DCB Bank Limited (DCBBANK) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the DCB Bank Limited Q4 and FY '21 Earnings Conference Call. Joining us on the call today are Mr. Murali M. Natrajan, MD and CEO, DCB Bank Limited; and Mr. Bharat Sampat, CFO, DCB Bank Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Murali M. Natrajan. Thank you, and over to you, sir.

Good evening. Welcome to all of you. Saturday, late evening, thanks for dialing into our call. Hope everyone has had a chance to look at the press release and the investor presentation, and of course, the 2 pages that we have put on the stock exchange. I have a couple of remarks to make, and then we'll open up for questions. March 24, 2020, when we had the lockdown last year, and it was a very, very different situation for all of us, for the entire nation and of course, the entire world. And at the time, we were trying to figure out how exactly are we going to move the ship forward? What are going to be the challenges? What should we focus on? What should we do next? And at that time if somebody had asked me to get or take a shot at what would be our profit performance for 2021 -- FY 2021, I wouldn't have given a very high probability of hitting the same number as we delivered in FY 2020. Even on an underlying basis, when we look at our performance for fourth quarter and for the full year, if you look at -- if you back off some of the excess provisions that as a conservative management team we made, we seem to have delivered same or better performance than last year from a P&L point of view. Many complications we had to deal with from lockdown, moratorium, extended moratorium, honorable Supreme Court judgment, the various relief and other guidelines released by Reserve Bank of India, the impact of that on the system. And don't forget, the bank even upgraded -- in the whole lockdown and other things, the bank upgraded its core banking system of Finacle to the next higher version. So we had some really -- I would put this as one of the most challenging professional year in my life in all these years of banking. But thanks to the support of my team and the Board and the promoter and investors, we are where we are at the moment. Is the battle over? No. We seem to have started the whole situation once again multiplied by, say, 5x or 10x of what we faced last year. The team is very confident. I used to tell you that we are confident. We continue to be confident. The experience that we have learned on dealing with this kind of situation last year is going to come once again, handy. It is unavoidable for some level of stress in the book. But we have strong operating profit, and we have a really good capital position. Tier 1 is 15.5% and total capital position is almost 20%. So we have a pretty strong capital position. And we have a robust business. Yes, it is focused on self-employed largely. It does get affected by lockdowns and curfews and restriction. But the fact is that most of it came back, I would say, by February-March. And we thought we ended March quite well only to come to a situation by 1st week or 10th of April, whereby unfortunately, the situation deteriorated a lot in the country. And the main priority of the country right now is to make sure that we plateau the second wave, reduce it and then get back to our business -- save lives and get back to our business as soon as possible. If you look at the slippage for the full year, it is same or similar as what we had in the previous year. And what has impacted us a bit is that normally you need about 7, 8 months to upgrade stock, collect from NPA accounts. You have to work with the customer, you need to use the SARFAESI Act and so on. The disruptions and our ability to kind of work out solutions has been hampered by various restrictions and so on. The customers are very much there. If you look at our collection efficiency, barring a percentage or 2%, we've been able to collect at least 1 installment from almost every customer, right? And a high percentage of customers had paid at least 3 or more installments. So that tells you about -- and it's all in-house. We don't have any external collection agencies, all in-house collections and recovery process. So that is where we are. We believe we have added headcount since the last quarter. We were all prepared to press the accelerator and move forward with some more speed. Unfortunately, there has been some setback because of the drastic increase in infection. So what we are doing is we are preparing ourselves to be ready such that as situation starts to improve, we can try and normalize the business as soon as possible and as much as possible. That's where we are. Hope you've had a chance to look at the presentation. I'm happy to take questions.

[Operator Instructions] The first question is from the line of Akshay Kila from Perfect Research.

Yes. Am I audible?

Yes, you are.

Yes, you are.

I just had a few questions. The first one, sir, can you please share the thought process behind investing in companies like India INX, India ICC and Techfino? Will we be seeing more such investments in coming times? The second one is, what's the long-term vision we aspire for? Do we also have the capability set to scale up, like, say, someone like Kotak Bank in the very long run? And the third one is what's the percentage -- total percentage of secured loan book in our total loan book?

What was the last question?

Sir, what is the total percentage of secured loan book in our total loan book?

