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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Okay. Good evening, and thank you for attending the IndusInd Bank's quarter 4 results 2024 Investor Meet. At the outset, I want to mention the bank has completed 30 years of its operations a few days back. The journey wouldn't have been possible without your support and confidence of the bank. So I want to thank all of you for the continued support to the bank in these times. I look forward to your support and hope that the bank continues to do the way it has been performing and continues to perform on a sustainable basis.
Let me start with some macro commentary and then go to bank-specific details. The Indian economy has been resilient in navigating the global challenges. Real GDP growth is among the fastest in the major economies. Improving economic activity helped credit growth sustain above 16% during financial year '24. While deposit growth is at 13% Y-o-Y, picked up compared to 9.6% last year. The liquidity environment remains challenging for the system. Financial year '25 expected to be a year of balanced growth for banking sector. We remain confident on our growth journey, while being watchful about the inflation and the rate environment.
Let me now focus on the key outcomes for quarter 4 financial year '24 and financial -- and for the full year. The retail deposit momentum continued during the year, with retail as per LCR deposit growing at 18% year-on-year. Our loan growth was at 18% year-on-year, driven by 23% growth in retail loans. Our vehicle business grew at 17% year-on-year, microfinance at 22% year-on-year and other retail at 32% year-on-year. Within corporate, small corporates grew by 33% year-on-year, mid-corporates grew by 8% year-on-year and large corporates grew by 13% year-on-year.
We continue to scale up our new initiatives with affluent grew by 24% year-on-year, NRI deposits grew by 33% year-on-year. Our merchant loan book against -- which is originated via Bharat Financial has now crossed INR 5,500 crore mark, while home loan book now stands at INR 1,792 crores. We saw sequential improvement in asset quality with slippages reducing across all the business units. Our quarter 4 financial year '24 credit cost was 111 basis points, and we closed the full year cost at 113 basis points within our communicated expectations. The profitability metrics have remained healthy and stable over the course of the year.
These are the key financial highlights for the quarter. Our net profit for the quarter 4 was at INR 2,349 crores, growing at 15% year-on-year. All key ratios are healthy with net interest margin at 4.26%, ROA at 1.90% and ROE at 15.23%. Our gross NPA and NPA was stable quarter-on-quarter.
These are balance sheet metrics, which were largely disclosed earlier. I'm happy to share that our balance sheet has now crossed INR 5 lakh crores mark.
Now coming to the profit and loss for quarter 4 financial year '24 and financial year -- and for the full year. Our NII grew by 15% for the quarter with stable margins. Other income grew by 16% year-on-year and 5% quarter-on-quarter. Core fee income was INR 2,293 crores, grew by 6% quarter-on-quarter. Trading and other income was at INR 2,215 crores during the quarter. Our overall revenue growth was healthy at 16%. We continue to invest in our -- across our distribution, digital, human capital and marketing initiatives. We have added 256 branches during the quarter. We have also added 2,100 employees during the quarter and more than 11,000 employees in financial year '24 across our group distribution. As a result our cost-to-income ratio have been on the higher side during the last few quarters.
Our provisions were down 8% year-on-year and 2% quarter-on-quarter. Profit after tax grew at 15% to INR 2,349 crores for the quarter and 21% for the full year to INR 8,977 crores. EPS for the year was at 116 per share. We have a very well-diversified loan book across retail and corporate products. The loan book mix has moved in favor of retail during the year at 56%. Consumer businesses grew at 23% year-on-year and corporate book grew at 13% year-on-year.
Now let me come to specific products and businesses. Our vehicle business. Our vehicle finance business grew 17% year-on-year with full disburse -- year disbursement crossing at INR 50,000 crores for the first time in our history. We had another quarter of healthy disbursements at INR 11,963 crores. Disbursement growth picked up sequentially in the MHCV and construction equipment, whereas growth was sluggish in LCV, tractors and passenger vehicles. During the quarter, we have also completed migrations of around 5 million vehicle customers to Finacle from the legacy system. This caused a couple of weeks of impact on business, but it was not a critical -- but it was a critical transition for us. Asset quality improved sequentially with gross slippages reducing to 0.57% versus 0.73% quarter-on-quarter in vehicle finance. The restructured book in vehicle finance reduced to INR 547 crores from INR 705 crores quarter-on-quarter with majority of the reduction coming due to upgrades and recoveries.
Microfinance, we had another strong quarter of business at Bharat Financial with outstanding book loan originated of INR 44,750 crores, growing at 10% quarter-on-quarter and 23% year-on-year. Both the microfinance as well as merchant acquiring business grew handsomely at 22% and 38% year-on-year, respectively. Our microfinance loan disbursements were at INR 13,800 crores, growing at 19% year-on-year. Microfinance gross slippages for quarter 4 reduced to INR 335 crores versus INR 363 crores quarter-on-quarter. The merchant acquiring business resumed its growth journey, crossing INR 5,500 crore mark with 16% quarter-on-quarter growth. We now have 700,000 borrowing merchants onboarded. The diversification initiative is playing out well with merchant business now forming 13% of Bharat Financial originated book. Deposit mobilized through Bharat Financial stands at INR 2,912 crores, and we have 18 million SA and RD accounts via Bharat Financial so far.
