Punjab & Sind Bank
NSE:PSB
Punjab & Sind Bank
NSE:PSB
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Earnings Call Transcript
Transcript
Other Earnings Calls
Good afternoon, ladies and gentlemen. I'm Shilpa Abraham, the moderator for today's earnings call. I welcome and thank each one of you for joining us today for the Q1 Fiscal Year '25 Earnings Conference Call of Punjab & Sind Bank. Please note that this conference is being recorded. [Operator Instructions]
I would now like to introduce the management of Punjab & Sind Bank. We have with us today, Shri Swarup Kumar Saha, Managing Director and Chief Executive Officer; Shri Ravi Mehra, Executive Director; and Shri Arnab Goswamy, Chief Financial Officer.
I would now like to hand over the conference to Shri Swarup Kumar Saha, MD and CEO of Punjab & Sind Bank, for the opening remarks. After which, we will have the forum open for the interactive Q&A session. Thank you. And over to you, sir.
Thank you, Shilpa, and good afternoon to all of you who have joined for this Q1 earnings call of Punjab & Sind Bank for the financial year '24-'25. So our Board has approved the Q1 performance of the bank and has been -- on 26th July. And already, you must have all got an opportunity to go through our results and the presentation.
However, in view of setting the context of today's interaction with all of you, I would like just in brief, tell you some of the key highlights of the bank for the Q1 of FY '24-'25.
The business of the bank grew by 7.10% and stands at INR 2,08,331 crores, a growth of 7.10% on a Y-o-Y basis. Deposits have grown by 5.59% Y-o-Y, and the deposits of the bank stands at INR 1,20,593 crores. Advances grew by 9.24%, and it stands at INR 87,738 crores.
The retail agri and MSME advances, which we are focusing on as a part of our revised business model, has grown at 15.69% Y-o-Y. The net interest income of the bank has grown by 15.18%. The operating profit Y-o-Y has grown by 23.35%. The net profit of the bank has grown by 18.95% Y-o-Y. And on a sequential basis, the net profit has grown by 30.94%. The net interest income has grown by 23.37%.
The gross NPA, with thanks to the recovery efforts of our department, has now been reduced to 4.72% as on 30th June. The net -- that shows bps -- reduction of 208 bps. The net NPA has gone down to 1.5%, a reduction by 36 bps Y-o-Y. The bank's capital adequacy remains healthy at 17.30%, which shows 11 bps growth Y-o-Y.
In terms of some of the other salient features of the bank's performance, we'd like to mention that the CD ratio of the bank has improved to 72.76. And we all know that the banking system is undergoing some challenges in terms of deposit growth vis-a-vis the credit growth. In our bank also, we -- our CASA has grown at only 5.36%, which is in line with more of the other banks also. The retail term deposits has shown good traction, and in the June quarter, we have seen that the term deposit has grown by 10.15%, which has helped the bank for reduction in this bulk deposit ratio of the bank.
So we will continue to focus on mobilization of retail and CASA deposits. We have taken out a lot of campaigns, a lot of -- we have repriced our -- some of our deposit products, and we will continue to move to the market for garnering fresh CASA and retail term deposits.
In terms of the advanced book, while the overall gross advances grew by 9.25%, the retail grew by 23%, agri over 9% and MSME at 13.63%, which has held the bank, which we have said earlier that the bank is now moving towards a RAM-based credit growth. So the percentage of RAM to the total advances has now improved from 51.73% of March to 52.49% as of June '24.
In terms of the -- some of the other areas. Our credit profile continues to be healthy. Our asset quality also remains -- looks pretty good and sound also. In terms of the core fee income. Our core fee income grew by 14% Y-o-Y in the June quarter.
One, of course, one, in terms of the advanced growth, I would like to mention that the -- while the overall advance has grown by 9%-plus, 9.24% the average -- we are focusing on average growth, so the average of the retail agri MSME on a Q1-to-Q1 has grown by 12.56%. So that's an encouraging sign for the bank.
We're able to translate the -- our objectives and products and services so that we improve our average RAM growth. Our slippages have been contained in this quarter. And so therefore, we feel that the slippages has been only INR 276 crores in the June quarter, which is against INR 451 crores of June quarter last year and INR 370 crores of March quarter.
So our collection efficiency has been given a lot of focus and it is now paying dividends in terms of some of the containment in the slippages front, particularly on the agriculture and the MSME front.
The yield on advances has improved to 8.70. One important, of course, development sequentially is that we have reduce -- we have been able to reduce the cost of deposits from 5.71 to 5.64. So that is how we are managing our liquidity. The NIM has improved to 2.69, both it has shown improvement on Y-o-Y and on sequential basis.
The return on assets was at 0.50. The cost-to-income has marginally reduced to 69.67. And overall, the capital adequacy still remains healthy at 17.30.