Yes. So we will give you the answer on the last, but I want to tell you that except for MFI BC loans. And to some extent, some -- what's it called, fintech tie-up loans. Hardly, we have any unsecured loans in our book. And I'll give you the exact percentage on that in a minute. As far as Kotak Banks or other big banks are concerned, we are currently focused on how do we get past the current situation that is there in the country. And how do we build momentum in business. And how do we make sure that we have as minimal impact on P&L as possible from loans that are likely to get stressed and are spread. That is our focus. If situation improves as soon as possible, we are planning to try and get our loan growth book, and we have the capacity now. We have got a lot of stuff sorted out in the last few months. We were all ready to press the accelerator. In fact, March has been a very good month for us. Unfortunately, April -- by April 7, 10, we have had these challenges, lockdowns and so on. We believe that we should be able to at least grow by high teens, provided situation improves as quickly as possible. Regarding our investments, from time to time, our management team keeps looking at some of the opportunistic investment. We are not interested in some big stake at all. They are all very small investments. Years ago, we made an investment in Annapurna. Then recently, we made a small investment in Techfino. Then we have made this investment in these exchanges. So we keep looking at small opportunities like that. And it will come without giving up some great valuation and having some great P&L impact or so. We just look for these opportunities and invest. So there is no big game plan here. It is just as simple, management keeps reviewing opportunities and making 1 or 2 investments here and there. It so happens that 2 investments have happened pretty quickly within a short time. Regarding your question on unsecured, secured, we have information that about 95% of our book is secured.

[Operator Instructions] The next question is from the line of [Malar Kemalmani] from -- an individual investor.

Yes, sir, I wanted to understand like what is the average duration? And what is the average ticket size of the deposits and loans?

Our main focus on deposits is retail deposits. If you see the press release, retail deposits, which is less than INR 2 crores per ticket has grown by 19% year-on-year, okay? Generally, the retail deposit size that we get is somewhere between INR 1.5 lakhs to INR 2 lakhs. Our loan, usually ticket price is only about INR 30 lakhs, INR 35 lakhs. If you look at the press release, you will find that we are one of the most granular portfolio in loans that you can come across. Only 5% odd of our book is in the top 20 loans. 80-odd percent of our book is less than INR 3 crores in terms of ticket size. So we are one of the most granular portfolio in banking at the moment, okay? And what was your first question?

And the duration of the loans and deposits?

The mortgage duration, the actual duration that we give could be anywhere from 10 to 15 years or something. But actual duration, customers may have only 7, 8 years because they tend to repay. Deposit, we always encourage customers to take long-term deposit like 2 or 3 years. So some months, we get deposits, which are 18, 24 months; some months, we get 30 months. So you can safely say the duration could be about 20-odd months.

Okay. Got it. And I wanted to -- I have 1 question. Like in your FY '20 annual report, you have mentioned the use of the SAS analytics and credit risk management on predictive model and the data analytics and the default behavior scorecard and the optimization of cash loading at ATM. So I wanted to understand this better. So if you could elaborate or else we can connect offline after this recording.

So the analytics team, there's a separate team, which looks at opportunities and risks using advanced analytics like the way we explain. And then we look at opportunities to optimize things. So like, for example, you were talking about loading of ATMs. If the loading of ATM is optimized, you'll save on funding costs, you'll save on transport costs, you'll save on agency costs. That's 1 example. So obviously, we can connect offline and say, but that is basically the job of the analytics team.

Okay. So if we could arrange that offline, that would be great.

Yes. Let's go. Yes.

The next question is from the line of Anil Tulsiram from ContrarianValue Edge.

Based on the bank track record for the last 10 years, I have full confidence on the asset quality of the -- that asset quality will be maintained and COVID challenges will be met. So no questions on that. I'm just trying to understand our strategy. So in the bank -- in the past, bank has repeatedly mentioned, City Union Bank has it's own model. So 2 questions on this. City Union Bank focused more on the working capital loan, whereas we focus more on the LAP. Not for a second I'm suggesting that bank policy is wrong or we need to change, just trying to understand why. And second-related question is, DCB Bank employee per branch is close to double that of the City Union bank. As a result, our employee cost as a percentage of total asset is 40 to 50 basis points higher. So can you just explain this?

