RBL Bank Limited (RBLBANK) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to RBL Bank Limited's Q2 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. R. Subramaniakumar, Managing Director and CEO of RBL Bank. Thank you, and over to you, Mr. Kumar.

Thank you, Vishek. Good evening, ladies and gentlemen, and thank you for joining us for a discussion on our bank's financial results for the second quarter of the financial year 2027. We have uploaded the results along with the presentation on our website, and I'm sure you had a chance to go through that in detail ahead of this call. I'm joined by Executive Director, Mr. Jaideep; and CFO, Mr. Bhavin, and other members of our management team to address any questions you may have. Before we get into the details on the Q2 operational performance, I would like to briefly touch upon the macro trends. The Indian economy continues to demonstrate resilience, supported by the robust domestic demand, healthy services activity, improving manufacturing momentum is supported by the government policies and sustained investment. The GDP growth expectations for FY '27 have been revised upwards to around 7.1%, reflecting the strength of underlying economic activity. High frequency indicators remain encouraging, while credit growth continues to be robust across the banking system, providing a supportive backdrop for the banking sector. However, the global macroeconomic environment has become increasingly challenging in recent months. with heightened geopolitical tensions, elevated crude oil prices, tighter global financial conditions and higher interest rates contributing to greater volatility across currency, bonds and capital markets. Inflation risks are likely to remain elevated over the coming quarters, driven by energy, freight and food-related pressures. In response, the Reserve Bank of India has raised the repo rate by 25 basis points to 5.5% and shifted its policy stance to calibrated tightening, signaling a continued focus on containing inflationary pressures. It has also undertaken measures to manage currency volatility, including interventions in the spot and forward foreign exchange markets and the introduction of a special window to meet daily dollar requirements. Market expectations point to the possibility of further rate increases, while the system liquidity is expected to gradually normalize as surplus liquidity is absorbed, elevated crude oil prices, weather-related risks and external uncertainties will therefore remain key monitorable. Notwithstanding these challenges, India's strong economic fundamentals, the fiscal discipline and the sustained domestic demand provides a solid foundation for medium-term growth. Fiscal pressures are modest and government's efforts towards fiscal consolidation are paying off and several developed economies are on the other side. Despite rising inflation, the fact that it is rising from a low level and likely to remain within the upward tolerance band of Reserve Bank of India is comforting. The system-wide banking asset quality is robust and therefore, remain constructive on the outlook for the banking sector with resilient economic activity and a healthy credit demand expected to support its growth trajectory. The bilateral and multilateral trade and investment agreement is a lever to navigate external imbalances, while domestic consumption and demographics will shift geared towards higher growth in a scenario wherein higher interest rates, evolving liquidity conditions and increased market volatility warrant continued vigilance. We believe that the overall medium-term operating environment within India remains favorable and offers meaningful potential for growth. In this backdrop, I will briefly touch upon our trends in the quarter. As you are aware, we have generated large amount of liquidity on our balance sheet between the capital raise and the deposits raised during the SNRB scheme. For context, between both, we have added 35% of our balance sheet as of 31st May 2026. This liquidity is deployed as follows: First, has chosen not to renew the borrowings and bulk term deposits, which were at a higher cost. grow our business across both wholesale and secured retail, where we have seen demand and the business conditions continue to remain fairly stable. The wholesale lending is a highly rated corporates where we want to start or deepen the relationship. The balance liquidity is tactically deployed in a combination of the short-term investments and the short-term loans given to our wholesale customers. Given the large liquidity still on the balance sheet, we expect to continue this for the next few months. Over the medium term, we expect this liquidity to be fully deployed in the wholesale banking segment, where we want to use both our ability to underwrite larger exposures and the liquidity to strengthen the relationship with the better rated corporates and the secured retail through the branch banking route, again, to deepen the customer relationship. At the same time, the corporate deposits and borrowings have already seen reduction in the cost. We will continue to focus on building granular retail deposits and rationalize our deposit rates gradually. As you may have seen, we have already started on this journey across our savings and term deposits. We will continue our investments in upgrading our distribution across branches, people and technology to deepen our network and improve the quality of our products and services. On to asset quality trends in retail. The collection momentum, including the rural businesses this quarter has been stable with no disruption so far. However, given deficient monsoons in certain districts, we continue to remain very watchful. We have also not seen any material impact on our portfolio arising from the conflict in the Middle East so far. In our unsecured retail business, we have seen JLG return to normalcy for a few months now with the bucket tax efficiency consistently close to 99.5%. We remain confident in the journey of credit cards and have seen the last quarter in line with the path laid out a few quarters ago. We are encouraged with the asset quality trends, and we expect slippages to trend materially downwards in line with our guidance in the last quarter on our business trends in the quarter. We continue to see robust growth across both sides of the balance sheet. Our credit rating upgrades have helped us add customers, especially in the wholesale for both advances and deposits. Our advances grew this quarter by 42% year-on-year to INR 14,314 crores and average advances grew 33% year-on-year. This includes leverage we provided to the customers of INR 10,300 crores for FCNR deposits and the liquidity deployment in a better rated wholesale clients, where we are looking to deepen our star relationship. Similarly, our deposits grew 34% year-on-year to INR 1,56,272 crores in the quarter. Average deposits grew 24% Y-o-Y. This includes the FCNR deposits raised by this quarter. As a result, our average CASA ratio stood at 24% as of 30th September. It would have been 28.1% exCNRosits. Some of the milestones achieved in the quarter. One, the balance sheet crossed INR 2 lakh crore to end the quarter at INR 222,344 crores, more than doubling over from financial year 2022. The term deposits crossed INR 1lakh crore to INR [ 150,746 crores ]. Operating profit cost INR 1,000 crore mark to INR 1,396 crores for Q2 FY '27. Cost-to-income ratio for the quarter was 56.5% versus 70.7% in Q2 FY '26. In summary, as we look ahead, our growth priorities are focused on building a scalable, resilient and profitable franchise. Our normal business trends are improving quarter-on-quarter as unsecured stress normalizes. At the same time, we are working on putting together building blocks which we will articulate in greater detail over the coming months. But briefly, we will focus on deepening and starting new relationships with large corporates which were not accessible earlier, either due to the constraint of credit rating, capital position or our cost of funds. We are also working to target the trade flows in the corridors where [indiscernible] is present, where we believe we have competitive advantages because of the E&V network, continuing to build granular and stable liabilities with our objective of progressively narrowing the cost of deposit gap reserve with the larger banks. At the same time, we want to leverage the momentum from the FCNR deposit relationship we have onboarded to target nonresident laws starting with the Middle East and over the time in all the geographies where ENBD has presence. [indiscernible] and in sectors like IT and IT services, the relationships are being strengthened especially on the liability and nonfunded side due to the group's cross-border strength and the bank's strong credit rating. We will invest in the distribution infrastructure, be it branches, people and technology to strengthen our presence in the relevant geographies. We will also take the early steps on investing in a wealth proposition for our customers. I invite Mr. Bhavin to take you through the specifics of our results.