On the digital front, we have been taking a lot of initiatives to improve our digital traction and a lot of value-added services are being added every day in our system. The apps -- Google Play Store rating of Punjab & Sind Bank UnIC is today at 4.60, which is one of the best in the industry. So we'll continue to work on that direction and try to improve our services through the digital mode, which will also reduce our operation cost and give much more value-added transactional satisfaction to our customers.
Our endeavor to expand our branches will continue to happen. As of now, we are having 1,569 branches. We have opened branches of 5 of the first quarter. We are having a plan of increasing branches by 100 for the entire year. Our ATMs will also be increased as we go along as we open new branches. The branches primarily will be focusing on the semi-urban areas and the urban areas other than the in Northern belt, we have identified 100 potential locations for that.
BCs, we have -- we started off 357 BCs 2 years back. Now we are having 2,000 BCs, and we intend to bring another 2,500 BCs by the year-end this year. So that will expand our delivery network through the corporate BC network to a large extent also.
And on the new development that has happened on the CASA front, we are -- as we are organizing a lot of campaign for that -- and as far as enablers are concerned, we have signed an MoU with Indian Army garner defense accounts. We have brought in the mutual fund fintech, wealth-tech partner, to -- for DEMAT accounts, which was an earlier announcement in '22-'23, which has now been frutified, is working very well.
We have tied up with Maruti Suzuki for digital car loans. And we're also trying to collaborate with reputed institutions like IIM Amritsar, ISB Mohali and Punjab Agriculture University to garner more and more fresh ideas on innovation, on agri innovation, on innovation of financial inclusion, and we'll continue to explore that.
As far as the other areas of -- we are taking a lot of measures on cybersecurity and having a robust IT infrastructure in the bank, and we'll continue to invest as per requirements so that we are able to create a future-ready bank -- and also which will also be equipped to handle the future IT challenges that may crop up at any point of time.
So that was a brief of my -- of our bank's performance of Q1, and now over to you, Shilpa, and we are -- we can take the questions as they come.
[Operator Instructions] Our first question is from the line of Mr. [indiscernible] from PNBISL.
Sir, we will move to the next question. The next question we have received is from Mr. [ Bimal Panchal ] from [ Bimal Panchal ] & Associates, who has asked whether Q1 FY '25 trend will continue for the year?
Yes, we expect to keep this momentum going as we have done in Q1.
So we have received another question from Mr. [ Godwin & Sons ]. What measures are being taken by the bank to more than double the BC network this fiscal year?
Yes. As we -- as you all know that the bank was earlier having the model of individual BCs, business correspondents, we have moved from the individual BC concept to the corporate BC model. And in a public sector bank, there is a process of onboarding such corporate BCs.
So last year, we had 1 single corporate BC, which we impaneled in the bank, which has spread the network to 2000, and the corporate BC themselves have employed 2,000 BCs under their company. And having learned from the experience of the -- first experience, we have now completed the RFP process for the second round, and we will be onboarding a few more corporate BCs, so that every BC, corporate BC is able to cater to -- every part of the country is catered by some BC or the other because we do not have BCs who are strengthening in pan-India basis, so we need to expand the BCs.
Some may have a good traction in the eastern part of the country, some may be good in the southern part of the country. So we will be onboarding a few or more so that we -- our entire pan-India basis can be catered. The Northeast is another area where we need to have BCs. So we have taken various measures.
And maybe after learning from the experience of this 2,500 also means 2,000 plus 2,500, that is 4,500, in the next fiscal year, we may go for further [indiscernible] 2,000, which we had announced earlier that we expect to have 6,000 BCs by the end of March '26.
We have an additional question from Mr. [ Godwin & Associates ].
Sir, I also wanted to ask you to what new products and services the bank has planned to add in the PSB UnIC app in the current fiscal?
Right. See, we -- just to keep a bit of a track on our progress on this, you all know that the bank went through -- bank had this PSB UnIC app for around 3 -- 2 years-or-so, in fact, 3 years, but we are constrained by the technology platform that we had on the CBS side. So our CBS had an earlier version of 7, which was constraining the further value-added services, which are presently required under the present ecosystem.
So once we have had the [ Pinnacle 10 ] upgradation done, our UnIC app is now having a robust platform. We are now trying to use it in different directions. As you -- as I've just announced that it is in the presentation also, while the existing services -- along with the existing services, we have now brought in the DEMAT services in the PSB UnIC. We have brought in the SIP mutual fund investment process, which is very simple and through this process, it is integrated in my bank's PSB UnIC. We have brought in government PPF account opening. We have brought in government accounts like Sukanya Samriddhi. Another constraining factor for our current account mobilization was today private banks are providing a lot of value-added services for the current account holders in their mobile app itself, like transfer of business, bulk transfers, debits and credits, which we were unable to provide. Now the system is enabled to a certain extent to provide those value-added services.
