Punjab & Sind Bank
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Punjab & Sind Bank
NSE:PSB
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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 Q2 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, Managing Director and Chief Executive Officer, Shri Swarup Kumar Saha; Executive Director, Shri Ravi Mehra; Executive Director, Shri Rajeeva; and Chief Financial Officer, Shri Arnab Goswamy.
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, everybody, who have joined this Q2 earnings con call of Punjab & Sind Bank. It's a pleasure for me to have you here and interact with you on the bank's performance of the second quarter of the current financial year.
So the results were already declared on 19th and the presentations were already uploaded in the stock exchanges, and I'm very sure all of you must have got the opportunity to go through our presentations. But just to set the context of today's interaction and for this con call, I would just like to mention a few of the highlights of Q2 performance of Punjab & Sind Bank. And from there, then we can go into the Q&A session.
So the business highlights of the bank is that the bank's business grew at 8.4% to INR 215,057 crores. So deposits grew at 6.48% with -- at INR 124,025 crores, and the gross advances grew at 11.14% and reached INR 91,032 crores. The RAM segment grew at 18% plus. The RAM percentage, we've also shown, a 317 bps Y-o-Y improvement at -- and now stands at 53.86%, which is in line with our guidance for the entire year, which we'd like to take it beyond 56% by March.
In terms of the efficiency ratios, we are very happy to state that the operating profit of the bank for Q2 increased by 76.15%. The net profit increased to INR 240 crores, an increase by 26.98% Y-o-Y. And this was possible by a robust net interest income of growth of 29.33%, we stood at for the quarter, INR 873 crores.
The net interest margin, which was -- which has also shown a good improvement both Y-o-Y and partially sequentially has improved by 38 bps for the quarter and Q2. The cost-to-income ratio, which was one of the areas where we were facing challenges and we were trying to address it into our various strategies, this time has been reduced to 62.82% for the quarter, a substantial reduction of 958 bps from a year-on-year basis.
The return on assets was at 0.65%, showing an improvement of 1,300 bps -- 13 bps, sorry, 13 bps on a Y-o-Y basis. The gross NPA percentage has also shown improvement and has reduced to 4.21% from a reduction of 202 bps. The net NPA has reduced to 1.46%, a reduction of 42 bps Y-o-Y. This was possible for -- in terms of our management of our asset quality, our collection efficiency. And accordingly, the fresh slippages was grossly reduced to INR 230 crores for the quarter. One of the important component of our income this time was -- has been the significant contribution of the core fee income, which has increased by 35.88% during the quarter.
So these were some of the numbers of the bank. Of course, the CASA, as you all know, understand that the CASA is the deposit mobilization. There is a lag between deposit and credit growth. So for us, also, we are still in that area of challenges, but we are trying our level best to improve the CASA plus retail term deposit component. The CASA margin reduced to 30.43%. But the traction of retail term deposit is still on. We are nearly at 9% Y-o-Y growth in terms of the retail term deposits.
The advances breakup still remains robust with the -- in terms of our September -- if you see our September numbers, 64.25% of the total credit profile above INR 5 crores was in the BBB and above, which is -- and primarily concentrated on the AAA and AAs of the portfolio. So the core fee income, actually, as I said, has increased by 35.88%. In fact, there has been a sequential increase of 26.05% also.
This quarter, we all understand that in view of the market dynamics, the treasury has contributed, and that has also shown a good contribution to the overall noninterest income of INR 359 crores for the quarter. So our gross NPA and net NPA, that is the asset quality, has shown significant improvement. The slippage ratio has improved. And for the quarter, it stands at 0.28.
The PCR also is an area where we are working on is at 88.56%. This -- I already said that the yield on -- as I already said, that the fresh slippages of the various segments have also improved. And particularly, that being a geographically skewed in the northern part of the country, the agriculture is always an area of challenge for us in the September quarter, and it is heartening to see that the agriculture slippages for the quarter has been reduced to INR 85 crores in September compared to INR 144 crores of the September quarter last year.
The cost of deposit has, we all understand that, the cost of deposit has sequentially increased from 5.64% to 5.74%. We are addressing that through our mobilization of CASA and retail term deposits. A lot of doorstep services are being implemented. A lot of new products are being implemented. So we will be able to -- we are trying to build that traction in terms of deposit mobilization.
So that -- and we are taking a lot of new -- and the capital adequacy stands at 16.89% without the calculation of the contribution of the half yearly profits. Of course, the numbers will increase. If you add the net profit for the half year and the capital adequacy will improve to 17.47% if we include that.
