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00:00We have with us the Managing Director and CEO at Bank of India, Mr. Rajneesh Karnatak
00:05to talk to us about Q1 numbers for FY25. Sir, first off, welcome. Good morning.
00:14I want to try and understand what's happening with margins because they've gone up. Any one-offs
00:19here? Also, if you can tell us whether this level of margin number is sustainable going
00:26forward through FY25 given the deposit growth pressure that's there in the system?
00:31Yeah. So, margins have improved for the bank. If you see the NIM, it has been closed at 3.07
00:37and it has been increasing sequentially and on a YOY basis. So, if you see March 24 for
00:43Bank of India, our margin was at around, NIM was at around 2.92 and in June 23,
00:48we were at around 3.03. So, margins is improving and it is improving because our yield on advances
00:54has now touched 8.60% and we have grown the yield on advances by 50 basis points on a YOY basis.
01:00Cost of deposit is also 4.82% and that cost of deposit has increased by only 60 basis points
01:06and the gap between the two is around 3.6 basis points because of which the NIM is around 3.07%.
01:14But definitely, this NIM is also improved because of some recoveries happening in the
01:19return of accounts where the same is going to be non-interest income. That is one of the reasons.
01:23So, considering the fact that there is pressure on the resources and the interest rates are rising
01:29in the deposit side, domestic deposit side and CASA and retail term deposit is a challenge,
01:34we feel that margins will be under pressure. But still, we will like to maintain our margins at
01:39shade below 3% for the current financial year. Understood. So, margins likely to cool off over
01:46the next two to three quarters is the sense I am getting from you. Your yields have gone up,
01:52you suggested. Talk to us about what has changed in terms of the book. Is there a change in book
01:57composition? Is there a change in focus with regard to what areas you are growing in? Is this
02:02a conscious effort or is this something that has just happened in a one-off quarter?
02:10It is not a one-off situation which is there. It is a conscious call at the top management level
02:15that top line is important for us but equally important is the bottom line.
02:20So, if I tell you that the last time the Reserve Bank had raised the repo rate was in January 2023
02:25from 6.25% to 6.50%. Since February 23 till date, as we speak, we have raised our MCLR by 6 to 7
02:33times and presently the MCLR has gone up from 8.4% to presently 8.95% on a one-year basis.
02:39So, we have increased by nearly 55 basis points. So, transmission to the lending side has happened
02:45from our bank side. Another thing that we have done is in the corporate book, we are not lending
02:49at repo rate or any advance which is up to 180 days. So, anything which is above 180 days,
02:54we are lending on the MCLR side and our MCLR, the lowest MCLR is the overnight MCLR,
03:00which is 8.15%. So, we are very conscious of the margins that we are trying to maintain
03:05and there is no particular shift in the overall credit numbers in the sense that 55% of our book
03:11will be continued to be the RAM book and 45% will be the corporate book. Within that, MSME,
03:16retail and agriculture is there and the other portion is there as regards the interest rate
03:21composition in the book, credit book, standard book which is there. Fixed book is only 6%,
03:26remaining 94% is floating which is linked to the deposit market rates. So, we are very conscious
03:32of the margins which is there per se and the limits we will try to protect as much as possible
03:38despite of the pressure. Understood. So, incrementally you are not doing riskier product
03:44to push yields. That's what I was trying to gauge. Are you pushing yields through riskier product?
03:53We are trying to keep a balance on the credit growth side after due diligence and other things.
03:58So, if you see our corporate book also where 80% plus is on the investment side,
04:03the external benchmark rate and external rating advances. So, there we are trying to grow our
04:09credit book with BBB advances also, A advances also where margins are better on the interest
04:14rate side and non-interest income process fee and other LCBG commission is also better. So,
04:19in a very nuanced approach, we are trying to grow our corporate book also and also our RAM book.
04:25Understood. And advances growth as well as deposits growth quite strong for you when
04:30I am looking at it sequentially. Talk to us about what's driving the kind of growth that
04:35you are seeing because not too many banks showing at least growth on the deposit side
04:40which you have shown this time. Deposit has always been a very strong franchise
04:45for Bank of India. So, if you see our slides which are also there, only 14% of our total
04:51domestic deposit is bulk deposit. Remaining 86% of our deposit is either CASA deposit or
04:56retail term deposit. In fact, we have closed our CASA number at around 43% of the CASA book.
