the extent of the deposit. But broadly, our NIM on the international would be 1.9% to 2%. That is what we are hopeful going forward, we can maintain. On the slippage, particularly that you talked about a very small amount of INR 200 crores. [indiscernible] can you just update on the slippage side?

[Unknown Executive]

So actually, this was one of the cases in one of the territories, and probably it is not the normalized degradation rate in international book. In fact, for the many quarters, international book has not shown any distress. So at individual asset cases, sometimes these emerges. But this is not the normal case for the international book.

[Debadatta Chand, executive]

In fact, it's a combination of many of the small accounts, which again, based on some accounting change we made that NPA. But over the last many quarters, it's a very fairly stable asset quality as far as the international book is concerned.

[Kunal Shah, analyst]

And secondly, again, maybe someone asked with respect to the personal loan growing at 7% quarter-on-quarter. Most of the players, we have seen there is a slowdown, which has happened. But I think for us, it is still continuing to be faster pace. And there is a rising NPL on this growing book. So wouldn't we be slightly cautious or conservative in this segment and any risk that we see?

[Debadatta Chand, executive]

Kunal, you're right on that. Actually, if you look at my base is very low, INR 32,000-odd crores in personal loan as compared to -- and out of that, maybe 50% is the nondigital personal loan the digital personal loan. The point you are referring on the digital personal loan, right? So that book is almost INR 12,000 crores, INR 13,000 crores not a big amount therein. Earlier, the growth in this segment was almost 80%, 100% quarter-to-quarter, right, actually, I mean, quarter-to-quarter on a Y-o-Y basis. And like in July 2023, when the market was not discussing, we started talking about moderating this growth. So from almost to 80% to 100% Y-o-Y in 1.5 year time, we have come back to 24%.

A couple of measures that we have undertaken during the process is to completely change the underwriting model based on a much state-of-art bureau model now. At the same time, some of the segment which has given a slightly elevated slippage, we completely stopped those segments. So the book is fairly balanced. We are comfortable growing at 24% or 30% or 35%, maintaining the asset quality.

In terms of the incremental slippage that you may be talking about in this quarter, it's INR 100 crores on the slippage of INR 2,500 crores for the quarter. So it's not any way significant. You get like unsecured personal loan is something that you need the market is growing in that segment. You want a bit of margin is quite high. So we can't put everything on the same year, but I don't know other banks, but we are quite comfortable at 25%, 30% growth, because the underwriting quality is much better as compared to what we had in the past because of the model part of it. Anything, Mudaliar sir want to add further on this?

[Sanjay Mudaliar, executive]

Sir, only one additional point I will give it is we are now moving towards the more of the salaried class account where we are going into the personal loans. So that gives us some additional comfort on this.

[Kunal Shah, analyst]

Okay. And last question on employee provisions. So this quarter, the run rate has been high. Is it more to do with the interest discount rate assumption? Or maybe now. And maybe if the rates decline, would we see a relatively higher provisioning requirement? Or we have already factored that in? Because that's going up to almost like closer to INR 11.50-odd crores for this quarter.

[Debadatta Chand, executive]

You're right. Actually, slightly adequately covered in the segment with regard to the discount rate that you are referring. So we are quite -- I mean, that adequately provided on the matter. Any thing, CFO, would like to add here?

[Chayani Sundar, executive]

Yes, so Kunal, as you know, there is a movement in case of the gratuity, it has moved from 6.99% to 7.05% and also the [indiscernible] size the requirement is there so as a result of that, there is there increase in this provision amount, but we are prudent in taking the provision, all the provisions as required has been provided in that.

[Operator]

Next question is from Jai Mundhra.

[Jai Prakash Mundhra, analyst]

Sir, a few questions. And first one, if I look at your interest on advances, right, only the gross interest on advances, that has gone up by 9.7% Y-o-Y in this quarter, versus 11.8% growth in advances, right? So we are at least -- we would have increased the MCLR. We are doing more CL, less corporate. Asset quality has been holding up. So why is that the interest on advances growth is lower than the loan growth?