A lot of -- we are expanding our branches who we are -- as of now, we are at 1,580 branches. We have already opened 17 branches this year. We have a plan of opening total of 100 branches for the current year. We continue to work on that. We are also increasing our DC network and our ATM network. A lot of initiatives have been taken on the digital front. Some of them have been highlighted in Slide #34.
A few various collaborations have also been -- have been done over the last 3, 4 months, particularly for defense accounts, for salary accounts, for potential Punjab-centering strategies and tying up with collaborations with Punjab Agriculture University, ISB Mohali. We also got the [ well tech ] partner system for the mutual fund and the demat business on our app. We also tied up with the Warehousing Development and Regulatory Authority for e-receipt financing.
So these were some of the key highlights of the bank for the Q2 -- quarter 2 of FY '24-'25. And I will pause here and are now -- we are now as a team ready to take your question and answers. Thank you. Over to you, Shilpa.
[Operator Instructions] Our first question is from the line of Shri Ashok Ajmera from Ajmera Associates.
Correct you, I'm Ajmera, not from Ajmera Associates. That's a different Ajmera. I'm from Ajcon Global. So having said that, compliments to you, Saha, for really good set of numbers, especially in this quarter as compared to the last quarter. And we have reasonably grown our credit book also, which is very, very heartening to know. And so I have got just a couple of observations and some questions.
Sir, our major contributor in the net profit or the profit if you talk about this quarter is noninterest income. I mean almost, as compared to the last quarter, almost INR 165 crores out of your total income of INR 307 crores has come from noninterest income. And that is also -- you also said in your opening remarks, the core fee income, good investment, scale-up investment and profit on the revaluation of investment. So my point is that going forward, in the remaining 2 quarters of FY '25, are we going to see the same trend in our profitability for us to make a proper assessment of the profitability for the whole year? Number one.
And number two, in this round of the questioning, you also said that there is some areas of challenges because the whole interest changes have not been factored in so far because there is a time lag. So what kind of impact it can be on the NIM? And what is your target of the NIM for the whole year? This is my first question.
Yes. Yes, thank you, Mr. Ajmera, and appreciate your questions. You're absolutely right, when you have analyzed it, that a major part of the Q2 results was due to the significant contribution of noninterest income. And if you see our sequential performance, so nearly around INR 165-odd crores have been increased in terms of the noninterest income, primarily due to the treasury, which has shown, as the market moved and then yields moved downward and trend, we had the opportunity to contribute and accordingly, they have -- the bank has done that.
Now going forward in this area, yes, we feel that the movement will not be in Q3 particularly. The movement, where it stands now, the benchmark yields may moderate a bit more, but we still don't know. We have to be -- though the RBI future projections on the policy cuts, we all know what is the stance at this point of time, so the official stance has undergone a change. But on the point of the rate cut, it still remains to be seen when it happens. And of course, the global scenario, that is also moving in various directions in the ecosystem.
So we feel that there will be a moderation in the income from the noninterest side -- from the treasury side. But if you see, the other part is that the core fee income, other than the treasury, has also moved significantly forward in this quarter. And we have taken a lot of efforts to improve this. In fact, if you see that there's a nearly INR 56 crores sequential increase in the core fee income.
And this is an area of where we feel that whatever short -- may come, it may come or may not come, but we have to be prepared, so we are preparing ourselves that whatever shortfall may come from the treasury side because of the lesser movement in the yields, we'll be able to make it up through our core fee income, number one.
And number two, what we are also doing is that as you see, if you see our movement of our advanced portfolio, the -- we have been telling -- talking on this consistently on our calls that you are moving to the RAM segment where the yields improve, and we are churning our corporate portfolio. So now the figure stands nearly at 54%, it's 53.86% at the RAM side, and we want to move it to 56%.
So the NII, if you see also, is showing a good traction of 29%. I think if you compare the 29% NII growth for the results that have been declared so far, you will find that the bank is -- our bank has been in a favorable position in that segment at least compared to the other banks. So we are churning our corporate portfolio, moving from the high-yielding assets towards the -- sorry, moving from the low-yielding assets to the high-yielding assets.
And we will continue to churn the corporate portfolio because, as we discussed earlier also, the pricing is very competitive. So we will be able to make it up. We have already strategized our plan post the declaration of this result amongst in the bank. And we already understood what are the one-off gains that we have got in Q2 and how do we need to rebalance -- how do we need to re-compensate from the other side if that one-off items do not -- have faced continuity in the -- in Q3.