Thank you, Mr. Kuba. Briefly touching on some of the specific aspects of our financial performance. Our advances grew 42% year-on-year to INR 142,314 crores in the quarter. Average advances grew 33% year-on-year. [indiscernible] wholesale advance grew 56% year-on-year, retail grew 32% year-on-year. Within wholesale, the Corporate segment grew 60% year-on-year and Commercial Banking segment grew 47% year-on-year. While in the Retail segment, secured retail assets grew 52% year-on-year and unsecured [indiscernible] Secured retail advances FCNR leverage we have provided to customers of approximately INR 10,300 crores. The retail wholesale mix was therefore at INR 5,644. Our total deposits grew 34% year-on-year to INR 156,272 crores. This was helped by the FCNR deposits. Excluding the FCNR deposit, the growth was 6% year-on-year as we look to optimize the cost of deposit, as mentioned earlier. Average deposits grew 24% year-on-year. Our CASA grew 14% year-on-year to INR 42,526. Average LCR for the quarter was at 148%. Now on our operating performance. Our NII was up 37% year-on-year and 29% sequentially to INR 2131 crores. Our NIM for the quarter was at 4.61%, an increase of 48 basis points sequentially. Noninterest income grew 16% year-on-year and 12% sequentially to INR 1,077 crores. This was also helped by foreign exchange income from the FCNR deposits. Fee income grew 12% year-on-year and 13% sequentially to INR 1,040 crore. Our net total income grew 29% year-on-year and 23% sequentially to INR 3,208. Our OpEx grew 3% year-on-year and 7% sequentially to INR 1,812 crores. The credit cost for the quarter was at INR 771 crores or 63 basis points, which included a standard asset provisioning of 11%. The specific credit cost was lower at 52 basis points versus 62 basis points of last quarter or INR 640 crores vis-a-vis INR 670 crores for last quarter. Our net profit for the quarter was up 170% year-on-year and 90% sequentially to INR 482 crores. On asset quality, GNPA was down 28 basis points sequentially to 1.02% and net NPA was down 8% sequentially to 0.29%. The PCR stands at 71.5%. Our capital adequacy ratio was at 30.1% and CET1 ratio was 29%. With this, we will open the session for question and answer.