First of all, we, of course, working capital loans. If you look at the pie chart in the investment -- investor presentation, you will find SME/MSME. Majority of that portfolio is working capital kind of loans. City Union Bank has an advantage. They have far number of more higher branches, and they are far more concentrated on a particular geography. So their strategy may be different to that extent. We find that we have expertise in loan against property. Even in loan against property, on a case-by-case basis, when a customer comes, we give certain kind of additional facilities to the customer based on cash flows, et cetera. We find that from a branch cost point of view, from a delivery point of view, loan against property is somewhat superior because in CC/OD what happens, customer utilization is a very big variable. Sometimes customer utilizes, sometimes doesn't utilize, but you block your capital because you have to keep the capital for the entire limit. So that we find not very efficient, right? And also the maintenance cost is higher in a CC/OD kind of product. That is our outlook, okay? So to that extent, it is different. We are different. At the same time, we are similar to City Union Bank because the target market for City Union Bank is self-employed, our target market is also self-employed. The way we administer the product is very different. For example, I don't think City Union does loan against property, but we have a separate team doing that. Cost, the number of people per branch is, again, in different model. We have a lot of outbound sales teams in most of the products who go and actually seek these loans, whereas City Union probably has a more branch-based model. What you should look at is what is our cost to average asset. Our cost to average asset this year probably is about 2.19, but that may be because of some of the actions that we took in order to -- the special actions that we took last year. But we believe that over a period of time, we should be same or better than City Union Bank over a period of time in terms of cost to average assets. And that is what is more important.

Yes, yes. Sir, second question is, can you elaborate more on the API banking strategy? What I meant is, what is our strategy for taking help of the fintech on acquiring assets and acquiring liabilities.

On a monthly basis, we are meeting several fintech. Some of the fintech companies are good and they can scale up. So we are trying our best to make sure that how can we make available APIs so that the fintech company can consume it and we can consume their APIs such that we can have an almost seamless kind of delivery to customers. This is a very long and big topic and complex topic, which we may not be able to address all of it here. Suffice to say, that we have a separate team, which is working with several fintech companies. Some of it succeed, some of it doesn't succeed. We sign up. We work on it. Fintech is not able to scale up. Some of the fintechs are not very compliant. So that puts the bank at risk. So therefore, we have to back off and say that, look, I don't think we can continue with this product, those kind of things. So it's a very long and big discussion which we have to have separately. Suffice to say that, there is a separate team focusing on tying up with fintech and making it successful.

Yes. Sir, the next thing I want to understand is, over the last few years, bank has been excellent in deposit franchisee. And today, we have one of the most granular deposits among the small deposit banks. So to ensure that these customers keep their money with our bank, just -- not just on the basis of the higher interest rate, but because of the better service or whatever it is. So can you elaborate more on this? Or will it be always higher interest rate or we can provide something else that they are incentivized to keep money with us?

If a company -- if a bank offers 7% interest on CASA and grow their CASA, you guys think that they are doing a very good job. And you think that we are offering a lower interest. If a term deposit rate is maybe 25, 50 basis points amongst the comparative peers, you think that we are offering higher interest rates. So you have to compare it properly and see where it is. Obviously, our rates are far higher than a Kotak Bank or something. They are a different franchise in comparison. The way we make sure that customers want to have our product apart from slight improvement in the pricing is the product itself. We offer health insurance in our term deposits. We offer life insurance in term deposits, all rolled into one. And customers like it. You can't go to the market and say, I'll give you good service, so give me a deposit. It doesn't work. But once you get a deposit, you better give good service, otherwise, you will see the deposits will go. That's is the way banking works.

Yes. Sir, one data keeping point, what is percentage of advances, which are in the floating rate of interest?

I don't have that number. Those are normal, not be disclosed here. So sorry about that.

Okay. Sir, just 1 last question. Sir, the cost of funds of the small banks like AU Bank, Ujjivan and Equitas has come very close to our bank, and they have also entered that of ticket size around INR 20 lakhs to INR 30 lakhs. So do you think you will have high competition from them or we will manage the competition the way we have managed in the past?

I have finished 12 years in the bank and started my 13th year, we have always faced competition from different, different segments in different, different point in time. Of course, AU is a competition, Equitas is a competition, HDFC Bank is a competition to us. Whatever be the competition, we have to have operational excellence, have good product, have good ability to deliver, and that is how we keep growing our book.