We will be bringing in much more, very much refined current account corporate biz app, which will cater to exclusively for my current account holders. And we're also trying to bring in some of the other -- we have already provided like some of the -- if you're seeing some of the apps, you will get a free credit score.
So credit score, so you can download a free credit score in my app. You can also download your CKYC number in your app. Suppose you are having a bank account in our bank, you can get the CKYC number free in my app locators. So there are a lot of other projects, which as we move on in our systems, we'll try to bring in a lot of other areas of value-added services, we think will add -- bring some traction in the -- attracting young customers in the bank.
Our next question is from Ms. [ Saloni Shah ] from [ Lime Waters ]. Her question is what is the NIM guidance for fiscal year '25?
Our Q1 NIM was at 2.69. So we intend to keep the NIM at between 2.75 to 2.8 for the March '25 year-end.
We have received another question on the chat from Mr. [ Ashlesh ]. His question is, can you explain the reason for INR 4,000 crores to net worth due to the shift to new investment guidelines?
Yes. I will try to answer part of it, and part of it can be answered by my Treasury and CFO team. Let me see how much I can explain. You're all aware that the RBI has taken out revised guidelines on the treasury, valuation of our treasury book that we have and that calculation also is well defined in the RBI policy. So as per the policy, we are having recap bonds with us, INR 11,672 crores of recap bonds.
As per the accounting norms and as per the Reserve Bank circular, this has been -- the INR 4,200 crores has been adjusted with the general reserve of the banks. So that's how the accounting happens. And this is across, if you see, all the banks have done this process uniformly with that.
We are receiving a few more additional questions on chat. Our next question is from Mr. [ Hetal Gandhi ], an individual investor. His question is, just wanted to understand about the recent RBI draft LCR norms for additional 5% run-off for retail deposits. So going forward, how much impact will it have on our bank's earnings?
Yes. I think a lot of studies have already come out regarding the -- and banks as a whole -- it's in the public domain and the overall bank senor seems that anything between 10% to 20% is the range in which the banking system will be impacted.
Our back-of-the-envelope calculations has shown that our impact would be between 10% to 12%. But we are sufficiently cushioned at this point. Normally, we maintained LCR around 130%. So we are adequately cushioned. And we'll take -- this as now the draft circular has been issued. I hope a lot of -- I think a lot of feedback will go to the regulator on the circular, but it comes to effect from 1st April. But we'll take cognizance of that and accordingly take our liquidity measures accordingly. But as of now, we are well cushioned to that extent.
Our next question is from the line of Mr. Sushil Choksey.
Starting on Slide 22, you gave a guidance on net interest margin that you mentioned [ about ] 2.75. Can you give the guidance for the rest of the graphics?
Yes. sure. As far as the return on assets, we are at 0.50. We intend to have it between 0.65 to 0.75, in that range. The cost-to-income ratio, we will gradually reduce, we will bring it down to below 69% by the end of March and maybe, if possible, below 60 -- sorry, below 68% also, but it will be between 68% to 69%. Return on equity also, we will try to move forward between 9% to 10%. That's the range we are working on.
Sir, can I understand why our cost-to-income ratio on a sustainable basis? I'm only asking from the tenure which you have taken for. Under the able leadership of yourself and Ravi Mehra, can't go down to 60 and even 55 next 2 years or 1 year?
Sorry, Choksey ji, I could not get the final question from you.
I'm asking yourself and Mr. Ravi Mehra, under the able leadership between 2 bankers who are doing well at the bank, why our cost-to-income cannot shore towards 60% in next 2 years?
Yes, yes. Overall, if you look into the time span of next 2 to 3 years, we feel that the bank is in a position -- in the next 3 years' time to spend to bring it around 60% to 62% by another 3 years down the line. The only challenge that the bank was facing in this transition period was augmenting income. And that is what you will find that slowly and slowly.
The last year's impact, of course, was particularly due to the wage revision impact that we had. If you take that as a one-off impact -- incident impact, the cost-to-income ratio last year was 65.69%. So -- but notwithstanding that fact, we need to augment our income very, very quickly.
So therefore, now our -- we are creating pipelines for our credit growth and increasing -- trying to increase our fee income, trying to mobilize our resources because we are constrained by a low CASA, and we are constant by a very, very competitive environment in the corporate segment, which is very, very demanding.
So we are going through a process where we have to balance the LCR calculations along with the -- what sort of deposits we take. So one of the churning that has happened in my liability resources is that while my bulk deposit percentage was hovering around nearly 22%, 23% one point of time has now come down to 16% in a matter of -- 2 years down.