[Debadatta Chand, executive]

Okay. Let me respond to that. Actually, rather positive that the book increase is 11.8% and the interest income increase is almost 9.7%. See, stance that you would have seen that we are also, at the meantime, building the quality of the book, right? So the quality of book covers with regard to -- as we discussed on the previous, can you reduce the personal loan growth, the margin in personal loan is very high. Similarly, a segment where there is a bit of elevated stress therein, you would have seen my NBFC book has gone down as a percentage. The Y-o-Y growth is very less because this is induced by the regulatory norms that came in.

So it's a balance in terms of how do you again put the income growth at the same time, create the underwriting quality. And earlier also, we said for us, the underwriting quality is one of the main building block while creating the book. So in that way, I'm quite happy that the growth is both balancing out in the 11.7% and 9.6%. So going forward, I mean, depending upon the interest outlook, there may be changes on the pricing of the loan asset and then we'll map it out accordingly what is the percentage increase there will be.

Anything, Madam Beena, would like to comment on the planning perspective on the income growth in advances?

[Beena Vaheed, executive]

No sir.

[Jai Prakash Mundhra, analyst]

Okay. Secondly, sir, on your margins, right? So I heard your commentary, if I were to adjust for the INR 350-odd crore additional recovery that we had in second quarter, right? So then the margins in second quarter would have been 3% and that has now come down to 2.94%. Would you believe considering your emphasis on quality and still tight liquidity, the trend maybe should be similar, right? I mean Q4 margins can actually be lower by a similar adjusted number 5, 10 basis points lower. Would that be a fair assumption?

[Debadatta Chand, executive]

See, my 9 months NIM is 3.08%. So one factor, again, I said during commentary that the penal interest and penal income, the impact is almost 5, 6 bps negative, right? So otherwise, it would have been 3.13% or 3.14%. It's on the written off of -- the recovery of written off exactly, it depends on the recovery that happens, how much you are recovering. If you are able to recover higher than the principal, obviously, there would be an interest component that will go to the interest income. So there are some one-off on that. So that positively attributed. But at the same time, let us also look at the deposit cost, which is again being elevated across the system. Rather on the margin cut that we have taken is much lower as compared to many of the industry that we have seen. So it's a balance call.

You would have seen that there is a corporate loan growth slightly lower as compared to what we did in September. Typically, while providing full money to the CapEx, the term loan segment, a lot of refi transaction that happens, a lot of takeover transaction that happen, which is again at a very fine price, obviously, high-quality asset. And there, again, slightly, we try to grow lower as compared to the last quarter.

So these are all calibrating call in terms of how do you manage it. But the full year guidance that on the margin side, we set 3.05% plus/minus 5 bps. That means 3% to 3.10% for the full year, I'm talking about. Q4 can be any number that you can estimate, but the full year would be to 3% to 3.10% with an upside bias. Why the upside bias is that a couple of factors that we are anticipating that the market to happen, particularly there is an improvement of liquidity that is happening because the regulator, the RBI injected durable liquidity now. If there is an expectation of a rate stance change or cut happening in Fed policy.

So our market borrowing side, that is also a significant amount undergo a change because that can reset quickly on that. Typically, the CD book that we are carrying almost can reset in no time. A lot of other deposits also there are maturing deposits happening before March. So based on that, we anticipate that full year guidance we'll be keeping somewhere between 3% to 3.10%. The scenario going forward on the [indiscernible].

[Jai Prakash Mundhra, analyst]

So you're saying this is assuming some rate action also, right, even if there is a rate cut, you will hold on to this more or less in the guidance, right side?

[Debadatta Chand, executive]

The upside, that is what I said. Ideally, otherwise, you can take the median number at 3.05%, right, for the full year. But I can still optimize to 3.10% if some of the assumption comes true for us, right, in that way.

[Operator]

The last question for this evening. We'll take it from Nitin Aggarwal.

[Nitin Aggarwal, analyst]

So I have a question around your business growth. While you have reported a similar growth in advances and deposits and that's something we appreciate. But at the same time, bulk deposit mix has also gone up during the year. So what will be any particular threshold that you will look to maintain? Because as you go forward the requirement of deposits will remain a as to support the loan growth and CD ratios are already elevated. So any particular level of bulk deposit beyond which you don't want to venture in?

