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"NIM has come down to 2.80%. However, I clarify again, our domestic NIM is at a healthy number of 3.
14%. So, definitely there has been some impact with the rising cost of deposit. The NIM has been impacted and also yield on advances are flat, that is one of the basic reasons.
And as regards the RBI circular on penal interest, so now we have to book under the penal charges," says Rajneesh Karnatak , MD & CEO, Bank of India . Let us start off with your net interest margins here. Now, we saw 25 basis points fall when it comes to the NIMs in this quarter, but going forward your cost of deposits has been rising while the yield on advances has been declining.
So, what is your outlook when it comes to the net interest margin considering these factors? Rajneesh Karnatak: As regards the NIM is concerned, our NIM we have shown at around 2.80%. However, this is the global NIM.
The domestic NIM is at 3.14%. And the reason for this coming down of the NIM is one of the factors is that 15% of our global book is the international book, where the NIMs are on the lower side.
In fact, it is at the international level our NIM. So, what it has impacted is on the global level, it has impacted the overall NIM. NIM has come down to 2.
80%. However, I clarify again, our domestic NIM is at a healthy number of 3.14%.
So, definitely there has been some impact with the rising cost of deposit. The NIM has been impacted and also yield on advances are flat, that is one of the basic reasons. And as regards the RBI circular on penal interest, so now we have to book under the penal charges.
Penal interest also has gone out of the interest income and it has gone to the penal charges to the non-interest income, so that has also impacted the overall domestic net interest margins. Stock Trading Cryptocurrency Made Easy: Cryptocurrency Course By - elearnmarkets, Financial Education by StockEdge View Program Stock Trading Markets 102: Mastering Sentiment Indicators for Swing and Positional Trading By - Rohit Srivastava, Founder- Indiacharts.com View Program Stock Trading Market 104: Options Trading: Kickstart Your F&O Adventure By - Saketh R, Founder- QuickAlpha, Full Time Options Trader View Program Stock Trading Renko Chart Patterns Made Easy By - Kaushik Akiwatkar, Derivative Trader and Investor View Program Stock Trading Macroeconomics Made Easy: Online Certification Course By - Anirudh Saraf, Founder- Saraf A & Associates, Chartered Accountant View Program Stock Trading Stock Valuation Made Easy By - Rounak Gouti, Investment commentary writer, Experience in equity research View Program Stock Trading Market 103: Mastering Trends with RMI and Techno-Funda Insights By - Rohit Srivastava, Founder- Indiacharts.
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14%, it is quite healthy and at the global level, the guidance we are giving at that, we will maintain a NIM at around 2.9% for FY25. I wanted to ask about your yield on advances because as per your earlier comments, those should settle around that 8.
5% mark. So, should we expect then to remain at the same level also coming in from now on? Rajneesh Karnatak: Yes, it should remain at the same level. So, yield on advances for us is 8.
65 for this quarter. And if you see the repo rate, RBI has not changed after January 2023 and it remains at 6.5%.
And as regards the MCLR for Bank of India, we have increased the MCLR from 8.4% to the latest MCLR of one year at 9%. So, we have increased the MCLR by nearly 60 basis point during this period.
So, we see that the yield on advances should improve a bit better going forward in the next two quarters and should be at around 8.65 to 8.76.
If you look at your slippages that have also gone up sharply, specifically when it comes to the corporate segment. So, are you seeing any rising stress when it comes to the corporate book because even during the last quarter that is Q1, you had made a prudent provisioning when it comes to the corporate book. Rajneesh Karnatak: Yes, as regards slippage is concerned, the slippage has been more than the last quarter.
So, there is one account, one lumpy account which has slipped during this quarter and it is a one-off account only. And it should not happen in the next quarters. So, further slippages we do not foresee in the corporate book.
There was one single account and because of which the provision has also increased. If you see our provision numbers, to that extent the provision has also increased on a quarter-on-quarter basis. I had a follow-up question about that because this one particular account that you have mentioned, do you feel confident about this account's recovery then in the coming quarters, any resolution plans that you are currently working on? Rajneesh Karnatak: So, we are very confident that some resolution process will come out either by way of a payout or some restructuring may happen in the account.
So, whatever the provision is required as per the IRAC guidelines we have already provided. So, if you see the slippage ratio and the cost of credit has gone up due to this one particular account. Had this account not been there, if you net off this particular account, our slippage would have been less by nearly 1000 crores and gross and net NPA would have been much better than the last quarter.
And in fact, the slippage ratio and also the credit cost would have been much lesser than the June quarter. So, overall, the improvement was there in the asset quality barring one single account, which is an aberration for this quarter. Also, if you look at our advances, the growth is healthy on that front, but deposit growth has been lagging and also it is below your guidance.