[Operator Instructions] The first question is from the line of Rikin Shah from IIFL Capital.

Congratulations on very strong FCNR mobilization in this quarter. I had 7 questions. The first one, if we look at the period and CASA growth, it's up almost 15% Q-o-Q, but the average CASA growth is flat. So could you just elaborate on progress on various initiatives to strengthen the retail deposit accretion, including branches, et cetera? I do notice that the employee head count has been rising, but any progress on strengthening the retail franchise. That's my first question.

Yes, Rikin, as far as the CASA today, what you're seeing is down, is it conscious, let go some of the high cost because you saw that we have reduced our CASA rate considerably. Whenever the rate of interest is reduced in the CASA, there will always be a downward dip, and it gets catches up. You would have seen it in 2 quarters before we reduced the rate and around INR 1,500 crores we lost and our team could mobilize at the same amount within a period of 4 to 5 months' time. So the recouping is a little time. So even if suppose any correction takes place, there will be some exit and those exits will be connected to [indiscernible] number one. Number two, the strategies are very simple. We are expanding our branches and identifying their respective [indiscernible] that means the number of people whose productivity has reached the desired level, more number of people are being added in respective branches. That's where you saw the people addition. And second, what is being done is that we are just expanding in with wide of branches, deals are adding approximately 30 to 50 branches in the quarter. This quarter, branches are supposed to be opened in the next 2 weeks' time, opening today, but for the crowded program of core and other things will do it today. [indiscernible] around 38 branches are getting opened in a couple of weeks' time. So the brand expansion is on track. And now we are going to have a differentiated approach, which is going to be unique for us in the sense that we are entering into the affluent, which we said almost 3, 4 quarters before that, we're getting into [indiscernible] business. Now with the ENBD's partnership, we have pretty confident of expanding this growth. And our segment growth, you have seen it, it is growing fairly well, and it is providing us a lot of confidence because of the various propositions which has been introduced into this particular segment [indiscernible] and if you see it, our retail term deposit continues to be growing at a very healthy rate -- last 2 quarters, it did around 20%, 22%. This time, again, it grew around 16%. That will again continue to grow and support our deposit growth and other things. I mean our advantage deployment.

Yes, we are also raising our NII proposition and the journey is well to capture the entire UAE corridor, which will help us to build the liabilities business.

Got it. The second is a data keeping question. If you could provide a breakup on loan book mix based on various interest rate benchmarks and also when does [indiscernible] reset happen for your customers?

So the reset is a 90-day reset. So you will expect that most of the loans will get reset by end of the quarter. So we'll see the full benefit in the next quarter. The -- if you look at overall, the -- about 58% is linked to external benchmarks, 32% is linked to repo. We have about 11%, which is the FCI benchmark, 12% to other external benchmarks and about 3.5%, 4% is on the internal MCLR rates.

Got it. The third one is on margins. So how should we think about the trajectory in 3Q and 4Q? Because on one hand, while you will have full quarter impact of FCNR in 3Q. But on the other hand, you may also have interest reversals from the interest reversal on cards going down and cost of fund may also potentially improve given the recent [indiscernible] rate cuts you have taken. So the outlook on 3Q and 4Q margin trajectory would be helpful.