[Debadatta Chand, executive]

So we said earlier multiple quarters, the dependency in the bulk has to go down. Actually, if you look at Bank of Baroda, the earlier quarters, there was a high amount of dependency vis-a-vis bulk deposit. We said every quarter, now almost 6, 7 quarters, we are saying the dependency has to go down. On the dependency doesn't mean that the outstanding would go down for every time. Although we reduced the outstanding consistently for many quarters, this quarter slightly increased.

The slight increase vis-a-vis the normal growth of deposit of, let's say, 11.8%, 14% vis-a-vis 11.8% [indiscernible] 2 reasons. We're able to grow our CASA higher than many of the peer system, right? Last quarter, CASA growth was 7%. This quarter, it is 6.5%. But also at the same time, the retail term deposit also able to grow at 9.5%, 9.6%. That is allowing us slightly on a mix to grow slightly higher on the bulk deposit, keeping there is a liquidity constraint in the market, right? So in that way, the stance continue to be lowering the dependency. But if there is a requirement while you can optimize on the both side or there is a requirement to give a certain resource mobilization, then we'll keep on raising on the bulk deposit.

The number that you're looking at 224,000, there is almost 25,000, 28,000 component of -- certificate of deposit therein. And the certificate of deposit, as you know, for a short-term at a much lower than the wholesale bulk deposit yet. And in case there is a hypothetically thinking a cut happening, this market would react very fast to that. So in that way balance out, it's a combination of any strategy in terms of how do you optimize on our cost. The stance continue to be lower dependency on the bulk deposit. That means this as a percentage of total deposits should not go up. Other -- for many quarters, actually significantly have reduced, although we have not disclosed to the market the number, but we said we reduced the dependency on the bulk deposit and that will continue to be the same stance for the future quarter.

[Nitin Aggarwal, analyst]

Right, sir. And sir, the second question is on the retail GNPA because if I look at the segmental GNPA, retail is one space wherein the GNPAs have gone up over the last 1 year pretty sharply. And within that, specifically the personal loan, wherein on a book, which is growing well, the GNPA ratios have been inching up. So how do you look at that? And how long will you think the stress will continue, especially in the personal loan book [indiscernible]?

[Debadatta Chand, executive]

Personal loan, see the GNPA personal loan December over September, the growth is -- it has from 3.16%, I believe it has gone to 3.9% kind of a number. In terms of the absolute number, this is roughly around a slippage of INR 100 crores, right? And my normalized slippage amount is roughly around INR 2,500 crores. That's not significant for me. Again, retail, we 1.5 years, we improved the underwriting quality, but then there are legacy book therein. This book is a small book actually my outstanding is INR 30,000-odd crores. The incremental slippage that we are talking about is much lower and the retail GNPA is going down. Like other component of the GNPA, I mean, the elevated slippage is not there.

So it's much more manageable. This is a segment where it's a NIM accretive, gives a good margin. There is a requirement. If we look for a bundled product rather with a secured loan along with the unsecured loan. So we will grow at 24%, 25%, 30% kind of a level and quite comfortable growing at that level. I'm not going to put any stress in terms of slippage, particularly on the unsecured personal loan.

So on a planning perspective, Madam Beena, anything to comment on the retail personal loan?

[Beena Vaheed, executive]

With regard to the retail personal loans, we have been going quite slow. The growth this year has been -- though it has been 7%, we are more or less going with salaried class advances, and we are not looking at the other advances as we looked in the previous years. So our focus would continue to be on the salaried class personal loans, not that we would degrow, but our focus would be more on the salaried class, and we would continue to grow, but with regard to the best of advances.

[Operator]

Thank you. That's the last question we'll be able to take today. And I request Manoj Chayani sir to please give the word of thanks.

[Chayani Sundar, executive]

So as we conclude today's analyst meet, I would take a moment to express our sincere gratitude to all of you for your time and participation. We are thankful to each of our analysts for their valuable contributions and their feedback, which will help this organization to grow in a longer way. Your continued support, engagement mean a lot to us, and we look forward to have a stronger bond with you.

If there is any query, any clarification required in future also, you can contact me or our investor team any time you feel like to get it clarified. Let's have a stronger bond with each other to have a stronger organization. Thank you for your participation, sir.

[Debadatta Chand, executive]

So thank you very much all analyst on call. Thank you very much.

[Operator]

Thank you.