So, what are the measures that you are taking to boost deposit growth? And do you think that the bank's credit deposit ratio at current level is comfortable? Rajneesh Karnatak: Yes, so on the global numbers, if you see our business has grown by nearly 12%. On the global advances, we have grown by around 14% and the global deposit has grown at around 10%. However, if you see the domestic book of the bank, our domestic book has grown by 13%, domestic advances have grown by 15% and domestic deposit has grown by nearly 12% to 13%, so that is the number at which we are going at the domestic level.
So, overall, if you see our CD ratio, the CD ratio at the global level is at around 80, but at the domestic level, it is at around 77 which is a very healthy number. At the global level, it is high because at the international book level we raise less of deposit, but more of loans and advances from international high banks to take care of our credit growth which is happening at the international market. Because of which the overall CD ratio is at 80.
However, the domestic CD has a very healthy number of 77. As regards the gap which is there between the incremental growth of deposit and advances, see our YoY growth has been 1,50,000 crores on a YoY basis as of September. Out of that 78,000 crore has been the increase in the advances and around 71,000, 72,000 has been the increase in the deposit.
So, this gap of around 8,000 crore is not much of a gap. We have ample resources available from us other than deposits through which we are funding our credit growth. One being that we had raised infra bonds of nearly 5,000 crores.
We had a tier II raise of also 2,500 crores. We are raising CD also and we are also raising refinance also from the market and we have excess SLR also with us nearly 40,000 45,000 crores, against which also we borrow. So, all these things put together we are very comfortable for raising resources to meet the credit growth in the ensuing quarters.
I also wanted to talk about your profitability then because that has also remained healthy. When you take a look at the second quarter coming in, you also reported ROA of 0.94% also, but I believe that this was also supported by higher non-interest incomes so going ahead how should we then be looking at non-interest income segment and also your ROAs then? Rajneesh Karnatak: Yes, so non-interest income has improved for us as you see that we have crossed 2,500 crores in the non-interest income and it has grown by nearly 40% plus on a YoY basis.
So, healthy improvement has been there and it is at the backdrop of some recoveries in the written off accounts. In seven-eight accounts, we got recovery. So, there was no one single account or a lumpy account which was there.
It was seven or eight accounts in the NPA book in which the recovery had happened during the quarter, that is one. The treasury income in which we have booked an income in the treasury segment and some improvement has also been in the third-party products income and other few heads also. So, we are very confident that this non-interest income will be sustainable in the coming quarters also in Q3 and Q4.
And as regards the ROA is concerned, so we have shown a very healthy ROA this time of 0.94 and we are confident that we will be touching a ROA of near to 1% in the ensuing quarter of December and March also. It is also worth noting that the SMA book has come down, but the specific SMA 1 and SMA 2 is still a little elevated given the guidance of GNPAs below 4% and NPAs below 0.
9%. How confident are you in terms of recoveries from here on? Rajneesh Karnatak: You must have seen that our SMA book above five crores has come down from 9,600 crores to 7,600 crores. There is a reduction of 2,000 crores on a quarter-on-quarter basis.
Within which, as you rightly said, there has been some increase in the SMA 1 and SMA 2 numbers. If you see the data more granularly, you will see that this SMA 0 number, which was high at the time of June quarter, these accounts have moved from SMA 0 to SMA 1 and 2 in the September quarter. So, these are five or six public sector accounts in one particular state which have gone into SMA 1 and SMA 2 category.
However, we are very confident that the slippage will not be there and they are also backed by asset and also the government guarantee is there. So, we are very confident that the slippage will not happen in those accounts. It is only, if you remove these accounts, which is nearly 4,000 to 5,000 crores, the overall SMA numbers is quite comfortable for the bank.
In fact, the overall SMA number to standard advance is only 1.7% of the total book, so that we are very confident of. And as regards the gross and net NPA, you see that our gross NPA has now come down to 4.
41% and it has the reduction of nearly 160 basis point on a YoY basis and if we see the net NPA, we have shown the net NPA at 0.94%. Again, here also there has been a reduction of nearly 60 basis point on a YoY basis.
So, we are very confident that the FY25, the gross and net NPA will be at the level which we have already given a guidance to the market. But in this environment, then given the slippage guidance of 1.2% earlier, do you think that the bank can still achieve that level then? Rajneesh Karnatak: Yes, so we are revising this guidance of this slippage because for the simple reason that one single account has slipped during this quarter and it was a lumpy account.
So, the slippage ratio, we are now estimating it to be at around 1.4% on a realistic basis. (You can now subscribe to our ETMarkets WhatsApp channel ).