So Rikin, I think there are quite a few pushes and pulls some of that you mentioned. On a blended average basis, we would expect it to be slightly lower than what we have reported in this quarter. It will also depend on the speed at which we can deploy normal advances growth. Because a lot of this is now lying in lower-yielding investments and within advances also, we've been tactical. So it will be a question of what kind of opportunities we get. But on the margin, I would imagine that we should be slightly lower next quarter and then probably inch up in Q4.

Got it. Q4 interims on the rate hike that has already happened and got it. The fourth question is on bank. Yes. Got it. The fourth one is on bancassurance income. So while it constitutes 8% of your FY '26 fee income and 3% of total revenue. Assuming there are no cost offsets and watering down of the IRDA guidelines, what kind of impact should we expect if this gets rolled out from next year?

So Rikin, I think the total banker income generally disclosed in the annual report, I think we have approximately INR 300 crores plus/minus of income per annum. And I would imagine, based on [indiscernible] reading of this, I think that will get substantially impacted. I would imagine anywhere between 50% to 60% impact should be minimum [indiscernible].

Enough research reports have been written by you guys to make a math of it. We have not done as much detail as you guys have, but you would expect a substantial drop in the fee income, which may come through. If nothing changes from this perspective of like the top circular is implemented the way it is.

The fifth question is on OpEx growth. So it has been quite low in the last few quarters, particularly led by the line item of other expenses. I do see that employee expense has inched up this quarter, presumably due to salary hikes that may have gone. But what kind of growth should we expect on overall OpEx going ahead, assuming some need to invest in the franchise branches, et cetera?

On the same range of 17%

So I think, Rikin, I think there has been an opportunity for us to rationalize certain areas and including one of the major areas that we rationalized is connection costs, specifically in cards, and I think that's flowing through that's been flowing through a bit. That's been part of the reason. And we've now pretty much coming down to normalized rates on that. And from here on, I think there will be an increase. I think it's a question of how quickly we are able to -- or what is the kind of quality we want to -- in terms of adding branches people. And we will also want to invest in certain new businesses, I mean not exactly new business, but a greater focus on health management. So some expenses will start getting incurred from next couple of quarters onwards. But I don't think the data materially changes. It will probably inch up to low single digits, maybe a little higher. But we will come back with details on this, and then there is a lot more time to [ taper ] that we put on the model going forward.

And I think some investment in marketing, et cetera, may also perhaps help. We have seen some midsized banks investing a bit aggressively on marketing. So if that happens as well, that would be fairly okay. The next question is on asset quality. So the gross and net slippages have continued to trend down in absolute terms. You had earlier guided for credit card slippages to come up materially from 3Q onwards. So could you just provide some color on the underlying trends in credit card? And how do we think about the improvement in credit costs here on?

So Rikin, yes, the cards slippages are in line with expectations. So while the quarter still had a 600-plus number. But if I take the last month number of the quarter, we are already in the 125, 130 zone. And therefore, I would imagine that, that trend should hold give or take a few percentages here and there. So that's something that I'm quite happy to report that while it took us a little more time to get this in order, but we are now actually seeing that on the ground as we speak. So we would expect credit card slippages to come down to around 400 plus/minus number for Q3, Q4 kind of numbers. And therefore, credit costs on cards should come down from the low double digits that we've seen to the 6% zone and the rest of the businesses will hold where they are, give or take, unless we see any material integration in any of the rural resources, which so far we have not seen at all, including the October 1 week collections that we have on retail assets, we have not seen any change in bounce rates or anything like that. So ceteris paribus, cards comes down from 11 plus/minus closer to 6, 5.5 to 6 reach.

[indiscernible], what was this 125 to 135 number that you mentioned?

Slippages in the month of September.

Monthly, monthly, monthly.

Okay. Got it. And then just the last question on yield on investments. They have jumped almost 80 basis points sequentially. So is it just this temporary FCNR liquidity parked into money market and an extension to this that given the yields have moved up sharply, should we expect any significant M2M on investment book in the coming quarters?

We stayed light on duration, so Rikin no problems on that, on mark-to-market. So second part of your question. On yield, of course, money market has given us opportunity to maximize on yields, and we've done that. So whatever uptick you are seeing is thanks to that. There we don't carry too much of the duration.