That's it, sir. Sir, just 1 request, at the end, next time, if you can put some slides...

You have to give chance to other people to ask question, please. Sorry about that. You have to give other people chance to ask question.

It is just a request, not a question. Just a request. Next time, if you can put some slides to explain the API banking strategy, that will be helpful.

The next question is from the line of Rohan Mandora from Equirus. Mr. Mandora, if you can speak closer to the handset, please. Your voice is not audible.

Is it better? Is it better?

Yes, sir.

Slightly better. Yes, go ahead.

So sir, on the collection trends in April, how is the trend if you could share some comments on that? And also given the fact that in the previous year, post the COVID, it took some time for some of the borrowers to start repaying. While currently, the numbers are there -- like in the nonrepaying customer is lesser, but it took some time for them. So now with the current wave of COVID, how do you expect them to behave?

The first-cut numbers of April seems to suggest that the collection efficiency is slightly lower than what we've seen in March. That is primarily because customers are available. There's not that any contactability issue. What I want to tell you is the difference between what you see in the second wave and first wave is, and I'm not trying to paint a negative picture here, I'm telling you the factual picture is that collection staff are -- some of them are infected. Some of the staff members families are infected. Customers are infected. Customer families are infected. So the whole system is somewhat distracted in trying to get past this challenge, right? So therefore, it does have an impact on collection efficiency and the market is close. I mean, you know that. I mean, people say in some of the states, we are not allowed to go out after 2 or 3 clock or something in the afternoon, even if you are essential service, right? There are very strict guidelines, which we have to follow, which we have to absolutely adhere to. So there is some dip in the collection efficiency, which I have mentioned in terms of a comment in my press release. Now what we like about the current -- this recent announcement by RBI is, it may change tomorrow, but we really appreciate that, is that they have not declared any moratorium. We believe that when moratorium is declared, then it takes time for customers to come out of the moratorium, which is what we faced last time. Although from a 58%, 60% moratorium, we were able to kind of "wake up" almost entire customer base and get our collections up. I mean, that is a dramatic improvement we have done since the August of last year. So if you do moratorium, then there are maybe complications in term of what happens to interest and what happens to interest on interest. All these complications, I think, have been avoided by not declaring moratorium. So if the situation comes back to normal quickly, I don't believe the collection should dip as less as what happened last year. But again, we have to watch and see what happens. That's my guess.

Sure, sir. And sir, any quantification for the April collection, how much decline it had compared to March level?

We will provide all that as we move along and declare our results in the next quarter. It's too early right now to say about it.

And sir, NIM decline sequentially other than the interest reversal on the 2 components, INR 37 crores and INR 10 crores. Is there any other one-off in that?

Underlying NIM appears to be in the same range as 365 to 370 basis point. We are confident that, that would be our NIM. Of course, how the whole MCLR benefit keep getting passed on because as we keep reducing the cost of fund, the formula is very much clear that it has to go back to the customer, especially those who are linked with the MCLR and not having fixed rates. So we believe that we should be in that range. There has been some quarter-to-quarter up and down regarding subreversal on NPA or reversal on the restructure or whatever, but core underlying NIM seems to be quite okay right now.

[Operator Instructions] The next question is from the line of Renish Bhuva from ICICI Securities.

And congrats on a great set of numbers in such a challenging time. So sir, just a -- first question is on the provision and the health of the portfolio. I mean, as on March 21, do we believe that the -- whatever impact is there due to first wave so in terms of recognition and credit costs, we have built it in. And the incremental stressed asset formation and the credit cost will be limited to the second wave? Or do you still believe that there will be some spillover of the first wave?

See, the existing customer, some of them have not been affected by first wave, and some of them have not been affected by second wave. Existing customer, some of them may not have been affected by first wave but may have affected by second wave. So it's very hard for me to segregate who is affected first wave, second wave and all these things. All I can say is, at the moment to me, I was like holding my heart in my palm, wondering as to what is going to be the announcement by RBI. Fortunately, there is no moratorium. When there is no moratorium, it is slightly easier dialogue with the customer. In fact, we have sent SMS to customers and all saying, boss, [Foreign Language], continue to pay. Moratorium gives some kind of inertia and some kind of a challenge, whereby it's very difficult to have a dialogue with the customer on its repayment. I mean, I don't know whether I'm able to get across my point on this, right?