And third option that we also kept open is that we are giving a lot of focus on recovery and recovery in return of accounts. The Q2 numbers may not justify those efforts, but there are a lot of things in the pipeline which will also help to boost the noninterest income. And if those goes through, and we're very hopeful that some of them will go through the things that we have in the pipeline, that will also compensate to some extent the shortfall that may occur in terms of the treasury performance. So these are some of the -- on the issues of the treasury.
And your second question was also on the NIM, on the NIM side. So we feel that we have improved to 2.71%. And with all the things that we said now, we are hopeful that by end of March, we shall be in a position to be at around 2.75% plus because we have some strategic thought process in that. It is a challenging environment. Deposit is a challenge. Deposit cost is a challenge, but we will churn our portfolios accordingly, move our investments accordingly and try to maintain that NIM up from 2.75% plus for the March quarter.
Sir, very elaborate reply and point well taken, sir. Having said that, I have got just one more question in this round. Sir, you have done really well on the credit growth side. In this quarter, it is almost about INR 3,294 crores. And if we got the whole year, you have done almost about INR 5,100 crores something.
So with that and with the visibility and with the confidence which you replied even the earlier question also, don't you think that we can increase our credit target from 12% to 14% or 15% growth? Because even looking at this quarter, if you just multiply with another 2 quarters, you have INR 6,500 crores additionally you can raise in the next 2 quarters as against a required amount of only INR 5,000 crores. So are you revisiting the number and giving us some revised target for that, sir?
We are -- see, we -- you're right. First of all, I must acknowledge what you're saying, and you have been saying this repeatedly for us. So we take it like that. And you're absolutely right, in your assessment, with a base like our bank that we have, we should grow faster. There's no doubt about it. But the point, Mr. Ajmera, I think you will appreciate that even if you see the Q2 trends so far for the banking industry as such, there is a moderation in the credit growth, right?
Yes, sir. Overall.
And when banks of larger sizes are moderating their credit growth, there is this genuine reason why they are moderating it. What is our -- what would be our -- in that strategy now in that way? We are keeping the guidance. If we have an opportunity to grow beyond 10% to 12%, we'll, of course, grow. But we not to -- we need to grow profitably, Mr. Ajmera. That is what I'm trying to do. We are trying to say that we need to do a sustainable growth.
I'm not naming the public sector banks. You will find that some of the banks so far has grown lesser than our bank has grown. So there is a component of challenge of the deposit mobilization where we feel that -- and I have told this 2, 3 quarters ago that the credit growth that is happening in the industry is not sustainable, and that is exactly what it is falling in line. And it will happen because as you see the private sector banks also, their conversations you must be attending, you will find that the same thought process is going through their minds also.
So what I'm trying to simply say at the end of the story, the bottom line is that we can grow. But if we have an opportunity to grow at a higher-yielding asset, we'll, of course, grow. We will not grow at the cost of my deposits. If my cost of deposit has 5.74% and if my deposit -- suppose that the bulk deposits, the CDs have grown, it's just going very high. So I need to grow -- I need to deploy funds much more than that. So I maintain my NIM, I maintain my NII.
So that is the overall strategy. If high-yielding assets come in our way, we'll definitely do. What we are doing now is that -- why we have kept the conservative guidance of 10% to 12%, because the corporate -- we are having some low-yielding assets because of the price movements, we are trying to churn them. We have told the big corporates that, yes, please increase our pricing to some X level. Otherwise, please prepay our loans. That churning process is going on. And that's a big number. So we are keeping that option open so that overall, my NIM and NII and my ROA gets protected.
Very good sir. Thank you very much for just, again, giving the confidence. And you're absolutely right, the bottom line is ultimately, end of the day is also very, very important. And -- but after the last few quarters, I mean now we see that -- I mean like you are doing better than the industry in some of the -- except that one bank, which is Bank of Maharashtra, which has always been in the forefront, in fact, irrespective of the size of the bank. But otherwise, yes, there is a lot of improvement in our bank also, sir.
Our next question is from the line of Mr. [ Saket ].
Sir, you have mentioned about 10% to 12% loan growth for the current financial year, sir? I missed your number.
Yes, yes. That's in my slide also. If you see the last slide of ours...
Okay. And sir, taking into account the current business environment, what is your current take as we see the consumption pattern also slowing down and the -- whatever the GDP numbers have been, they are also pointing towards stress in the system. So what are you penciling in, in terms of this 10% to 12% growth, wherein you are categorically moving towards your RAM trajectory? So what are the factors that you have factored in, in giving this 10% to 12% loan growth when the underlying sentiments, if I may use the word, have been deteriorating or are on the negative side?