We'll take the next question from the line of Kunal Shah from Citi Group.

Yes. So again, coming on to the margin side. So when we would look at it in terms of this deployment of the liquidity, if you can highlight in terms of what is the incremental yield compared to that of the book yield, which is there at 10.8 odd percent and maybe what is the kind of decline, which we can expect? And the savings rate tweak, which you had done recently. So maybe from 5-odd percent cost of SA where do we actually see it coming down. No doubt, you have indicated some directional trend on margins, but maybe specifically on yield and cost of deposits, how the trend should be.

Let me see if I can give an answer. Let me explain, right, there are so many moving parts, and I'll give you some of those, which will help you maybe build something, right? So if you see yield on advances, which has gone down from 11.2% to 10.8%, if you actually see individual segments, nothing has gone down. It's just a mix issue, as wholesale has picked up, hence, the unsecured retail has come down, that is reflecting in what's happening on the yield on assets. Yeild on assets obviously is impacted also by the FCNR leverage that we have done. If you actually exclude that, this number would be another 10, 15 basis points higher. But it's more a mix issue rather than a incremental yield issue at our individual product level. Now the way to think about it from a going-forward perspective as well, the liquidity which is generated is currently sitting in investments in non-SLR investment, which is still lower than what the advances [indiscernible]. So going forward, as our Stage 1 will be the fact that we'll move from the investment yield to wholesale yields and from the wholesale deal to the blended advances yield, that's a journey, but it's not a 1 quarter, 2 quarter journey. That's going to take a little bit longer. That's on the positive side. The flip of this is that you will see a full quarter impact of the FCNR leverage given in GIFT because you see only 1.5 months or that's just a little bit more than a month in this quarter. So that full quarter impact will come and offset somewhat by the increase in the depo rate, which will flow through a little bit in this quarter and a little bit in the next quarter. So too many moving parts to actually pinpoint on -- to say this is where we would. We're fairly confident to say -- you will see a little bit of reduction in the next quarter just on account of where the mix is sitting right now on the balance sheet. And as that moves forward, you would see an increase going through. But pace of that will remain on deployment of the liquidity, which is available.

Kunal, I think the longer term, I think we will also want to see trends where liability costs come down as we rationalize retail deposits, savings account deposits as our mix of current accounts and savings account improve from here on because I'm hoping that this is as low as one gets, given that we are saddled with FCNR as well as a one-off event. So I think the idea would be to reduce rates on liabilities as well as improve the mix over time to add to margins. And some of that, we will be more than happy to lose to the kind of lending that we -- we look forward to doing over the next few quarters.

Sure, and in terms of the provisioning, so there is a standard asset provisioning, which obviously on this INR 26,000 crores of incremental advances which have been built, we would have taken 40 basis of -- 40 basis points of provisioning. But besides that, was there any other standard asset provisioning or buffer, which was created during the quarter?

No, between what was provided from a FCNR because there are 2 specific things. One is the entire FCNR on which we have to carry [indiscernible] and pick up in gross loans itself, right? So why it doesn't show -- but that's the [indiscernible] Buffers on the standard asset side [indiscernible]

And how much was credit card in the overall provisioning. You said like it might come down to 6-odd percent, which is closer to INR 400-odd crores, okay? So maybe currently, is it still near 600, 650 and that's the delta maybe INR 200 crores, INR 250-odd crores, which we could see on the credit cost side.

So if you see -- and I sort of...

Guards provisioning for the quarter was approximately INR 575 crores. And yes, this should come off a reasonable base.

Yes. So 6% would almost on '27, 500 would translate to 400. So almost like INR 175-odd crores on credit cost getting into the second half.

Sorry, what are the total amount you said INR 20,000, Yes. That's right. It's roughly INR 20,000 crores.

Yes. okay, okay.

[indiscernible] is about for 19,000.

Got it. And one last question, maybe this year would still have some FCNR noise, but getting into FY '28, what would be our overall guidance on the ROA trajectory, the overall growth looking at the higher base, which would have been set already in FY '27. If you can just provide that outlook, that would be really helpful in terms of how we are looking because there is a huge liquidity almost 35% of balance sheet liquidity, good time to reconstruct the balance sheet and improve the ROA profile. So what would be your targeted ROA for FY '28?