No, no. I got it. Yes.

I'm not saying customers should not be given moratorium, but that should be left to the bank to see what kind of moratorium is required. For example, just restructure a loan, you can give a 3 or 6 months moratorium for him to come back to some business as usual to see and start repaying. That's a pretty decent way to handle this thing, right? And what we believe is -- see, it's like this, what we believe is our NPA slippage last year and the year that we finished is pretty much the same. And if you look at the NPAs that we started with the year before, we would have provided almost 80%, 90% of that NPA. It is when you get a sudden increase in NPA because of all the Supreme Court and all, it takes time for us to build the provision, okay? Second point I want to say is, provision also is a factor of the recovery. We are dealing with secured business. I'm telling you, given the small ticket rise and all, customers will not let go off their property and things like that. But you have to give that time to customer to rectify his account. And maybe they want to just liquidate something and pay, whatever it is, it's better to do that way. That is how we are trying to get the collections going. Currently, what comfort I can kind of present here is that if you look at Page 3 of our press release, if you can get hold of that. If you look at it, provision for NPA is INR 489 crores. That includes the floating provision. We never have, so far -- we have been creating floating provision every quarter, and we have never used that floating provision, okay? So we've just kind of presented that to you separately, right? Then we have INR 287 crores of provision for restructured assets and for other contingency. So as we enter 2021, yes, we are facing second wave; yes, maybe collections efficiency will dip and all; but I won't call it cushion, but I would definitely call it as some kind of quantum that we are carrying forward. And we kind of try to assess the situation by -- from competitors and other banks and all, we seem to be in a reasonably good provision situation is what at the moment. What will happen in the coming quarters, the management is very clear, always make conservative provision because that helps the balance sheet to strengthen. And we are only making provisions. We are not doing write-offs. So it should come back as we do the recovery.

Got it. So sir, actually, my next question on this reconciliation. So this INR 489 crores is including floating provision. I mean, if we look at the calculated provision coverage on the gross NPA and net NPA, so we are utilizing floating as in Q4, right?

No. Sorry, Bharat can answer.

Yes. Renish, for floating provision, RBI gives 2 alternates. One is one can count it partly towards Tier 2 capital, where there is limitation on what we can count. So standard asset provision, which we make, goes into our Tier 2 capital. Floating provision, which we are making, other option RBI gives is if you don't take it as a Tier 2, then you can recommit for net NPAs, but it does not mean that, that INR 180 crores is absorbed against actually specific NPAs, which are over there. Specific provisions for gross NPA is at INR 380 crores, which is mentioned over there. INR 287 crores, which is mentioned is assets which are not slipped. They are standard and still to make additional provision or they are restructured stress, but they are standard assets.

Got it. Got it. So basically...

The RBI guidelines, which I'm saying is recorded in Tier 2 capital by us.

Got it. Got it. So if I understand correctly, so floating provision, since it's not a specific provision, in case there is a higher recovery, we can write back.

Yes, RBI has recently announced that you can look at floating provision with Board approval. Earlier, it was only 1/3 and with RBI and Board approval, now they said, you can utilize up to 100%, and that too with Board approval. So that flexibility is there with us.

Got it. Got it. So basically, for COVID, I mean, for all practical buffers, we have a pool of INR 287 crores. I mean that is the contingency buffer we have as of now.

INR 109 crores also, in a way, is a contingency buffer in that sense.

Like it's a way of presenting. You can see INR 287 crores and move on, that is also -- we don't have any problem because that is also correct. The answer one I have is that the provision that we made for NPA, let's say, for example, we started with X amount of NPA this year. The formula that we have in terms of making provision for that is always higher than what is prescribed by RBI. I mean it's not that we have to -- like it's the way the policy works in our bank because we want to make sure that we are always ahead on provisions. And of course, if the recoveries are there, you -- we kind of reverse that provision.

Got it for it. I mean, so our provision policy must be on LTD base rather than IRA account base is what you're trying to highlight?

It's partly there, yes. Not fully, but partly, yes.

The next question is from the line of Pranav Gupta from Aditya Birla Sun Life Insurance.