Right. I think that's a fair question in terms of the ecosystem that is playing out. What we'd like to say is that from our bank's perspective, historically, we had a higher proportion of corporates, and 3, 4 corporates going bust had a lot of negative impact on the bank. And so we have changed our strategy to move towards derisking the portfolios. Derisking the entire -- first of all, the movement towards RAM segment is the first priority is to derisk the portfolio, the entire advanced portfolio. It diversifies the risk.
Now within the RAM, now the question that is actually coming regarding the negative sentiments of consumption, et cetera, and in certain segments, particularly in the unsecured segment and credit card business, first of all, in our bank, we are not in that area. We are doing personal loans. But personal loans, our delinquency is very limited. We are very well positioned in that because the personal loans are basically done for salaried accounts. Though it is an unsecured loan, but it is for -- on salaried accounts. So our overall portfolio remains healthy.
The other unsecured part which normally in a banking system is the educational loan. There again, we are comfortable as far as we are concerned. The credit card business, we don't have. So these 3 segments wherein the entire, what we call, ecosystem and the regulator is also pointing out on various forums that these are segments where we need to be careful about.
So first of all, we are not in those segments. If we are growing, we are trying to grow in solid retail, vehicle, gold. Gold loan also, some here and there factors are there. But again, as of now, our bank is well positioned in the gold loan portfolio. It is giving us good returns. So we -- and we have got a robust system in place also vis-à-vis the -- what the regulator and various other stakeholders are talking about. But in our bank, it's a low base. So we have a lot of scope to improve our gold loan portfolio.
So vehicle loan is doing well. The housing loan, also the co-lending, of course, another area, we are working very closely. We have already increased our co-lending portfolio to INR 2,900 crores for the Q2. And we have good partners, around 10 partners we are having in the co-lending space, which, as of now, our experience is very healthy. We have got in some robust places there. We'll do some direct assignments of housing loan of very reputed banks. This quarter also, we have done an amount on that.
So overall, in terms of the risk perception of the retail segment, we are not foreseeing in our bank that challenge. But as things play out, we'll be very conscious of what is happening in the system. But so far, the segments that we are trying to build upon, trying to grow are segments which are well with good mitigants and the areas of -- which are giving me good returns also.
Our GST product, if you see, we have been talking on this subject, the GST, which gives us -- our bank gives loan amount up to INR 10 crores is a very well -- a very good product for the bank, which talks on the cash flows of MSMEs. And in that situation, we have already created a portfolio of INR 1,500 crores in GST. And the delinquency there again is under control. And nearly, it is virtually negligible, I can tell you that.
So again, this is an area where it gives me good yields. And of course, we have the -- we'll also go into the renewables. We'll go into the LRDs, which are in the corporate segment, which will give me a better yield also and also a secured portfolio. So these are some of the areas in which we are working on.
Our next question is from the line of Ms. [ Sulvni ]. We will move on to the next question. I'll request Mr. Sushil to please ask your question.
Congratulations for a stable result.
Thank you. Thank you, Mr. Choksey.
Sir, [indiscernible] that you have all the names in place...
Choksey-ji, throw us a louder -- I think the sound -- can you come to the mic a bit closer?
Yes, yes, yes. Sir, can you hear me now?
Yes, yes, absolutely, loud and clear. Please go ahead.
I said congratulations on a very stable and a positive result [ and by team ]. And you have a great team now to work on credit growth, which is reflecting in your result. Sir, my first question is, how are we going to improve our CASA to get our margins up from 2.75% towards 3%?
That's the question only or you have some more?
I'll come one after another.
Okay, sure. Sure. See, this is a challenging area for all of us in today's ecosystem. All the ratios are coming down. Every banks -- all the means in all banks, CASA ratios are coming down. And particularly, we have a challenge because our geographical presence is still not as it should be in our public sector bank. And we are facing this challenge, and we're trying to not only -- the challenge of some of the unethical practices being done by some of the -- some banks, I'll not use any adjective for that. Outside the public sector space, there are certain things that are happening in our geographical areas. We have come to know about it. First of all, we have to -- in terms of customer retention, we need to build up on that.
In terms of customer acquisition, we are trying to -- what we are trying to do is create more and more customer-friendly products, both on the liability side and also asset side. What we understand and what we have internally strategized is while we can, we will continue to hunt for more and more stand-alone CASA retail term deposits. But the crux will remain is that we have to do more lending on the MSME side to improve our CASA. That is a correlation between the current account portfolio and the MSME advances that happen in the bank.