Nonvehicle retail loans. Our retail assets contributed -- continued the robust momentum with 9% quarter-on-quarter and 32% year-on-year growth. Our MSME book under Business Banking continued with strong traction with 21% year-on-year growth. New acquisitions have reached an all-time high during financial year '24 driven by a reinforced focus via MSME 2.0 strategy. Majority of the MSME new acquisitions are granular and from less than INR 2 crores segment, that is small business segment, leveraging our digital lending platform. Our home loan book now stands at INR 1,792 crores, growing 30% quarter-on-quarter. We have cautiously moderated sequential growth in unsecured products like credit cards and personal loans at 5% versus 9% quarter-on-quarter last quarter. Our credit card spends market share was at 4.9% as per last available RBI data. Overall, scaling the other retail assets is one of the key focus areas of the bank, and we aim to grow our other retail asset at faster pace while improving the balance towards secured mix.
Corporate portfolio. Our corporate loan book grew 13% year-on-year. Within corporates, small corporates grew by 33% year-on-year. Mid-corporate, excluding gems and jewelry business grew by 19% and large corporates grew by 13% year-on-year. Gems and jewelry book continue to see working capital reduction due to weak global demand. The asset quality of gems and jewelry book remains pristine with no NPA, SMA1 and SMA2. Corporate fees remains granular and diversify as we removed reliance on chunky sources of like investment banking and structured finance. The proportion of A and above retail customers is now 77% compared to 73% year-on-year. The weighted average rating too has improved to 2.51 from 2.65 year-on-year. Overall, we are growing our corporate book in a calibrated manner with focus on granularity and areas where we have right to win rather than chasing headline growth numbers.
Deposit growth, the retail deposit momentum continued during the year with retail as per LCR growing at 18% year-on-year. As mentioned in the balance sheet release, adjusted for outflows for deposit originated to a fintech partner, our retail deposits growth was 20% year-on-year and 4% quarter-on-quarter. With a constant endeavor to bring forth innovative propositions, we have recently launched contactless payment wearables Indus PayWear, India's first all-in-one tokenizable wearable for both debit and credit cards. Cost of deposit increased by modest 4 basis points quarter-on-quarter, driven by mix in favor of term deposits and some repricing. We have added 256 branches during the quarter and 378 branches in financial year '24. Our branch count stands now at 2,984. We maintained healthy average surplus liquidity of around INR 39,400 crores during the quarter with liquidity coverage ratio of 118% versus 122% quarter-on-quarter. Overall, we are making steady progress towards retail deposits -- retailization journey, amidst the challenging liquidity environment, and we'll take you through our initiatives in PC-6 discussion.
Digital business. Executing our Digital 2.0 Strategy. Our digital platforms continue to show robust growth. Direct-to-client platforms are scaling up with efficiency, creating a new tech-led business model. Overall, during the year, bank acquired 2 million clients digitally in DIY mode, disbursed more than INR 1,000 crores of personal loans to new-to-bank client acquired digitally and acquired 250,000 cards digitally. While the business is growing strongly, the business model also drives better business efficiency in the lines in which it operates. INDIE, the flagship digital platform for individual segment is off to a strong start and completed 6 months of operations. We have 5 million installed base and 1.2 million clients on INDIE. More than 9 million transactions are processed every month on INDIE platform and transaction are doubling month-on-month.
Yield and cost movement. Overall margins continue to remain stable around our expected range. Loan mix moving in favor of retail loans provides the ability to absorb deposits repricing. Our fees is very granular and diversified on the fee side. Core fee remains healthy, growing at 6% quarter-on-quarter. Share of retail fees continues to be healthy at 72%. Overall fees remain steady at 1.9% of assets.
Movement in nonperforming assets. Our GNPA and NPA was steady at quarter-on-quarter. We saw improvement in all the asset quality metrics such as gross and net slippages, restructured book and security received during the quarter. All the 4 business segments saw sequential improvement in slippages. Gross slippages reduced to -- down to 0.44% versus 0.56% last quarter. Our restructured book continues to run down at 0.40% compared to 0.48% quarter-on-quarter. Our net SR book reduced to 0.34% of loan book versus 0.37% quarter-on-quarter. We have made INR 91 crores provisions for security received during this quarter. Our SMA1 plus SMA2 book was at 0.25% of the loan book. Our quarter 4 credit cost was at 111 basis points. We have closed financial year '24 with full year credit cost of 113 basis points, in line with the communication at the start of the financial year.
Loan-related provisions. We continue to carry strong loan-related provisions. Our PCRs on GNPs remain healthy at 71%. During the quarter, we also saw a full repayment of the funded exposure towards a stress telco of INR 990 crores. The bank had made a prudential contingent provision towards this account. The bank has retained a large part of this provision in the contingent buffers. The contingent provisions of INR 1,000 crores provide cushion for any volatility in micro finance and customer vehicle segments. We expect -- aspire to keep 2% extra on microfinance and 0.5% extra on MHCV portfolio as a buffer.