Hello?

Yes, go ahead, please.

Yes. Good set of disclosures from your end. Just a couple of questions. So firstly, in your opening comments, you sort of spoke about being able to deliver mid-teens growth if we see a normalization of this pandemic in the next couple of months. Just want to understand from your end that while you have added capacity, would you -- once this thing of COVID sort of eases out, would you be more conservative and sort of wait for a little more time to understand how the cash flows of customers will get affected post COVID? Or would you start sort of lending where you have comfort. Just wanted to understand that.

That is what we did last time also. You see last time, also because of lockdown and stuff like that, we had to wait for a certain level of cash flows to be visible for us to lend. I am taking all that into account. See, for example, we have grown gold loan by more than 100%, 150%. Now today, the challenge is, I was talking to some very big gold loan company Chairman also. The challenge is customer's fear and inability to reach the branch for gold loan, as an example, right? When the situation improves, I don't see that becoming a problem for us, so that we should be able to lend that. When I look at our SME working capital kind of loans, we are constantly in touch. We can see the churn and we can constantly see the thing. So we should be able to do well. With out home loans, we talk about small family home loans or even small outfit, within a short time, we should be able to see some of the cash flow. So obviously, we are going to be cognizant of -- we are going to take cognizance of what is the cash flows and all. What I'm trying to say is that from a capacity point of view, we are quite ready, and we feel confident that if situations start to smoothen out and better, we will be out there. That's basically what we are seeing.

Sure. Sure. Sir, second question is, just wanted to understand your perspective on SARFAESI versus restructure. So obviously, because of the Supreme Court circular, you were not able to enforce any recovery measures until late of March. So given the second wave, we will see cash flows and we will see collection efficiencies drop. And once we start seeing a recovery, will we sort of look to do more recovery proceedings versus a restructure? Or how should we think of this?

There is no magic formula on that except one, is that SARFAESI for an account that has slipped into NPA should always be used as some kind of -- I won't say threat, but some kind of a pressure on the customer, okay? Usually, customers -- I mean, even in the past, I've told you, 90%, 95% of the customers always settle. They don't go in for SARFAESI because customers feel that if they sell the property, and we also feel that if they sell the property, they'll fetch a better value than bank selling the property because the property will lose some value, and the customer won't get any excess cash flow that may be available to him. So our usual go-to question is to force the customer to settle with us in that. When a customer, we feel, has got even all these restructures that we have done, none of the restructure, I can say, has been done, just say, okay, fine, let's do the restructure on this and push it forward. That is not how it is. We track restructure performance separately to see how customers are repaying. The reason we do that is if customer has said that he is going to be all right, his business is looking up, he can pay 50% of installment, 60% of installment, we want to make sure that we give him a chance. That way what happens, 12, 18 months down the line, if the customer situation improves, it will be better for the customer as well as for us, right? NPAs don't earn any money, right? So I don't think there's going to be any change in strategy. But given RBI's current announcement that has happened, I do feel that customers will ask for restructure. Again, we will do case by case, look at it and see how best we can tailor that for them.

Great. Sir, just a clarification on this. So had the Supreme Court order not halted SARFAESI, do you feel that we could have seen accretion to NPAs, which would have been lower than -- or much lower than what we saw, given that collection efficiencies still March have continuously improved post moratorium.

I think I would like to answer the question. As I think we probably would have done a far better job on recoveries and upgrades. Because if the courts are not functioning efficiently, if you can't take help of the lawyers on a continuous basis to serve the notice. I mean there's a lot of logistic challenges. How we go and paste a notice in a house which is under, say, for example, mini -- what is that called, containment or something, right? I mean there's -- I mean, if I start describing this, there's a lot of small, small, small. I mean, when we sit in our collection call, partly it is entertainment, and partly, it is -- you just say mine, I got so many complications are there in a COVID kind of situation, right? So yes, I think we could have done a far better job. But the fact is, I think the team is quite geared up. I mean, we keep doing collections review about 2, 3 times. The spirit of the team is very high. I don't see any de-motivation and things like that. Yes, sometimes, we get a call from parents saying that their children won't come for work or something because they are afraid and all. We deal with all these things. But having said that, I think when the situation improves, we have already demonstrated to the investors that our collection efficiency -- we are the first bank to put out the collection efficiency as a number to track and other banks followed, you know that. So we will continue to look at that metrics and see how we can improve.