So at present, our MSME portfolio is growing at 11%, not good enough at this point. We need to increase it to a much higher level and acquire more and more MSME customers. So we have decided that we will go in this Q3 and Q4 and actually decided today itself, that we will be holding special MSME drives in all the 25 zones for every fortnight, and we will press upon the point to our field functionaries that it is important for CASA to lend also. So we need -- that is another area.
Collaborations, as we discussed earlier, we have now created a lot of collaborations, particularly defense and other institutes. In Punjab state, Punjab Employees Association, then MCD Chandigarh, then MCD Lucknow. So many other salaried, we need to mobilize more and more salaried accounts into our bank. And for that, we need to have excellent customer service, excellent user experience on our digital app. We will appreciate that our PSB UnIC app today in the Google Play Store is rated at 4.70, which is the highest among the public sector banks. So we have moved from 3.7 to 4.7 in a matter of 1 year.
And that has happened -- one, particularly to the Finacle upgradation in October that has happened, we have been able to add various value-added services. Now we are having mutual fund business in that. We are having PPF in that, what you call, PSB UnIC app. We have also other -- various other products that we have in the pipeline, loan against FDs. So these are some of -- and many others are in the pipeline. Some of them are mentioned in our presentation at the end of the slides that we have.
So customer acquisition will be -- is correlated with not only advances. It is also correlated with services that we provide, value-added services, both at the brick-and-mortar level and also on the digital level. So in both the areas, we are concentrating on improving customer service, both physically and interaction and also digitally to provide more and more backup so that we can build on that.
And these things will -- some of the new projects that we are having, we have talked on that before, but it is worth repeating them also again today is that the new projects that we are taking to build up this CASA component and which will be implemented in 5 to 6 months' time is one is, of course, the CASA back office, which we not only take care of the regulatory part; but from the business part, we are going to introduce certain new methods of technology for customer acquisition like tap banking, and that may come around January, February. Then we are also revamping the RFPs on for the call center revamp, which you have to give us the CRM module also, again, 5 to 6 months' time.
Third, we are going to have a -- so though ForEx -- though it is a ForEx matter, but again, it is somewhere related. The ForEx trade module is going to come very short -- in another 5 to 6 months' time. So these new projects that are going to come are very important. We have created a data analytical sell now, which gives us a lot of ideas on how to do cross-sell into our captive customers, which will also help us in creating this environment of acquisition of CASA accounts. I think this will -- CASA may -- it is not that this will happen overnight. But once we take the right steps in the right direction, I think overall, it will play its part in the coming times. So that was on CASA.
And of course, just an added point is that while we will consider CASA, we are now moving in a CASA plus retail term deposit way. We are trying to build that. We are at 72-odd percent at this point of time. We'd like to build it up to 75% and then move to 80%. So that over -- at least the account -- the depositor is retained and which will give me a fair lift to increase my advances and get out of the bulk and the CD borrowings that we do.
Sir, how much of CD and bulk deposit we have today?
See, I'll tell you, 72% is the CASA and retail. So the balance is bulk and CD. The bulk is around 20% and the CD is the rest, percent, percent, percent.
Sir, you've been a treasury person also in the past. So between yourself, Ravi Mehra and Rajeeva, do you think that the interest rate scenario in '25 first quarter, RBI should be acting? Global interest rate scenario has peaked. The interest arbitrage between treasury and corporate, this may be the right time to move from treasury to corporate credit. And this is my thinking. And if the yield is moving between [ 6.50 ] to [ 6.70 ] in next quarter, how are you going to capitalize the balance with the low CASA and locking in long-term bonds or maybe loans which are yielding you 9% or 8.75% or 9.25% and where deposit rates are where we are?
Yes, that's the market dynamics. We are -- over the last 2 quarters, I can tell you, Mr. Choksey, is that over the last 2 quarters, we have been -- we have moved a bit away from treasury and deployed in a higher-yielding asset of credit. So that we have done in a small way. I'm not saying in a big way, but because we were very conscious of this -- the yields coming down in 1 or 2 quarters. So we were conscious, but we balanced it a bit. So we were able to -- the sequential growth that you are seeing in the credit, some part is, of course, due to some sort of a reduction in the treasury. We didn't build it up to the level we could have built up.
Now coming to your second part, in terms of the global, we all know the global and domestic situation. And there is a -- that the rate cuts -- maybe the rate cuts will actually eventually play out in the next financial year. So we are now looking into how -- wherever opportunity, the bottom line now is this, instead of really having a scrip-to-scrip strategy, the bottom line is this that we will invest in a higher-yielding investment or higher-yielding, what we call, the assets that we have in pipeline.