Kunal, I would rather say that it settled down with what we are seeing it now and the immediate growth what you are looking at. And with regard to what is also let us wait for some more time [indiscernible] I did say that over a period of next few months, we'll come back to you with the company details. Now let us settle down with the current 0.92 and how it is looking positive for the next couple of quarters.

So just to kind of give a little bit of flavor here. See, we are -- it's very interesting to have a situation where there is a significant amount of liquidity between FCNR and equity, which is effectively fixed rate in a rising rate environment. So there will be tailwind to margins. There is talent growth. So clearly, I think there is going to be material and the fact that our BAU business, which is excluding all this noise is obviously trending much better in terms of predominantly cards, MFI is in the pretty much normalized. So I think one should see significant tailwinds, but I don't think we would want to comment at specifics at this stage.

The next question is from the line of Jayant Kharote from Axis Capital.

Sir, data keeping end-of-period deposit -- term deposit versus last end of period, there seems to be a delta of INR 26, 27,000 crores and we've raised 34,000 of FCNR. So if you could tell me as of 2Q end, what is the stock of FCNR on the book as of September end? And against that, can you also tell me the stock of wholesale deposits plus wholesale borrowings, some of which we could expect to be repaid in the third quarter.

Yes. [indiscernible] only is around INR 3,300 crores or something like that. And the is a downward trend. I don't have..

We'll maybe pick it up off-line. So in effect, if -- I mean to explain to you a bit to saying what's the generation of deposit has allowed us to not necessarily remove some of the Q2 time deposits, which we had on the books. Is chosen consciously to let go run down some of the high cost time deposits. As a result, maybe if your math is not working out, but maybe we can pick it up offline, and we'll see.

So maybe you can just let us know what is the how you run down this quarter? And how much do you plan to brand down next quarter?

It doesn't work that way, right? Because what comes up for renewal is what we can run down. We are still willing to pick up all deposits, which is available at a particular price point. Correct? So it's not a conscious call. It's more about the fact that what comes in when there's a rate which is available, it's a choice of the customer, if the customer renews with us, we are happy to renew it at our rate. It's not like I'm telling no to a customer. It's just that I've put up a rate which if the customer is happy with they will come. So I don't have a number to say this is what I'm running off, unlikely a borrowing, which I may consciously run off, which is what we've already done in the first quarter.

Sir, second question is on more of a 2-year or in a slightly outer year question, not the immediate quarter. Sir, we currently have this liquidity deployed in [indiscernible] yielding decent 7 percentage or maybe slightly lower. We are increasing our mix on corporate clearly doubling down. So I can understand near-term margins will look up after 3Q maybe an inch up in 4Q. But with the mix shift happening, is it fair to assume directionally we are looking at a lower NIM, lower credit cost model, let's say, FY '28, '29. Should we think about it like that?

So I don't have an answer to that. And I do want to leave a thought which was Jaideep mentioned earlier, and I'll draw your attention to Slide 8 on the right-hand side bottom, you see that Quarter-on-quarter, our total cost of funds is coming down, our cost of time deposits is also coming down. So while you will see a little bit lower yield on assets, you would expect that to be either coincidentally [indiscernible] lag, the cost of fund catching up as well. So we're not telling you that I'll continue with a high NIM or et cetera. So NIM is a function finally of what happens to what the credit cost and what.... At the end of customers' profitability is important, not necessarily individual productivity or individual product level line items, right? There are 2 levers here, and we'll try and play both of them. We hope that we continue to be an elevated net interest margin levels from where we are. But no guidance per se to say it's coming down or staying there or not, right? It's too many moving parts.

Understood. Sir, last question is on the SAR growth, low single digit sequentially, not in line with the rest of the balance sheet. Is there any number in your mind that if you're unable to grow at this pace you are willing to slow down balance sheet growth? Or at this point, it is not consequential.