Healthy capital adequacy. Our CET1 was at 15.82% and CRAR was at 17.23%. Our credit risk-weighted assets grew at 15% year-on-year and loan growth at 18% year-on-year. Sequential growth in RWA is higher due to operational RWA in addition in quarter 4. Capital utilization remains efficient with improved risk density and strong internal capital generation.
Now let me take you to the Planning Cycle 6 progress. We completed first year of Planning Cycle 6 in March 24, and the outcomes have been largely in line with our ambitions. We made steady progress across key themes of PC-6 as seen in next few slides. We continue our retailization journey. We progressed towards our retailization journey with 73% of incremental deposits in the last 4 years coming from retail as per LCR and CASA. Share of retail deposits is now 44% as compared to 31% in March '20. We continue to invest in our distribution network and opened 378 branches during financial year '24 and 1,073 branches in last 4 years. We believe our investment in the distribution should aid us in maintaining the growth momentum in retail deposits. We have lowered our dependency on bulk deposits and borrowings. Certificates of deposits remained low at 3% of deposit while borrowing contributes 9% of the total liabilities.
Diversifying domains. Over the period, the bank has diversified its vehicle finance book with addition and scale-up of new vehicle categories like light commercial vehicles, cars, utility vehicles, construction equipment and tractors. We have gradually reduced dependency on MHCV segment which now contributes 6% of the overall loan book as compared to 11% during March '18. We have revamped our LCV business by carving out a dedicated business unit. Bank's LCV market share has now crossed 10% from sub-5% a few years back. We have also scaled up passenger vehicle book improving balance between passenger and commercial vehicles. Overall vehicle portfolio is now diversified across product categories, and the bank is well positioned for sustained growth across different product cycles.
Bharat Financial. We continued our progress on the journey of transiting Bharat Financial's rural business from microfinance to micro banking. We have scaled up our merchant business via our Bharat Super Shop offering. The loan book has now crossed INR 5,500 crores across 7 lakh nano retailers in Tier 2 and Tier 3 cities. The share of nonmicrofinance loan is now close to 13% of the overall loan sourced via Bharat Financial, and we aspire to take it to 30% to 35% in the next 2, 3 years. Our initiatives on the liability are also showing -- moving steadily, and we now have close to 18 million SA and RD accounts opened via BFIL with deposits of more than INR 2,900 crores.
The bank is adopting a one-bank approach to capture the entire ecosystem via community banking in the diamond business. We have launched Indus Solitaire a community-based focused relationship program, offering the gamut of tailored banking services for the diamond industry. While in the interim, we have been cautiously slowed down on the growth amidst global demand challenges, the asset quality of the book continues to remain pristine with 0 NPA and 0 SMA1 and SMA2.
Scaling subscale businesses. We are scaling our new and existing initiatives across assets and liabilities. This is one of our key focuses on PC-6. On the asset side, our home book loan book now is INR 1,792 crores. while merchant advances via Bharat Financial are at INR 5,565 crores, growing at 35% year-on-year. Our MSME initiatives have shown strong traction driven by sharp focus via dedicated business units and best-in-class digital offerings. Overall loan book via our MSME-focused business units grew at 26% year-on-year in financial year '24.
We continue to scale our existing liabilities initiatives for Affluent and NRI banking. We further expand our Affluent and NRI offering with the launch of private banking focused on HNI and ultra HNI customers.
Accelerating Digital 2.0. We have laid a strong digital foundation with our progress on our Digital 2.0 strategy and created a strong stack of digital products and capabilities. Our recent launch of INDIE is showing healthy trends and user adoption of 5 million-plus downloads and 1.2 million accounts, around 9 million transaction. We'll continue to integrate digital across our business, scale up of existing initiations and launch plans. We plan to launch INDIE for business and INDIE for NRIs very shortly.
Imbibing ESG into our businesses. The bank has deepened its impact on the society through responsible lending, mitigating climate change and promoting social behavioral changes. We have launched multiple initiatives, including ESG-linked products such as green deposits, sustainability-linked bonds, et cetera. Indus WE, a platform for women entrepreneurs, offering a holistic banking and nonbanking services. Indus Solar offering rooftop solar loans to MSME clients, fostering innovation in solar energy utilization. ESG-oriented debt solutions for -- corporate solutions for corporate banks.
On track for our PC-6 ambitions. Our financial year '24 progress has been largely on track with the PC-6 ambitions across parameters. We remain committed to achieving our Planning Cycle 6 goals. The key focus areas of financial year '25 are: steadfast focus on retailization of deposits, navigating challenging environment; calibrating loan growth in sync with deposit growth, prioritizing diversification and granularity; integrating one bank distribution structure to fully leverage its strong distribution across network segments; scaling new initiatives like home loans, MSME, Affluent banking, NRI banking, et cetera; leapfrogging Digital 2.0 with planned launches and scale up; relentless focus on compliance and governance; maintaining healthy profitability in top quartile of the industry. These are our key ratios across key business parameters.
We continue to show healthy traction across all our key metrics and expect to show similar trends going into financial year '25 as well. We aim to grow ahead of the industry. We are committed to PC-6 growth rates while being watchful of the operating environment quarter-on-quarter.
