Congratulations on a healthy quarter in a tough environment. What has led BoB back to profits with low slippages in the first quarter, as well as lower credit cost on a sequential basis?
There are two major aspects which I think have had CASA improve things. One is on the structural side where we have had very tight discipline both in terms of managing liability franchise and also on the asset side. So, on the liability side, when you have abundant liquidity, it is very impossible that you allow deposit growth to run too far ahead of loan growth which creates pressure on margins. We have tried to be disciplined, make sure that our deposits grow in line with our loan growth.
Because we were choosy there, we have been able to make sure that most of the growth has come from CASA deposits. So, the CASA ratio moved up within a year from 39% to nearly 40% over last 12 months. That is one abiding benefit for the bank, not only in terms of margins for this quarter but also going ahead. Similarly on the asset side, there is a lot of liquidity sloshing around, pressure on margins. We are trying to be disciplined there also.
While both slippages as well as credit cost has been lower sequentially, what is the kind of slippages as well as credit cost that you expect? Where do you see gross net NPAs settle at for the financial year close?
We had guided even before the second wave that we would expect slippages to be below 2% and credit cost to be between 1.5% to 2% and bearing towards the lower end of that scale. We believe that despite the second wave we should be able to deliver on the guidance.
Your overall exposure to NCLT accounts is a little over Rs 48,000 crore and the PCR is 94%. To what extent of this amount do you see resolution? What are the overall recoveries and upgrades you expect for the whole bank and from these NCLT accounts as well?
The NCLT accounts tend to be the very highly provided; upwards of 90%. In terms of you might say anticipating in which quarter would it happen is always very difficult and so we do look forward to the resolutions of NCLT accounts. We are making sure that in terms of our recovery efforts and in terms of our recovery budgeting, we are looking beyond the NCLT accounts also. It is very tough to say what will come in which quarter, but I would believe that there are some accounts which probably will happen within this year and they will contribute significantly to the recoveries.
What is your exposure funded and non-funded to Vodafone Idea, how much you have provided for and what is the provision you expected to make?
Our exposure is relatively small, so it is not something which could significantly impact the improvement in the corporate credit cycle we have knocked off.
Let us talk about return ratios and profits from a two-year perspective. What is the improvement that you can expect on those two fronts and how do you see yourself competing with the modern day players that are coming in and making waves in the space?
The question might have two segments, one in the terms of the improvement in the profitability. I think that is something which is likely to be sustained over the next two years simply because we have built strengths in terms of the business both on the asset and liability side. On the liability side in terms of a CASA ratio, which now pretty much compares with the best in the business. Or on the asset side in terms of retail growth, which again have been better than market. So, we are very positive in terms of the structural story.
As we discussed, the improvement in the corporate credit cycle is likely to sustain over the next two years despite the second wave. We have seen even in this quarter the impact on corporate has been very marginal, therefore we can be fairly confident that the improvement that we have seen should continue going ahead.
The structural improvements in the balance of the bank, the earning power that has accrued to the bank from new businesses, and also the cyclical story should again help us have sustainable improvement and get back to return ratios which are very respectable. Coming back to the second part, in terms of the challenge of fintechs, I think it is an opportunity for banks and it is a great opportunity for us to collaborate with fintechs to create new businesses. Even as we speak, we have a very significant digital initiative which is being rolled out where we are collaborating with a large number of fintechs.
We expect that a large part, particularly on the retail side, should be digitised over the next 12 to 18 months and all of this will happen in collaboration with fintechs who would be our partners. I do not see any competition with fintechs as a zero-sum gain which is at the cost of banks, I think it is a great opportunity for the banks to in fact become much more efficient.