So that would be the overall strategic thinking and try to improve our yields on investments. See, if you see our yields on investment, we are at 7.06%, right? And our yield on advances is 8.75%. So there is a gap there. So now sources have to be deployed either in investment and in -- or in assets. So from that perspective, whatever best comes, I'll ask Madam Mahima to -- in the treasury front, if you have anything to contribute, my Treasury Head will now supplement anything she wants to add.
Yes, sir. As Saha said that we have consciously reduced our portfolio to around INR 1,000 crores, INR 1,200 crores, and we are not built up that way. But if you see that our treasury -- if you include the profitability also, then it will be 7.85%. And in the coming also due to rate cut scenario, we are managing our portfolio in a way that because SLR requirements are also there, we have to maintain from that perspective also. So in overall scenario, we are managing our trading book in such a way that we can fund the liquidity -- we can have the good liquidity also, we can improve the advances and the treasury income also, sir.
Sir, what is unavailed credit sanctioned as of today on your books?
Yes. Mr. Mehra?
Sir, Ravi Mehra this side. So it's around INR 4,000 crores.
INR 4,000 crores...
Yes. I think when you asked this question a few quarters back, we were a bit...
Subdued.
We were a bit subdued. Now we can tell you that...
Sir, I'm asking this question because the vibrant environment is visible on the presentation color as well as in the numbers.
Okay. Okay, good. Good, good. Yes.
Sir, my next question before I come to the next round. Basically, we know where the bank stands. For digital transformation, you started the digital journey. Where have we reached up on the digital journey, how much spend we've done and what is likely to emerge in the next 6 months or the next year?
The bottom-line answer on this in a one-liner is that you will find a lot of changes that are coming in the next 6 months. It's too premature to be -- for me to tell you exactly what are the areas which we are working on. But one thing I can assure you, as I just gave you a small example of the rating improvement, which gives an overall idea how the app is now behaving towards a customer. And that is very important, the UI/UX experience is very important in this part.
So there are multiple projects that we have taken, some of them have been listed in the presentation. I'm not repeating them. But 2 things which can be talked about here is that the corporate biz app means we are having a retail app for the -- which is doing so well. Now to mobilize current account, which is also a part of the current account acquisition, we are developing the corporate biz app. We'll give some name on that. But internally, the biz app is going on. And within 3 to 6 months' time, we'll be able to provide updated facilities to current account holders through our business app. That will be a game-changer for the bank in terms of customer acquisition and retention.
And besides that, as I told you that we already started very advanced level of value-added services in the app like sort of mutual fund. We didn't have sort of listing products. We'll bring the -- we have already brought that. So today, we are -- the customers of our bank can open a demat account through my app. And it is a very, very customer-friendly experience. We are already building up on that. And I'm very sure in the long run, it will improve the stickiness of the customer.
So I'm only saying a few of them. There are multiple ones. Once we cross the bridge, I think we'll announce it. And accordingly, you will find a lot of lot of traction happening through our app. What is the -- why are we so confident on this? You can ask me. The confidence comes from the basic point that my core banking technology has been upgraded last October. And this is the time where we are building it up. Last October means October last year, right?
So now the impediments to do a transformation in digital side, which is particularly the base, that has now gone. Now it is only now adding those products on that base. So I think some sort of -- but talking about exactly what other things we'll do, well, maybe one quarter down the line, we'll hold our cards and we'll announce it slowly.
Our next question is from Mr. Saket.
So sir, you were explaining about the granular details of the RAM part of the story. But sir, as we see the trend today, almost every bank is moving towards this RAM part, building a RAM part of the portfolio and with the same set of understanding that it is going to derisk their bank from the delinquencies going ahead. Could you please explain the reason, sir, why are the banks not moving towards the corporate part of the story? Because the growth in the lending could always be headed by the corporate side.
If you could just explain the story, not only for Punjab & Sind Bank, but almost all banks wherever the calls we are hearing, everybody is trying to build a portfolio that is skewed towards the RAM part of the portfolio. And everybody is exiting the corporate book. So if there is degrowth in the corporate sector, where the actual lending or where the actual contribution will come into the economy? That was my basic point, sir.
So I'll talk less about the system and more about my bank, okay? It helps the context also. For our system [ compatibility ], what we can say is that while we appreciate the point that there can be a herding of RAM segment portfolio by all the banks, that there is a possibility, and we need to be conscious of that process. But in terms of our ecosystem, you will find that the corporate segment today, one part is that the opportunities are not as that much as you think it is to be, okay, the CapEx particularly. We are having other segments, but the CapEx particularly are not having -- yes.