We remain comfortable with our margins with some prudential upside when the interest cycle returns -- turns. We continue to invest in digital and other liability initiatives. The cost to income thus should be range bound in the near term and improve as the operating leverage plays out in the few quarters.
The asset quality is now in a steady state, and any improvement would be based -- used to build contingent buffers. Overall profitability of the franchise would thus be stable in the near term and improve as some of the benefits from margins and operating leverage play out over the course of next few quarters. Thank you. And let me open the floor for question and answers now.
Yes. We can take questions now.
Myself Rohit from Market Memories. I have just two, three quick points and questions. First of all, sir, you mentioned your new to credit, you have approximately -- new to credit, and to see you have lend around INR 1,000 crores, and plus your...
The digital platform on personal loans, we've lend INR 1,000 crores, new to bank, not new to credit.
And microfinance also, you have lent. So basically, I want to know how do you take the credit score for people who are the borrowers, how do you judge the credit score of the borrowers who are availing of these loans in micro finance?
So there is a process which we use for the microfinance loans, which is the household income, debt servicing ratio and his performance in the credit bureau. And basis that, we decide this is the household income, debt servicing ratio and his track record and compute a score versus which we give the customer the loan. The average loan in cycle 1, which is given to a new client is absolutely low amount, which is INR 25,000, and then we'll take him up the value chain as we go.
And suppose if he is unbanked, he doesn't have any banking. If he's unbanked, he doesn't have any banking facilities or banking...
We only disburse through the bank account. We don't disburse anything to nonbank customers. We don't do cash disbursals.
And you said you have about 2,984 branches pan-India. So how many are in the rural areas like...
25% -- as per the regulator, 25% to 30% branches are in the rural areas. But we have a different distribution outlet in the rural because of the Bharat Banking BC outlets, we also have another 6,792 outlets across pan India, including IMFS as well as Bharat Financial outlets. So inordinate large distribution.
Sir, Ramesh Bhojwani from Mehta Vakil. First and foremost, many congratulations on excellent set of numbers and a beautiful presentation, you have given an all-encompassing account of all your four verticals. And it's so heartening to see the asset quality not only is under control, but it has improved. And going forward, it will still improve is what you indicated in your, I can say, not only verbal, but even the body language. Sir, only thing which comes to my mind is, I think the best in the banking industry cycle is it likely to continue for a year more? Or are we now going to see somewhere some weakening or some sectors or some segments of the economy or industry showing symptoms or signs of weakness?
So I think you can look at a glass half empty or half full. And I think if the economy has to grow at 8%, 7% to 8%, I think the credit quality of the economy will continue to do well. And I continue to believe that these are the golden ages -- times for the Indian economy, and we will continue to do well in the Indian economy. And I think if the economy has to do well and has to become a $5 trillion economy, banking sector has to do well. And I think for the banking sector to do well, the credit quality has to remain very good.
Absolutely. But sir, looking at the macro picture on the geopolitical front, today globally, there are 3 wars which are being fought. And if these don't get contained or ceasefired, they may catapult into a World War 3 kind of a situation.
I can't comment on the geopolitical. I can only say that we have to be watchful of the inflation because we get impacted on inflation if the oil prices go up, and we have to be impacted on the rates as a consequence. And we are very watchful while we maintain a growth rate of 18% to 22%, but we are very watchful of the environment, external environment, and we'll continue to evaluate quarter-on-quarter what the external environment is. And that is where we are convinced that we should be able to maintain the portfolio quality.
And last thing is I personally believe that the microfinance industry in India is of a size of at least INR 3 lakh crores, if not...
INR 390,000 crores.
Yes. And you are moving microfinance to micro banking. You also added that -- extended that statement even to my colleague here. But any specific strategy or focus or a concentrated move to double this micro finance book in the coming year?
I think you have to do a balanced growth at any point of time. You have to understand what should be the contribution of each portfolio and each segment in your overall book. We believe a microfinance book should be not more than 11% to 12% of your book, and that's what our strategy is. And you -- it doesn't mean that rural should be 12%, you diversify into other products, which are secured in nature and have cash flows which are of a very different nature. So it doesn't stop the growth, but what you do is diversification of your portfolio and a cohesive strategy is very important to grow in that segment.
Jai Mundhra from ICICI Securities. A few questions. First, on loan growth, right? So you mentioned -- I mean, in our PC cycle, we have been saying 18% to 23% loan growth, and we have delivered that in the -- a bit of a challenging environment. But going ahead, I mean the constraint on funding still seems to be still there. So this 18% loan growth guidance, I mean, is still relevant even in the period where deposit mobilization may be under a bit of a constraint.
So like I said, there is no reason for us to change our guidance right now. We continue to believe that the bank should grow at 18% to 22% as we operate in those segments. Otherwise, we lose market share. And we play in businesses where we have a right to win. That's number one. Number two, in my opinion, I think this liquidity issue, I think is about cost of deposits and not a liquidity issue.