05:02That is there and 60% of our branches are in rural and semi-urban areas which are giving us
05:07good CASA numbers and the retail term deposits. So, as far as our bank is concerned, there is
05:13no much challenge as far as the increase in deposit is concerned. If you see sequentially
05:18also from our slides, we have grown our deposit more than the advances on a sequential basis from
05:24March 24 to June 24. But on a year-on-year basis, our credit has grown more than the
05:30deposit. But sequentially, since we have given more concentration on raising deposit
05:34in the Q1 quarter of this financial year, our deposit growth was more than
05:38the advances growth in Q1 quarter. Understood. And I want to try and tie this in with
05:45what's happening on the provisioning as well as credit cost front. So, while growth has been
05:51likely quite a strong driver in that sense, margins have also gone up. But what's happening
05:57on credit costs? Where should they lie on a normalized basis? Because they've come off quite
06:02sharply. And tell us just what's happening there and what can the full year FY25 guidance be?
06:10On the credit cost side, if you see our credit cost, we closed at 0.85%.
06:14Sequentially, it is improving. If you see the credit cost which was there in March
06:1924, it was around 1.4%. So, provisions we have made in this quarter as a matter of prudence. In
06:26fact, if you see that our provision coverage ratio has now improved to 92%. Our gross and net
06:32NPAs have also come down sequentially. Gross NPA, which was a year much above 5%, now it is 4.62%.
06:39We were already below 5% as on March 24. It has come down further to 4.62%. Net NPA, we have
06:45for the first time gone below 1% and we are at 0.99%. So, that is another number which is there.
06:52So, provisions definitely in this quarter credit cost was high. But overall in the entire year,
06:58I think the credit cost would be at around 0.70% on an annualized basis because most of the provision
07:05which was there has been made. And good recoveries are also happening. If I tell you on the recovery
07:09side also, we have a fresh repayment of only 1,900 crores. Against that, we have done a total
07:15recovery of 2,700 crores, which does not include the write-offs. So, this recovery is from
07:21upgradation through cash recovery and recovery from return of accounts or in the interest
07:25income in the NPA accounts. So, 2,700. And if I include the write-offs also, then the total
07:31reduction in the NPA book is around 4,000 crores in this quarter itself as against fresh slippage of
07:371,900 crores. And our cash recovery to slippage ratio within that is already 1.4042%, which is
07:45excluding the return of. So, already we are at a healthy number, which means that against 100
07:50crores of slippage, we are doing a recovery, cash recovery, upgradation and recovery from
07:55the return of accounts of 1.42 crores. So, that is the kind of runway we have built now from this
07:59quarter. So, I noticed that metric and it was very impressive. I agree with you, Mr. Karnatak.
08:05But is that sustainable is what I want to ask and also what's the full year FY25 guidance on
08:10recoveries? So, this number will be sustainable for the reason that we have a lot of put efforts.
08:17Our ARB branches and our recovery setup has been tightened. The entire organizational setup has
08:22been revamped. So, we have a lot of OTS schemes also, which are the fields are doing not only
08:28from the normal OTS, which are there for small accounts, mid-corporate account and large accounts,
08:32but even for the return of accounts targets have been given to the field. In fact,
08:36internally, we have given a target that our total recovery should be twice the number of slippage,
08:41which is there. So, overall, the end of the year, you will see a better number as far as
08:46the slippage ratio is concerned. Present slippage ratio is already down at 0.35%. So, we on the
08:52annualized basis, if I can say that we will be trying to maintain our slippage ratio at around
08:561.10%. Understood. So, what's your full year loan growth as well as deposit growth guidance,
09:04if I may ask? So, as far as the credit growth is concerned on the global credit growth side,
09:10we will be growing at around 13 to 14%. And on the deposit side, the global deposit side,
09:14we would be growing at around 10 to 11%.