[indiscernible] linking sort the balance sheet growth at. But anyway, the soft growth we have decided, as I said a little while earlier, to retain -- we are going to expand the branches. We are getting to no segment, which is easier to we are not able to penetrate much. And we will see a lot of positive growth in SA as you move forward in coming quarters. The sequential growth in [indiscernible]

[indiscernible] is it a prerequisite for you for [indiscernible] to grow at least, let's say, double digit or to continue the balance sheet growth or you're willing to be tilt build out over the next 1 or 2 years?

I think we may want to look at [indiscernible] and as well I think there are multiple things here. The fact that we want to go down the path of lower funding costs is a reasonable assumption to have. Now that will come down through a combination of higher access to wholesale deposits because a lot more corporates are willing to now bank with us given rating profile, et cetera. there is a large amount of trade corridor business that 1 we look at, which will also come along with its current account opportunities. There will be an increased focus on NR, as Mr. Kumar mentioned. So I think it's a combination. Maybe the better way to look at it is, will we continue to grow our loan book when our cost of funds is going up or not coming down, probably there will be some level of give and take that we will need to look at -- but I don't think we will link it to any single metric like you're talking about.

The next question is from the line of Piran Engineer from CLSA.

Congrats on the quarter. Just firstly, 1 question, Bhavan, you correctly when you said cost of deposits, the 5.97 number is ex FCNL.

Sorry? No, that's -- total deposit is there, if you've broken that up into the PD and SARS, you can see that on the page. Page 8 has the debate at right-hand side bottom chart, you'll see the breakup of cost of [indiscernible], cost of TD and cost of INR TD.

Yes. So the cost of TD of 6.86 is FCNR and INR both?

Correct -- that's correct. Only INR [indiscernible]

Understood. Understood. Okay. That clarifies, just firstly, from a wholesale lending perspective, now you mentioned a few times that wholesale lending is a priority with high-quality corporates. How should we think about over the next, say, 1, 1.5 years, what is your target ROE in this segment? Like, for example, hypothetically, if you think you'll make an ROA of 50 bps lending to some data company. Would you do that business or not?

[indiscernible] think about it at all, especially at this point of time, but generally as well, I would think, because you need to look at on the wholesale side, especially if you look at the risk-adjusted capital-adjusted returns and not necessarily pure ROA, but that's a separate lease. Right now, from our standpoint, the way you think about this is what money is sitting right now in liquidity in a short-term money market instrument. Would I lend to what you mentioned? Absolutely. Because that's a clear pickup of 50, 60, 70 basis points from where there it is, right? So that's the way you start thinking about it. Given where our situation and our position is -- but I would generally say for a bank who doesn't have the excess liquidity that we have would also still think of a wholesale not necessarily only from an ROA standpoint, but a larger relationship that they would have. And it definitely consume this capital, right? I mean these are not constraints that I have as a bank.

Got it. Okay. And maybe too soon -- sorry, were you saying something?

No, no. Go on.

Yes. Maybe it's too soon, but any targets that the Board now has for management over the next 3 years or so that you can share with us?

Nothing on the chart now.

I think we are in a situation where there is enough and more done. And I think it will take some time for us to put all that together and look at any specifics for the longer term.

Understood. And is the name change on the cards also soon?

See, we told you sometime back now, RBL Bank name is there, and we'll deliberate and then do any based on the market feedback and I feel we'll take a call at the appropriate time.

Got it, got it. And just lastly, given that we are pretty close to ECR transition, how do we think about steady state credit costs, the impact of that from next year onwards?

So again, there's just too many moving parts. A lot of things will depend on the mix the way we are seeing it right now is at an individual product line level, whether it is credit cards, whether it's the microfinance business or the secured retail business. Wholesale has always been pristine. We've not seen a misshapen in wholesale for a while. We've seen individual product lines all trends better, and we would expect that to continue, especially given that we would start moving up the value chain in terms of the customer profiling and selection as well. A lot of the absolute credit cost at a bank level will depend on the mix, which I don't really have a view at this point of time at what the mix would be at the end of next year to be able to give you a sense of that.

The next question is from the line of Param Subramanian from Investec.

Firstly, on the NII for the quarter. So quarter-on-quarter, the NII is up like INR 476 crores. So will you help me with the work of that? Because when I do the rough math, the capital itself contributes that much, which seems to indicate that the rest of the business we didn't create much NII. So what am I doing wrong over here, yes.