And I think as long as you continue to create the right mix of assets, liquidity is not an issue, and you can manage your book. Don't worry about CASA ratios and liquidity. As long as your liquidity is matching your asset growth, and if you are able to do 16% to 18% growth, you will be able to grow at 18% to 22% given that our portfolio lend themselves to refinance and a lot of that funding can also come from refinance as a consequence of a growth.
So we don't see an issue in our growth because we have refinanced as an option in the borrowing where we have a tap out there, and we also believe that our liability growth will touch 16% to 18% this year, and we should be able to match that growth.
And sir, within this growth question, we have given additional detail on vehicle portfolio that the way that we are diversifying, right? What is your sense of the vehicle book growth in FY '25? Because at system level, the overall industry, CV, et cetera, seems to be...
One of the reasons why we diversified, if you look at it, the CV book has not grown and has slowed down, but our growth has been 17% in a very tough environment also. We continue to believe that our vehicle finance growth will grow at 18% to 20% next year because of the diversification, which we've done in our book.
And it's not dependent on a singular product like MHCV coming in. It's a full diversification. Passenger vehicles are doing well. Tractors will come back. It's not done well last year. It's going to come back this year. We expect a very good monsoon. And I think we have enough levers in our vehicle finance unit to make sure that we deliver an 18% to 20% growth.
Right. And lastly, I mean, last two questions. One is, it looks like the cost of deposit has only grown by 4 basis points, but the cost of funds have grown -- I mean, it has increased by double digit.
I'll tell you why. I think we had a scenario where one fintech partners, which we had INR 4,000 crores of liabilities in fixed -- individual fixed deposits, went off at a certain point. We have a strong view that we should not reduce our LCR below 115% at any point of time. We at that point, did external borrowings. And I think foreign currency long-term borrowings, and we had a cost which was associated with it. I think it's a matter of prudence that we did it, and it was very important to manage it at that point. We still are able to maintain our net interest margins and this is the ability of this bank to manage its NIMs where people thought our NIMs will be 4.15% or 4.2%, we still come at that NIM because our ability and our portfolio's capability to diversify so fast.
Basically, you see the borrowings number. The borrowings number has gone up by INR 7,000 crores as well add up to...
And if you can suggest that these other loans, right, this has become like INR 25,000 crores...
INR 5,500 crores in that is coming out of micro- merchant acquiring loans. The balance comes out of -- I'll give you the details. Yes. So affordable housing is about INR 1,988 crores. KCC is INR 2,966 crores. Home loans is INR 1,792 crores and others, which include BLS, gold loans is about INR 5,123 crores.
I thought the number was INR 25,000 crores in total.
The other is given in the investor presentation.
Okay. Yes. And sir, if I may ask from a 2-year perspective, do you think you have cushion on, let's say, margins -- upward cushion on margins, OpEx, credit cost in all these 3 line items?
So very difficult to comment as of now. We've set and given a direction on the ROE. See what you should look is the ROA, we've given 1.8% to 2.2%. That's the end, whatever we do. We are right on our dot on year 1, we're at 1.9%. I think you should only see positive movements. You've never said that -- and positive movement happens if there is a margin improvement, which -- so our cost to income is highly inflated as of now because we've invested in new businesses, but we've still been able to maintain our margins.
This is Pratik Chheda from Guardian Capital. Just taking forward on the point on the deposits. I mean this quarter across the industry, deposit growth has been strong on a Q-o-Q basis, which was a slight positive surprise. So just wanted to understand whether this is more a temporary thing? Or do you see the deposit mobilization now sort of picking up? And how have been the early indicators measure almost a month into the...
Deposits is not the issue. Please understand that, liquidity will not be issue anymore. It is about the cost of deposits. And that is what the issue is. And as long as you know how to manage the cost of deposits and how you manage borrowing cost of deposits and cost of funds, you will get your numbers. So please understand.
I think we're making more of what it is. I think as long as you do granular growth on deposits, you have a healthy mix of borrowings into it, I think achieving that growth. And we are a small bank, so we're not such a bank that we have INR 10 lakh crores of deposit, for us to do 18% to 22%, it means only INR 15,000 crores to INR 16,000 crores a quarter, yes. So there is nothing much to it.
And incrementally, the borrowings have gone up by around 18%. Can you just share what is the cost of borrowing for these additional borrowings that have come in the fourth quarter?
They have been less than the cost of deposit. But yes, overall, the cost of funds will go up because, again, if they are over the cost of funds, which was 5.3% or 5.4% earlier, obviously, it will go up.
So you had mentioned earlier also that you won't use additional provisions. So have you utilized anything this quarter?
Yes, we have INR 300 crores.
Okay. And what's the plan for the remaining one-off provisions?
I have said in my presentation that we will keep 1.5% to 2% of micro finance book, which is the JLG book and 0.5% on the MHCV book, always as contingency purpose. So we are well much within that, and we will continue to keep that buffer as we go. So we will continue to add or delete basis on it. So it's not that we are going slow or high. We will continue to create a contingent buffer to take care of any volatility in our earnings.
We are -- I've always said our earnings profile will be very stable, very annuity driven, and that is what you will see of our earnings.