So that is a very, very important segment on which my bank's overall future growth will depend upon. So we did a lot of working on this, first to get out of this bulk deposit phenomena and try to focus on the retail term deposits. So once my deposit liability starts coming into the bank, in spite of the challenges that are happening, you will find that my cost of deposit on the Q1 has come down sequentially, which shows that we are able to manage my resources well.
So that -- those -- one is the -- the big income growth that was not coming into the picture because ultimately, the big income would come if I grow very heavily on the corporate side, I'll get squeezed in my margins to a large extent. So we are balancing it. We are trying to go for a sustainable growth and in a very calibrated manner, that's why I said that if you see my RAM advances growth, which gives me better yields than the corporate segment, that is growing at a 12%-plus trajectory and which is giving me yields also in return.
So we expect -- yes, that's a pain point, our low CASA and high cost-to-income are the 2 areas we still need to work very, very strongly. My team is working. Mr. Mehra is also leading his team very, very efficiently to bring that down.
But as we move on, we will try to -- because any jerk coming into the CIR -- you remember, in 3 years -- if you go back to history for 3 to 4 years back, my cost-to-income ratio was as high as 75%. And we were able to bring it down to 64%, 65%.
But of course, the wage revision impact, and we were unable to supplement with the growth trajectory. That's why this suddenly again has gone off track a bit. But again, now we are slowly and slowly bringing it down. We assure you that we are very focused on the cost-to-income ratio factor.
And our Board is also monitoring very, very strongly, and we have done some strategic thinking. So I'm very sure we will be able to come out of this -- we have come out of many other challenging areas, on the asset quality front, on the other areas; however, this is another challenge we still need to overcome.
Our next question is from Mr. Ashok Ajmera.
Sir, my -- again, my major question is, sir, on the credit growth side, which I think in this quarter is around 2%. And you said that we are constant by the corporate credit. And -- so can we not look at some midsized corporates rather than the large corporates for our credit dispersal? And again, my question as usual, being a small -- having a lower base. We have a lot of scope to grow our book in MSME and mid-corporate. So what has changed on that as far as the bank's policy or the view is concerned?
Yes, Mr. Mehra will answer.
Sir, [indiscernible] year-on-year growth for corporate is around 2.9% only. But having said that, we're not averse to the corporate credit. It was a conscious decision as MD sir said that we were balancing it towards the RAM segment because of the better yield opportunity available.
Subsequently, what sir said that we have got a reasonable pipeline as well as of now for the year, maybe somewhere around INR 6,000 crores. So I hope that this is going to give us a reasonable, you can say, stable kind of growth in the corporate segment as well.
With regard to your question on MSME, definitely, we are working on modernizing our products as well. We have rebalanced our portfolio towards MSMEs we were looking for some mid-corporate branches. We have designated some of the branches in mid corporate.
And more importantly, focusing on the STP journeys for MSME as well shortly, maybe within the span of 2, 3 months will be in the market with some STPs that are premising.
Yes, because I would like to see Punjab & Sind Bank to be in the range of 14% to 16% overall credit growth. I mean that will basically make the difference. Otherwise, on the asset quality, you have improved a lot. Our gross NPA now even under control.
Our net NPA is also under control. And on the whole, the profitability is also good. I think in order to go to the next level, we'll have to think on that. And as you said, yes, with all these efforts, our credit portfolio should increase substantially.
Mr. Ajmera, I would like to also supplement what Mr. Mehra said to be more -- to give you a vision of what we are thinking. Our co-lending portfolio is also showing traction. We are moving very strongly on the MSME.
If you find this time, our MSME percentage growth has been 13%. We were having a 6% to 7% growth in MSMEs earlier. So co-lending is one another opportunity of working very strongly. Trades platform, we have increased our portfolio to INR 800 crores in trades platform that, again, builds up the MSME portfolio.
We're also looking for assignment -- direct assignment opportunities where we were looking for retail and MSME portfolios. So these are the 3 segments apart from the core business growth from our own network, these are some of the other areas, I think what you are visualizing for this bank, we can achieve it very, very strongly.
Our next question is from Mr. [ Saloni Shah ] from [ Lime Waters ]. Sir, her question is, how will the funds plan to be raised through QIP in H2 fiscal year '25 be utilized to support the bank's growth?
Yes. Of course, the QIP will not only help -- in fact, we have given the disclosure that the bank has now got an approval of around INR 10,000 crores overall, in INR 2,000 crores of QIP, INR 5,000 crores of infra bond and INR 3,000 crores of AT-1/Tier II bonds. So we are having now all the approvals in place -- in terms of internal approvals in place, will hit the market as far as whenever we are in a position to take all other approvals.