So what is -- also, the second part is very, very important. What important part is this, that the pricing war that goes into a corporate segment portfolio, there's literally a price war. The corporates have become more bargainable, so they bargain to the most. And we are all cutting each other sometimes in terms of retaining customers, in terms of building portfolios, which in the long run is not a healthy way of -- or I'll tell you in other word, is sustainable way of growth.
So first of all, the sectors are limited. Secondly, wherever opportunities are there, there is a pricing issue. And as you know, there's a lot of pressure on the liabilities with the LCRs. The LCR part also needs to be taken care, the lag effect between deposit growth and credit growth. So these are multiple factors which you cannot just ignore while you strategize the things going to be done going forward.
And now coming to my bank, my bank had a portfolio of corporate around 55% at one point of time. And what happened? We all know what happened. And we were a small bank, 3, 4 -- 4, 5 corporates on the NBFC segments went bust. Some banks were able to sustain themselves in some way, but we got into big trouble. So in terms of the appetite, in terms of the capital ratios that we have, we think that it is for a bank of our size needs to move away from the corporate, the corporates will do where we get good returns, and we are much more comfortable on the -- not only on the return on investment, on the asset, but also on the return of the money.
Number two is that the risk concentration of segments in the corporate segment sometimes can create a systemic issue. You must be hearing the regulator talking frequently on 1 or 2 segments. Some actions have been taken on certain segments. So these are some of the areas where we need to be conscious about. So our point is that in our case, we have shifted gears. And in -- if you see in our bank's own books at this point of time, my yield on advances in the RAM segment is at more than 9.5%, while the yield on advances on the corporate segment is much less.
So ultimately, it's a balancing game. The deposits that we have, the resources that we mobilize in the market has to be deployed in a profitable manner. And that's the diversification we need to do. We are now building a lot of retail products -- sorry, MSME products, equipment financing, food processing, cluster-based financing. And the more we diversify on various segments within the RAM, not only it diversifies the risk, it also gives me better returns on my assets.
So that is what I -- it is my view why we have moved towards this because RAM is not only retail. RAM is retail, agri, MSME, please appreciate that. And within retail, there are secured, unsecured, mortgage-based loans, personal loans. We are not in the personal loan segment. We are not in the credit card business. We are not in the -- so much in the educational loan. We are in GST. We're in mortgage housing loans, car loans, gold loans, LAP, loan against properties. And for us, those segments are doing well, and we are going to bring in digital journeys.
I forgot to mention in a previous question that we are now bringing the digital lending into our digital store in the retail and MSME sectors. So there, again, we are conscious. So I think these are some of the factors at this point of time. Of course, we can always take a call when the ecosystem advises us to take a call. But at this point of time, we feel that this is a better option for the bank.
Our next question is from the line of Ms. Surbhi Tiwari. Sir, I think there is an issue with the connectivity. We'll move on to the next question from Mr. Rajeev Srivastava.
My question is your guidance for the slippage ratio is below 1.25 -- 1.25% for FY '25 with the actual figure at 0.52% as of September 2024. So what steps are you taking to control slippages, especially in the MSME and agriculture segments?
Yes. See, the guidance what you have given, I think we have kept in mind the slippages that has -- that may occur in agri, MSME and retail partially and also a few mid-corporate-sized accounts. You know that the MTNL story has already played out. The -- on 8th October, our bank has also declared the account as NPA. We have exposed around INR 171 crores in that. And we also provided it fully in terms of the classification in the 30th September results itself. So we have -- but that will be part of the story unless or until some resolution happens in the industry segment. So MTNL is one area.
We have, in terms of the collection efficiency of the -- sorry, and another 2 -- one account, of course, is being also reported in the [ offshore ] accounts, the Jonson Rubber. It continues to be classified as standard, but the account is technically NPA due to the high court order stake, we have not classified the account as NPA, but we are holding more than 60% -- nearly 65% provision in that account. So we will -- so that part is also there.
We are also -- another mid-corporate account on a residential mortgage, a project loan, which is under the SMA-2 category. We are -- on the SMA-2 category, it's about INR 100 crore account. We have fully provided -- not fully, sorry. If the account slips, we are provided adequately in the 30th September results. So these are some of the accounts which may slip, one has already slipped, MTNL has already slipped, and which will impact our ratio a bit. But from the profitability side, we are already protected.
On the RAM segment, what we have done? We have started doing centralized calling. We identify accounts. The call center is activated. The department is activated. And then important structural change that we have brought in, in the bank is creation of a credit mid-office concept in the zonal offices. What these mid-offices do, and this has been implemented just recently, is that they go through each of these sanctions that are -- before disbursement, they go through and do a due diligence and the approvals are given by a centralized office in zone office and some in head office, in some big cases, for disbursement of loans. And they also monitor constantly beyond the cutoff of the loans that are sanctioned.