Sure. Just 1 last question, if I can squeeze in. So I wanted to get some sense from you on the extension that you received from the RBI. What I understand that you -- the bank might have applied for a 3-year period, but only 1 year has been received. Is there any -- anything additional in the communication that we've received to suggest why the RBI might have offered a 1-year extension rather than a 3 year? Because as per the new paper, you are eligible, right, to receive an extension. Just wanted to understand that.

In general, whether it is -- I mean, this is my understanding. In general, all banks apply for 3-year extension for CEO, and RBI has been giving only 3-year extension. The extension process with regulator is not an interactive process, whereby the bank will come to know in advance or something as any of that. It's a level -- it's a process whereby you put in your details, they may seek some additional details. And then -- so whatever communication has come from RBI, we have put it out in the exchange for you. If there is any additional communication, we would be responsible enough to put it out for you if it is...

[Operator Instructions] Next question is from the line of Himanshu Upadhyay from PGIM.

I had a question on this collection efficiency, what we present to business loans and home loans, okay? So, generally, what we read and what impressions we get -- or maybe my impression is wrong, you can correct me, if that is the case, that home loans are more stable, okay, than business loans. But in collection efficiencies, what we are seeing is for us is business loan is doing much better than home loans, okay, in both one time...

Where are you reading, can you just guide me on that?

This is Page #4 of the press release, what you have given, okay?

So home loan is at 96.8%. Business loan is at 95.2. Customers, including delinquent and restructure in home loan is 1.43, which is slightly higher than this. And if you look in 3 EMIs paid, it is 95%. So it could be like small bunch of customers are from maybe some slightly higher ticket price or somebody who would have passed it. So I won't read too much into this as a difference in some portfolio and all. Both are self-employed portfolio largely. So I wouldn't -- I mean I won't consider this as some major difference to be explained.

Okay. But the risk-weighted returns would be similar for both the products? And what is your observation?

Home loans, generally at a risk weight of 35% to 50% and loan against property is generally at a risk weight of 75%.

No. I was asking our own observations. What has been in our case?

We have had -- we had made sure that our pricing metrics and our risk metrics delivers greater than 14% return on both these products. Customer to customer, it may differ, but our, what's it called, hurdle rate is 14% ROE on all these loans.

Okay. And 1 question was on gold loans. This is Slide #12 of your presentation, okay? Do you see a significant amount of jump in the stress, or I would say, INR 69 crores to INR 552 crores in 1-year period.

INR 6.9 crores to INR 55 crores. Gold loan, INR 6.9 crores to -- this goes up and down. We don't -- we bunch up the auction process for customers. We don't -- and we give a fair chance to customers to repay the loan because these are all their personal jewelry. So I won't -- I mean, we keep looking at various ways to make sure that we are not sitting on some fraud or spurious jewelery. So as and when we are able to do auctions, these numbers will start coming down. So I won't -- I mean, I won't be concerned about that.

And 1 last question. On the FD side, which we give, what help that strategy we have used very efficiently over the last many years, okay, to get granular deposit franchisee and increase the penetration. But how's the relationship or the strength of relationship? Have we any important learnings from that thing that we have been able to increase the depth of those relationships? And how do you evaluate your own performance over the years?

So first of all, the scorecard of the branch is skewed towards getting retail term deposit and then cross-sell CASA to that customer. Secondly, I think the product team has given some good products like this health insurance and life insurance, which has been packaged into these products. Third is our analytics team tell me, based on a sample data of the term deposits, if, for example, our term deposit customer comes in, in January of a particular year at INR 100, they deepen their relationship to almost INR 150 or INR 160 by end of the year. So it seems to be quite working well for us from an existing customer deepening of relationship as well. So that's how we have been getting term deposits and reducing our bulk deposits.

Okay. Okay. And generally, a conversion rate would -- has it improved drastically over 4, 5 years?

What is conversion rate?

So cross-sell ratio for those customers and the depth of relationships, what...

It's been 3 years since we embarked upon a full retail term deposit strategy. September 18 is when we started. The initial results are quite encouraging, and we believe that as we put more and more effort on this from our call center and branches, we should be able to do better.