So these sort of areas will not only allow our LCR be under control. It will also help us to grow in our credit and also take care of our future IT investments that you are going to help. In fact, we have a plan of around -- for the next 3 years, we have already chalked out a plan of around INR 800 crores of IT investment spread over 3 years.
So -- and those will be -- those are very important sort of investments which are required just to sustain the ecosystem that we are working on. So the QIPs or the capital raising that will happen will not only be utilized for the future credit growth, and also utilized for the future IT investments, which will also require capital.
Our next question is from Mr. [ Mahesh ]. His question is, the valuation of the recapitalization would have been done at fair value. Why would it have such a large impact? Two, can you sell these bonds given in open market? If yes, would that result in an actual loss?
And just to clarify, he has also asked how could you have a loss of INR 4,250 -- sorry -- how could you have a loss of INR 4,250 crores on a face value of investment that is at INR 11,672 crores?
Yes, my DGM Treasury, Madam Mahima is going to answer this.
Yes. Good afternoon. The bank has total capital bond of INR 11,672 crores. As per the new investment policy, that has to be valued at the fair market value and the valuation was around INR 7,200 crores. So the balance has to be routed to the general reserve, so it's not a loss.
It has a notional that has to be moved to general reserve as per the new investment guidelines. So that we have moved. And it cannot be sale in the open market. It will be -- gradually, the value will be increased. And it will be, again, used to its actual value of INR 10,100 crores or INR 11,672 crores. So it's not a loss. It is as per the investment guidance, which we have moved to the general reserve.
Our next question is from Ms. [ Muskan ].
I would like to know regarding our agri exposure has reduced quarter-on-quarter by roughly 2.5%. So what could be the reason for that?
Yes, Mr. Mehra...
Actually, we agree that we could not grow in agri because of, you can say, we are primarily concentrated in Punjab and Haryana and to cover up that gap and achieve the[ PS ] targets as well, so we are moving towards other aspects, and we'll be focusing other than KCC and agri farm loans. We have tied up with some equipment manufacturers like tractor manufacturers and other things. We're also looking for the opportunity for co-lending in agriculture and MFI financing.
And because of our presence in Punjab primarily, there is a seasonality of fluctuation in the agriculture, particularly the KCC accounts, where the averment happen more in a bi-yearly -- biannually methodology. So that's how the figures fluctuate a bit. But we were again growing at a lower pace in Y-o-Y factor earlier. Now at least we have reached 9%. We'll take it forward to a double-digit growth in the next few quarters.
Our next question is from the line of Ms. [ Shivani Kumar ].
My question is, I just wanted to understand the breakup of retail loans between urban and rural areas. Also, going forward from which area you are expecting more growth?
Ma'am, as of now, I don't have the data of the bifurcation of retail loans in different areas that we can measure separately. But with regard to the growth aspects in retail loans, definitely, we are looking towards home loan and auto loan and personal loan as well to augment the growth.
Our next question is from the line of Mr. Sushil Choksey.
Shilpa, first is, you should, as a moderator, allow 2 questions per person. I think you're abrupting the call when the question Q&A was not over. Sorry for intervening on your subject, but I think...
Mr. Choksey, we'll take care. Yes. Fair enough.
Secondly, sir, when I was taking your guidance, you've highlighted that you will get into co-lending or you will do retail, but what steps have you taken within the bank because there is no better time for your colleagues and employees at PSB than what is prevailing in the last 12 months or 24 months [indiscernible] counts where business possibility is concerned.
CD ratio of a bank can easily move up with all kind of products which you engross, I think. So was it difficulty with technology? Was it because of something else that we can't improve quarter-on-quarter to get to that pace at earlier than what we desire on paper?
Yes, I think that's a relevant question, Mr. Choksey. I'll try to answer that. You're right that a bank of our size, the CD ratio can be improved much faster than what we have been doing. You're absolutely right in that segment. But what I personally feel is that having understood the bank, we had to create proper -- we have to create proper systems and underwriting processes before we actually do some leap frogging.
And this is the area where we are plugging for the last 2 years. We had -- we didn't have a very effective credit delivery structure, which we have now implemented in the bank. We didn't have proper -- we had something, but we didn't have a proper underwriting mechanism for augmenting credit growth in the way you are expecting to happen.
See, while aspiration is all we look forward to, we also need to realize that the ground realities has -- of every organization has its own legacy, which we need to carry forward. And transforming things in a knee-jerk manner may also -- may have -- do not -- may not get the desired results.
So what we are primarily looking into? Now, see a bank which is 4 years back was having a corporate credit percentage of 55% and a RAM percentage of 45% and suddenly 2 big NBFCs go down in that market dynamics and suddenly, the balance sheet goes topsy-turvy in the bank in a whole.