Sir, in terms of your cost of deposits or cost of funds, how much more increase you expect for next couple of quarters or the most of the repricing is done?
Very difficult to project right now. I think we look at it over a period of time. I think it's also not good to have very long-term deposits right now. So we are seeing when the rate change happens and what is the cyclical. So we are managing our book right now. So I think as long as we maintain our NIMs between 4.2% to 4.3% and maintain our ROAs between 1.8% to 2.2%. That is the number we give a guidance. We don't give a guidance on every parameter because that is for us to manage our businesses. But we want to give returns, which are consistent, and we've said that is what our NIM guidance is, and that is what our ROA guidance is.
Thank you, sir. So my -- I have two questions. My first question was on the Reliance Capital and mutual fund business by the holdco right? So it's part of the holdco. But do you foresee any pressure going ahead from RBI to just have one bank, 1 company?
We've not got a license. So we don't have 1 bank, 1 company approach and holdco can have multiple companies. But bank is an independent entity governed by the Banking Regulation Act, so I think we don't have any pressure as such that we've got to take a stake or not take a stake. We've not invested anything in that company. So we can't even comment on it.
And sir, any clarity on promoter stake, means promoter increasing stake?
See, it depends, it's between the promoter and the regulator. Whatever information we are asked if we are asked by the regulator, we respond. And I don't think there's been any such information, which we've been asked in the recent times. And I think it's between the promoter. It would be very difficult for us to make any statements around that.
Got it, sir. Sir, and my last question is on the MFI business. So it's doing well. You said that it will move up to the high teens. It's moved up to 20% year-on-year from a lowish growth earlier. So where do you see the growth settling for the next 1 to 2 years? And just in terms of asset quality, of course, your exposure in Punjab, Haryana is small. So it's good, but any such asset quality stresses you foresee in the future?
First of all, I want to give you the comfort that MFI book, which is in the JLG, while the MFI book may grew at 20%, 21%, 25% also. It's not that we will only grow in JLG. That diversification is very important in our portfolio, and that's what we've done.
We continue to maintain 9.5% and 10% market share on that business. And that is what our market share will be, and it will not be more than 11% to 13% of our portfolio. That's the number 2 statement I want to make.
Number 3 statement I want to make is, yes, we saw Punjab coming 11 months ago. We saw the waves of Punjab coming and even some parts of Orissa and Bihar also coming and some parts of UP. We started exiting those portfolios at that point. That's why our exposures are very, very low. And we did not restructure any of these assets, and we wanted to take them as losses if there are any. So we continuously believe these small ticket loans would never be restructured. We should rather take them as losses and move forward.
So a couple of questions. Firstly is on the slippages, while there has been an improvement in slippage rate this quarter versus the last quarter, but how do you really see this? Because consumer slippages still looks a tad higher. So where would you see them in FY '25? Any color on that?
Our slippages are in the consumer side is absolutely under control. It's only in credit card where we see a little bit of an elevated slippages. And I think we write off the credit card portfolio very early also. So I think the slippages are coming in the credit card side, which we now think has stabilized. So it will now see a stable flow and then it will see a decline. So we are not seeing fresh inflows into the 30-plus bucket.
But I think the floor rates have to happen because the resolution rates in the 30-plus buckets are a little bit low at that level indeed. So I think you should start seeing in 2 quarters' time credit card flows coming down. And as a consequence, you will start seeing the slippages going down in the retail side of the portfolio also.
Okay. And secondly, on the additional provisions that you plan to make in MFI and MHCV. So see, last 2 quarters, we have been only consuming provisions from contingent. So -- and by when do you see that bank will be in a position to start making those provisions?
See, you can't give a guidance on this. It depends on the opportunity and the stability of the flows which I want to see. And I think my books are very stable right now. I think I carry enough contingent provision to manage any market volatility.
If I feel that my market volatility is a little higher, I will start making contingent provision, or my micro finance books touches a certain level. And I think I have -- it's the INR 1,000 crore provision is not enough to take care of that, I will make the provision immediately.
I've made a commitment and I'll make that 2% and 0.5% of the MHCV. I will add to that, and maybe I'll start demonstrating to you that what I carry as the provision from next quarter onwards. So that you're comfortable that the bank carries enough provision to take care of any volatility in these 2 books and the volatility comes in these 2 books only.
Right. And my last question is on the corporate banking yield. Now this quarter, there was a slight drop there. And our focus all through has been more on the mid-corporate and small corporate in terms of growing that book. And so how do you really see that and what explains this drop this quarter?
So we continue to believe large corporates is a very important part of our business. Niraj Shah runs this business for us. I think we do very specific segments in that, and we focus on very specific deals in that. We also focus on that segment because we get our risk-weighted assets as a consequence of that. . So we do it at a time when we need risk-weighted assets and we see how to balance the risk weight assets. If you see our CET1 ratio and you see the decline, we've matured 81 bonds and I think a 40 basis point impact. But we've still not gone -- lost the CET1 by 20 basis points because -- and we had an operational risk also because we had to do a provision still because our CET1, because our A-rated paper and above went up, and that is what large corporates does to me.