Our -- we send regular SMSs to the borrowers towards the -- for reminding them about their overdues. We have implemented the NACH mandate in a very big way. This was a bit lacking in our bank. A lot of accounts were not based from the ECS point of view or the NACH point of view or the SI point of view in our accounts. So that standing instructions have been put into place. So therefore, you will find if you -- the collection efficiency of the bank was, overall, was hovering around 60% 2.5 years back or 3 years back. And that has moved to -- that has now moved to 97.82% in 30th September, overall, I'm saying.
So within the segments like the MSMEs, things will vary. But the overall collection efficiency has improved to 97.82%, and that's a fair-enough positive movement that we have done. So various methods, we are now strengthening our underwriting engines, monitoring at the branches. We have created back-office structures for sanctioning of loans. Earlier, all the sanctions were done at the branch level. Now branch powers are limited. It goes to the back office.
And again, the trend shows that the delinquency of the accounts that have been sanctioned by the back office is very, very negligible. And therefore, this gives us encouragement to bring these sort of practices in the bank, which will take care of the future delinquencies. Yes, some of the legacy accounts within agriculture and maybe a bit of MSME are still there. We don't ignore that. But our top priority, our credit monitoring division is working very hard, and that's why you are seeing the significant downward trend in the fresh slippages that have happened.
And for the September quarter of our bank, which is particularly in the Punjab and Northern side, restricting the agriculture slippages to only INR 85 crores, I think the teams have done well in that, but we cannot be complacent. Anything can happen on agriculture side, a lot of -- there are a lot of political announcements that can happen. We have to be conscious of that. But the monitoring teams are now well engrossed in improving the collection efficiency. We have to do a bit of improvement in MSME and retail also in terms of the segment-wise, but I think things are picking up in the right direction.
Rajeeva-ji, if you want to add anything to my ED monitoring.
Sir, you have already spelled all the steps that we have taken. And of course, there is a marked improvement in the quality of underwriting after creation of centralized back office. And apart from that, as you have touched, regularly, we are in touch with all the borrowers for timely repayment. And of course, we have implemented early warning systems also. So that throws the early warning signs and then we take immediately steps.
So with all these steps and as adequately reflected in the numbers also, so this year, in September, the retail slippage was INR 47 crores as against INR 62 crores last year. Similarly, there's a reduction in agriculture and MSME also. So overall, the slippage ratio has come down. And hopefully, going forward also, we look towards lesser slippage going forward. So that's it.
Our next question is from Mr. [ Ashish ]. Sir, he wants to know that you seem to have classified the PSU telecom account as NPA, while other banks have classified it as NP? Any reason?
See, that -- the NPA is based on a prudential guideline on the 90-day period. So our NPA became as from our disbursements and overdues. Our overdue on the 90-day period was getting over on 8th October, so we declared on 8th October. However, we have fully provided for the -- fully means 15% provision has been done in the -- in our 30th September itself.
Our next question is from Mr. Saket. What is the update on dilution of Government of India shareholding?
We have taken a plan of INR 2,000 crores of QIP. We have taken the approvals. We have announced it also. The merchant bankers are now on board. We are going through the legal process of appointing a legal counselor for that. And very soon, we will be in touch with the market. And we'll time it accordingly, but INR 2,000 crores of QIP is still -- is on the cards, either this quarter or next quarter.
And apart from that, that is part of the dilution that may happen from the government side. Apart from that, we have also taken approvals for INR 5,000 crores of infra bond. We may raise it -- issue it in tranches and another INR 2,000 crores of -- INR 3,000 crores of Tier 1, Tier 2 bonds. So this overall INR 10,000 crores of capital raising, out of that, INR 2,000 crores is QIP which impacts the dilution. So we will be -- we were waiting for these Q2 results. Now we are trying to -- we'll approach the market at the right time.
The next question is from Ms. [ Esha Mehta ]. One, RAM now forms 53.86% of the total advances. What is your target for RAM's contribution in the next few quarters? Second, whether the bank is looking to reduce the share of corporate loans in the future and focus on increasing the RAM loans in the portfolio?
I think we have answered that. Anyway, the guidance, if you see the last page, it shows more than 56%. So we are moving in that direction. And if that happens, the corporate segment will reduce.
Our last question is from Mr. Choksey. Sir, I think there are some connectivity issues. We'll wait for a moment.
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 the Webex chat 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, and have a good day.
Thank you, everybody, and thank you, Shilpa. Thank you.
Thank you, sir.