And that is -- and we cannot go into that trajectory again. So now from 45 -- 55, 45, if I have to bring down to roll reversal in the bias towards RAM segment, the bank needs to go through that pain point of creating proper structures in place, proper personnel in place, proper monitoring in place, proper digital infrastructure in place to augment finance in that.
And you will appreciate that in spite -- and if you see -- how can a bank have a retail NPA of more than 3%? There's something -- there were some issues which we need to address. So those issues have been addressed over the last 2 years by creating proper credit underwriting offices at the back end, which is giving a very healthy sign that the future delinquency of those new sanctions that are happening over the last 2 years are under a reasonable level.
So that platform has to be -- have the base. I can easily increase by book at 20% at this point of time in the leads that I have. But is that sustainable? So the bank's own legacy, number one. Number two, the position where we stand at this point and the future in which we want to take it forward, so that we don't go through a process of 2018 to '21, where we got into a lot of a problem and the bank went into a serious shrinkage mode of the balance sheet.
If you will see from 2018 or 2017 onwards, the bank was in a shrinking mode, the balance sheet. For a bank of our size, any small value here and there can create havoc in the overall figures. So that's why it's better, I personally feel, though it's a pain we go through, but transformation goes through pain.
And this transformation is to be a sustainable one. We need to create proper systems first before we go into the big leagues. And my team is really working very, very strongly. We have taken [ CSOs ] from the market, we are taking specialized positions from the market, we are increasing the capacity of our stock executives, sending them for adequate good trainings in India and abroad.
And these are all investments for us. And remember one more thing, our technology, of course, was a damager in this entire story. If I have to augment credit growth aggressively, I have to have a very strong system. So now I think by 15th or 31st August, we are going to grow digitally in 4, 5 areas and which will be the most updated system in the entire industry.
We were able to crack the defense mechanism through a -- at least an MOU, which was not there. So many banks are with Indian Army. So now we are getting traction actually on the ground to open defense salary accounts, which is a great boost for this bank. We are now progressing on other salary accounts. We have created new current accounts products.
So all these collectively today, my people are on Saturday, Sunday now are in the field for deposit mobilization. So deposits has to come, credit has to be augmented. So we assure you that through all the sustainable measures that we are taking, the bank is slowly, steadily moving in the right direction.
Sir, my next question is if treasury yields are nearing 6.9% and if it heads between 6.80% and 6.85%, would you take adequate profit to deploy, I mean, in view of the current CASA issues and deposit rate towards credit, which is yielding you over 9%?
See, we will take the profits as it comes. We are having sufficient cushion to build on the -- on this yield curve movement, which is a positive sign. But if I -- see, my credit growth can be managed either by my resources or from my firm borrowings, or one process has reduced my investment book.
So I'm not in a position -- I'm not at this point thinking of reducing my investment book because of the situation that is coming. We need to continue to leverage this yield moment curve and try to supplement the credit growth through our other means, if not the CASA retail, then the infra bonds and the other bonds.
So first, we'll try to go with the infra bond in the market, we see how it hits the market, and how what pricing we are able to manage it. So we'll try to build this credit growth on the platform on the fundraising that we have now talked about.
Sir, can I take 1 more question?
Yes, please.
Sir, the technology spend, which you mentioned about INR 800 crores, this is for the year or...
No, next 3 years.
Next 3 years. And will you mean by technology spend of INR 800 crores, what kind of products and initiatives are there, some pricing?
See, overall, I'll try to give -- my GM IT will also supplement. Let's say, on technology, we are trying to build well state-of-the-art call center, okay? So that is a 6-month project from now on.
We are trying to build a centralized trade finance module, which another 8 to 10 months project is on the pipeline. We're trying to increase our servers. We are trying to increase our cybersecurity measures, which have become very important.
We are also going to implement the back-office structure for mobilizing CASA accounts, so again, that's big project for the bank. We have been talking on this before also. This is another around 6 months is now very -- in a very advanced stage, but it'll take 6 to 8 months' time.
All which entail costs. This is around a 1 year, 2 year. This cost maybe around INR 200 crores -- INR 150 crores to INR 200 crores is for this 1 to 2 years. And the long-term projects of data warehouse, we are going to go for a data warehouse project, again, which is going to become a big, big important development for the bank, which will always give -- also give us the leverage to leverage our own data and CRM management -- CR management for leveraging our own captive data.
So data warehouse is a big project, which will entail a significant cost, which is a long-term project of around 3 years. So that's a long-term project that we are there and the others are all, as I said, some of the projects will be between 1 to 2 years.
[ Stock price ], thanks to limited float, is expenses, how do you plan to propose to do our QIP or follow-on offer whatever product you were envisaged based on government support?
Sorry, I didn't get the last part of your question.