So we balance our books very, very well, and that is what it is. We will grow large corporates in line with our system growth, not higher than the system growth. But I think it's part of our strategy. It's a very important piece of our business. And we believe, though we may not make that much of money, it helps in our capital allocation, and we believe that its preservation of capital is very important. And that's why we've not went -- we've not gone to the market for the last 4 years to raise capital.
Just wanted to understand from you on the status about the Vodafone recovery account.
So we got a recovery on February 8. The full loan was repaid. We told you last time last quarter that we will get this recovery. We got the recovery on February 8. February 8 was the date.
This is Anand from Emkay. Can you just talk about how the funding cost curve is moving? Do you think that basically it has largely peaked or possibly it's going to peak in 1 or 2 quarters number one. Number two is that, particularly in terms of lending rate, basically, you run a lot of fixed rate book as such.
Do you see any scope of increasing lending rate, particularly into any products in case of microfinance lot of the NBFC microfinance are actually asked to reduce the rates as such. Any such case for us, number one. Number two, in case of MHCV and other vehicle loan products or the affordable housing loan products as such, have you increased the lending rates in the recent past?
Not at all. I don't believe that you can, at the bottom of the pyramid, start increasing rates because the opportunity represents to do that, right? You have to look at this business in totality rather than as individual vectors. And I think if you increase the rates, the ability of the pay -- the intent will be there but the ability to pay reduces, and that's not fair. In my opinion, while it may -- you may say it's INR 10, INR 20 per month, it's not the right way to do our business.
In my opinion, that we -- our rates remain at 21%, 21%, 21% and we don't want to do anything, which is contrary to that. We don't want to offer rates at 28%, 26%, 28%. That's not right on the microfinance side. I -- if you ask me on the funding side, I think the gap, as long as there is a gap between the savings account rate and the fixed deposit rates, I think there will be a COD shift, which will happen. It may be 3 to 4 basis points, but it will happen because you can't tell a client to keep money in savings account and then have the -- and not keep it in the term deposits. And I think that's happening in the industry. Second, I think midsized banks and like us and even the large private sector, I think the current account growth will get subdued because with the 10% regulation, which has come in, a lot of banks in private sector banks will not have 10% exposure to large corporates. And I think whatever money you may get, you can only keep for 2 days or 3 days, which is the cash management of the new account, the special purpose accounts are far and few. So I think there is a lot of money which banks used to get as transaction banking floats, which have disappeared. So that's why the cost of deposits have gone up in the banking industry.
And I think you should not worry about that as long as margins are maintained between 4.2% to 4.3% and banks manage the risk in a diversified manner. I think that's the new mantra. And I understand that that's the way we are managing a mantra. And I think while CASA ratio is important, our CASA ratio has reduced from 44% to 38% in 6 quarters. But again, our NIMs have remained very stable.
So basically, what could be the levers to maintain the led in NIMs basically where we are at this point of time, basically, if we don't increase the lending rates, our cost of fund tends to go up, so how do you manage that? Is there basically any scope in terms of...
You must look at cost of funds. The difference between cost of deposit and cost of fund in our case, well in other cases of 15 basis points, in our case, is almost 100, 120 basis points. I understand why that cost of difference comes in. That's number one. Number two, I think the mix change in the business, our ability to change the mix and every change of mix between corporate and retail gives us about 550 to 600 basis point incremental yield. That is very important for us as we manage our business as we go forward. And I think those are the important parameters for us to manage them.
Sure. Secondly, on your OpEx basically from the industry perspective as well as IndusInd Bank perspective, we believe that certainly, the branch expansion is bound to happen across banks. And I think you are also focusing on that front because you want to mobilize the retail deposit. So how do you see your and basically the industry cost structure moving up from here, be it investment into the branches, be it investment into people, technology, all these platforms.
So I'll tell you, you have to understand where the costs are coming from. That's very important. One is people cost, and I think retention of people has become important. And I think with all banks expanding the way they are expanding, I think people cost have risen. And we must accept that. No more can you say that I will give a 5% increment and try to retain people. I think the cost of people have risen and it's an acknowledged fact which has happened in the industry.
And I think that's something which we need to. And of course, 30%, 35% of attrition also raises another cost issue, which comes in as a consequence of that. That's one. Number two, the cost of technology has risen. If you want to be ahead of the curve, you've got to invest in technology and at a very fast pace. And I think the technology costs have started showing an increasing trend. And it's showing for the last 2 years, and continuously showing an increasing trend.
Number three, I think payments business cost has gone up to a large extent, specifically on the UPI side and I think those costs are increasing. Even if your account is debited, you're paying to the wallets. At the end, people don't use you as a wallet. They move the funds from your account to a Google Pay, and if you pay the Google Pay or the aggregator payment service provider, you are actually paying to UPI. That cost is increasing at a very fast pace for the banks. That's number three.
Number four is the branch expansion. Number five is when you get into digital, initial phases of first 1 year, 1.5 years, 12 to 18 months, you will have costs which come in. Now you can stop that initiative, but I think you are contradicting yourself and spoiling the growth of the future of the organization, because I think branches are required because relationships belong to branches. But digital is required because transactions are enabled through digital. And you need both complementing each other. And I think that's where the costs are happening.