Based on the float is very low, so the [ stock price ] is pretty reasonably priced. Looking at our book value, which is approximately INR 20 and government is not likely to go [ IFRS ] and you may have to increase your capital, which is not an necessity, but you are forced to do it because we have to dilute as per SEBI rule. If that's the environment, how will you meet your criteria when the market is not conducive because of price to book or market cap to advance or market cap to deposit?
No, those are the -- yes, those are the constraints -- practical constraints we may face. But as you said also that one limiting -- one factor that is driving this concept is, of course, the regulatory side that we need to dilute. And we and many other banks are also coming into the market maybe in the same period of time, many banks have also -- other banks have also announced their intent on QIP.
But we are talking to some of the potential investors, we have started talking to them. It is not that it is a very bleak picture. It has some green shoots the picture that we are getting from the market. And reasonably, we will try to hit it as it -- as we feel and when it should be hit in the market. So we feel that it is possible.
We are confident that we can raise this in spite of whatever you said, you said because there is a positive atmosphere for PSB as a whole and both nationally and internationally. So we'll try to encash the sentiment notwithstanding the...
Sir, I'm not negative on PSU banks. My observation is based on the current float and the pricing mechanism, and it is very clear that yourself, that is PSB, IOB, Bank of Maharashtra, Central, all will hit the market in more or less similar times zone and because of the crowding, how do we manage that? That is more a question.
Yes, yes. That's the key point. You're absolutely right. I agree with you that the timing would be very key to me -- to us. And once the merchant bankers are on board, we'll have this discussion internally and see what we can do about the timing of the issue. But this is one [indiscernible] we have in mind the approvals are for a 1-year period. So we'll take that into that consideration while setting the time for...
My earlier questions are more directed to this achievement you successfully do it and that is what my wish is.
Yes, thank you.
We'll just take another 2 question. One is from [ Godwin & Sons. ]
Sir, my question is, what factors influenced Punjab & Sind Bank's decision to open 100 new branches this fiscal year and which regions other than the Northern region are being targeted for the new branches?
Yes. See, you must be knowing that our branches network is very much skewed to the Northern part of the country, so around 42% of our network existing is in Punjab itself. So now we are trying to open branches in areas which are other than the Northern belt, primarily in the Central, Southern and Eastern side and the Western side. So that would be a guiding factor for the bank.
And also, we are looking into more into the urban and semi-urban areas, where we are -- we have got good studies within ourselves regarding district-wise business that are available in the country. And according to the according to the study that we are having, we'll identify the districts where we can penetrate where there is a scope, viability of opening new branches.
We are presently -- hardly, we are present in around 335 districts of the country. So there is a long list of uncovered districts that our bank can penetrate. So primarily, other than Northern belt, we'll be focusing on South, Eastern belt, Central, Western; Western means Maharashtra, Gujarat when I say; Rajasthan. U.P. also, Eastern U.P. also, we may look into. Northeast, we have some scope, we can still look into. So these are some of the 100 potential areas that we intend to open.
Our next question is from the line of Mr. [ Saket ] from Kapoor & Company.
Sir, if you could give us some understanding of the repricing of our deposits, that is our liability franchise, what percentage of our deposits have been repriced to the market? And how much is spending to be up for renewal?
Okay. So just give me a bit of time. See the repricing that happened -- see, we have now taken out special products for maybe 333 days, 444 days, 660 days, so the existing -- earlier, these sort of special products where are getting repriced at the current level. But in spite of that, I think the question that you're trying to get into is what is how -- what is the impact on the cost that is going to happen.
So yes, I think that is what you are going...
Old pricing [Foreign Language]...
Yes. I think what is happening, Mr. [ Saket ], what we find now at this point of time is that this pricing impact is going to plateau out. If you see my Q1 cost of deposit, it has actually come down marginally, but it has come down. So we were finding that this traction was quarter-on-quarter was increasing in previous year.
So there is a possibility that -- which we feel very strongly is that we are not going to repricing further whatever we have repriced now in terms of certain products, we are going to hold at that level. The system will automatically mold itself, ecosystem will automatically mold itself to this new level of deposit interest rates.
The -- there will be a competition in the market to raise deposits. But I think the competition would be -- the rates would be similar. All banks would be at a point will offer a similar rate. So we feel that it may still have a marginal bias, positive -- higher cost maybe in 1 or 2 quarters.
But overall, the traction will now plateau slowly. It is not uphill curve that was happening on a...
To be in a nutshell, we can conclude that the NIMs are not under pressure. We can see the NIM's trajectory what we posted...
The only risk is that -- only risk of NIM, maybe not in the 1 or 2 quarters, which is coming, but the NIM impact can be gauged really after 1 or 2 quarters when the LCR calculations finally come into the picture. This is a draft circular. We have done some assessment as of now.
And how does it translate into our overall mobilization of deposits, how does it impact our liquidity management? That may be we will still monitor it. As I said, the 10% to 12% is a back-of-the-envelope calculation. We are still working on it. And for the 1 or 2 quarters, it doesn't seem to get impacted. But once it gets implemented from April onwards. And in that situation, the geopolitical situation, what it is, the current trends that are -- will also get factored in that situation.
So in that -- so that much open-endedness personally I feel should remain open. But in the next 1 or 2 quarters, I feel that the NIM should not be under pressure.
Sir, LCR point, I -- if you could repeat once again, sir? What does the new circular guideline on LCR -- that is the liquidity coverage ratio you are talking?
Yes. What it states is that the liquidity coverage ratio is a combination of various factors, how much of CASA we have, how much of retail term deposit we have, how much of bulk deposit we have, how much we borrow from against our additional securities, how much we take certificate of deposits.
What it -- the Silicon Valley crisis that happened? The regulator wants us to be in a comfort zone, if a situation like that happens. So there is no run on the bank. So the banks are told that you have to -- under a calculated methodology, the outflow and inflow of funds have to be looked into and your LCR should be the minimum level is 100%, which is stipulated by RBI, so that you take your deposits accordingly.
Suppose you're taking deposits and you are borrowing against SLR securities also, there is a calculation method under which we find out what is the LCR we maintain daily. Now the broad factors so far was CASA, was retail term deposits, was bulk deposits, borrowings and certificate of deposits.
This are broad. There are other small, small. The impact of these such things are taken into calculation that for calculation of LCR. Now the Reserve Bank has come into -- has gone ahead and said that if a customer is doing Internet banking or a mobile banking, there is an additional runoff factor that has to be provided in the LCR calculation, meaning thereby, suppose a customer is -- you're having Internet banking, maybe you yourself doing mobile banking, based on your transactions, and your activation of your account, you are actually taking out money from the bank.
So there is an outflow. You are doing numerous transactions on your UPI because UPI has gone ahead in a big way. So what is happening is RBI is trying to cushion us that -- because digital transactions are now in a majority front compared to the manual transactions, so please take this, this is an outflow risk that has to happen -- that happened.
So whether it is an Internet banking customer or a mobile banking customer, based on that, how much of an outflow can happen in a CASA account, how much an outflow can happen in a term -- sorry, in a current account and how much can happen in our savings account.
So some calculations have been given, either it is 5% or 10% or 15%, based on that, the banks now have to keep additional cushion so that the banks do not get into a breach of the regulatory guidelines of 100% minimum. Average banking system maintains some -- of course, there may be exceptions here and there, but I'm talking on average, I'm not naming banks. Average LCR is maintained between 120% to 135%. That's an average. Some maybe a bit low, some maybe a bit high.
From the current 100 level, we have to go to 125?
No, no, no. The minimum threshold is 100. Banks are always maintaining cushion of 20% or 30% more in that daily -- because it's always better to keep a cushion, so that a situation like anything that happens, which is unprecedented -- it can happen, no? Plus you have a Microsoft outage...
You are referring to the Silicon Valley type example, sir, that happened in $42 billion were withdrawn from depositors...
Absolutely. So as a regulator bank, RBI asking us [Foreign Language] what is happening, we are doing -- what is he trying to say, what the government is the trying to say is that we are aggressively growing credit. Credit [Foreign Language] we should always have a cushion that in such a unprecedented situation, there is no pressure on the bank to pay deposits back to the customer.
So that run-off factor, you just call a -- technicality it is called a runoff factor, which is -- which RBI has told us, which has to be between 5% to 15% additional -- there are calculation part in there. So we have to be careful of that.
Right, sir. And last point, sir, what should be our loan growth? How are our advances going to grow for this year and for the next year, what is that trajectory, sir, if you could give some understanding?
This year, we should grow at 12% to 14% and the next year, maybe between 14% to 16%.
And this year, base itself, what is our base on which we'll grow 12% to 14%?
Around INR 88,000 crores.
Okay. Right, sir. So we'll be 1 lakh crores in the next 2 years?
If everything goes okay, maybe in the next year itself -- this year itself.
Right. Okay. This year itself -- INR 88,000 crores...
Yes. It maybe. We are trying for that. We have given a conservative guidance because the synergy changes very dynamically. But if all things go well, a INR 1 lakh crores advance by March '25 is not impossible.
As there are no further questions from the participants, we now conclude this conference. Should you have any further queries, please reach out to Ms. Mamta Samat at 9930625104 or [email protected]. Details are mentioned in Webex's chart and the analyst invitation sent to you earlier.
On behalf of Punjab & Sind Bank, I thank each one of you for joining the conference call today. You may now disconnect your lines. Thank you. Have a good day ahead.
Thank you all. Thank you for your participation. Thank you very much. And thank you, Shilpa.
Thank you, sir.