So recently, basically, RBI has been very active and putting a lot of punitive action taking, particularly in terms of IT systems as such. So what's your broad view? I mean, not talking about any particular player, but broadly in terms of industry and how basically IndusInd Bank stacks in that, do you see any kind of that risk coming in for IndusInd Bank ever from the regulator?
I cannot comment on the regulator behalf. So let me tell you, nobody can comment. I'm lucky that I've not got the punitive action. But my CSITE audit, if that's the indication does not reflect that I have any such issues, so that's because we invest in technology before we scale our business. So even digital. We've not scaled up to a large extent because we want to keep on testing our technology and the infrastructure before you scale up anything.
So I think we are very, very cautious about that. I think as you grow this business and if you think that the volumes and scaling up of volumes and payments is happening, how do you define infrastructure and your architecture of the technology is very important. And I think people -- it's -- the traditional models are not going to work in this infrastructure.
Real-time DR, multiple switches. How do you create that capability in the systems and UI/UX. How do you have online real-time systems to trace when there is a constraint or a stoppage in the system or something is happening.
So efficient tools, efficient monitoring capability, efficient change management system, effective architecture. It's a very different tech-related stuff, which has to happen, and we've invested in that. So that's why our technology costs have gone up the way and our efficiency is what it is because we invested because I know that it will pay back to us in a long-term basis. But I think that's investments which you have to do if you have to survive. Now can I say that we'll get a penalty? I don't know whether we'll get a punitive action. I can't judge for the regulator.
Sure. Lastly, if you can just talk about your tech expenses as a percentage of overall OpEx and as well as the branch cost broadly?
I didn't get your question.
So the branch cost as well as the tech cost as a percentage of your OpEx, if you can talk about that?
So it's about 9.5% of tech cost, and branch expenses I think -- I can talk to you about consumer bank as a whole. Okay, I can take out the asset fees out of it because asset is more, so about 18% to 20% of my expense -- 22% of my expense would be the branch expense.
So basically, physical takes away somewhere about 30-odd percent of the overall OpEx, and that has gone up in the recent years, or like?
It does go up because the people's cost is going up. It's not -- some cost has come in. The branch is a some cost now. So the variable cost is only the people cost.
And the attrition rate this year has come down versus the last year in broader terms?
So Zubin is here, he can talk. But I think to give you a comfort, yes, we are down from 51% to mid-30s, but Zubin can talk about it.
So I think Sumant has already shared the numbers. Last year, a year before that, was a tough year for the entire industry, and you all read reports of our attrition pushing the 50% mark, crossed into 51%. But a lot of initiatives and activities were implemented last year in terms of understanding why people are leaving.
There was a huge boom where people wanted to leave for fintech, just like the dotcom in 2000. And I think it was -- at that point in time, I think we told -- we said that we can't stop these people from going. Holding back people at 40%, 45% hikes was not making sense. The payroll costs would have catapulted geometrically.
But the last year has been good for not only us, we've, I think, come right down to the bottom of the list of attrition now, fortunately, it's just upwards of 35%, below 36%. And how that plays out is that it helps bring the cost down. So the cost of manpower that you're seeing, which you see is slightly elevated in the past year is the replacement cost for the 51% of the previous year.
So there's a lead lag effect that needs to play out when you're hiring. As we go forward -- so let me put it this way, Sumant gave you some numbers on the number of people we hired. Our cost for hiring is between 8% and 9% hike year-on-year on our salary -- sorry, cost for hiring is around 19% year-on-year, 18% to 20% year-on-year.
Replacement cost, last year, which was the highest we've ever seen because of the attrition in the previous year was pushing 8.5%, you'll start seeing that going down. So actually, holding back people always makes a lot of sense, not just from the fact that you lose or you don't lose trained resources, but the replacement costs given in the market, as Sumant said, we used to take targets.
I used to give my team targets that you're not going to hire anybody above an average of 7.5% to 8%. Those days are gone. The kids and others who come over here expect 30% to 40%, we start with 15% come down lower. So I think the market is finding its levels. And we should see standard stabilized attrition between 28% and 32% for the industry as a result.
Sumant, just last thing basically, you ticked almost all the boxes that one would expect it to be. The only slight disappointment or basically the ask that we have for next year is that, if you can shore up your contingent buffer, I don't know where from you find profits, maybe from treasury gains or something like that. But certainly, I think we would want you to build up that contingent buffer.
I have always told, if we need one we will definitely shore it up. As long as the contingent buffers takes 1.5% to 2% of the microfinance, JLG book and MHCV. And if there is a shortfall, we'll demonstrate it clearly on the next quarter onward, what is the shortage, we will definitely add that to the contingent. If there is a release to be done, we will release it. But I'm assuring you we will never be short of this number.
We can cut for tea and I'm there, you can ask any questions if you want. The management team is also here, I wanted the management team once a year to be introduced to the investors. You can ask any questions in the spirit of transparency that whatever we've said, and I think that will give you the comfort of what we are doing. Thank you so much.