Ladies and gentlemen, good day, and welcome to HDFC Bank Limited's Q3 FY '24 Earnings Conference Call on the financial results presented by the management of HDFC Bank Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Srinivasan Vaidyanathan, Chief Financial Officer, HDFC Bank. Thank you, and over to you, sir.

Okay. Thank you, Nirav. Good evening, and a warm welcome to all the participants. There is an earnings presentation deck published on our website. Please refer to it as appropriate. As you get to it, in the meantime, let's cover a brief on the macroeconomic environment that operated during the quarter before we review the earnings. We continued to see healthy domestic activity -- economic activity driven by robust common spending, primarily in capital expenditure, improvement in domestic manufacturing and resilient services sector performance. As you know, the GST collections grew 13% year-on-year. Manufacturing and services PMI continued to remain in the expansionary zone and the consumption side improved consumer demand driven by sector spending resulted in robust growth across various sectors. Our [indiscernible] rate unchanged at 6.5% and retained its stance and changed at withdrawal of accommodation and modestly reduced its inflation forecast in the second half of the year. As we look ahead, the economic environment is poised for strong growth. India's year-on-year GDP growth for financial year '24 is estimated at about 7%. And for financial year '25, GDP growth rate is expected to be around 6.5%, continuing to be one of the fastest-growing major economies in the world. Let's go through the key factors of the bank's growth journey. Advances can be referred to on Page 7 and 8. Gross advances are at INR 24.7 trillion as of 31st December, reflecting the sequential momentum of INR 1.1 trillion or 4.9%. Retail advances grew 3.3% quarter-on-quarter, primarily driven by strong performance in the mortgage business. Retail mortgage disbursements of INR 460 billion during the quarter grew 18% over prior year. In the CRB business, it continued its strong momentum, registering a quarter-on-quarter growth of 6.7%. Wholesale segment, excluding non-individual loans of HDFC grew 1.9% sequentially. Non-individual loans…

[Operator Instructions] The first question is from the line of Mahrukh Adajania from Nuvama.

Sir I have two questions basically, and the first one in general is on deposit growth. Sir, in general there's a lot of noise around RBI having a discussion with banks on LDR, plus deposit growth has been very, very tight in November and December irrespective of whether you've had a discussion with RBI or not. So how do you view deposit growth and LDR from here on? If you could give us some sense target or guidance on how LDR will pan out, or what LDR are you looking at in FY '25. And a related question to that is that if deposit taking remains tight irrespective of the LDR debate, then what would you choose? Would you choose to offer higher rates compared to competition because you ask rate for deposits is on the higher side now? Or would you choose lower margins if the deposit situation remains like this for say 2 quarters?

Thank you, Mahrukh, for asking. If I miss anything, come back, but let me start with your first one in terms of the deposits and the CD ratio itself, right? It probably addresses a broader point that many of them would have. If you think about -- first of all, any conversations with RBI is confidential, and it is between the regulator and the bank. So we will not be able to talk about any individual conversations or anything else. So keep that to the side. That's not your main point. Your main point is in terms of the rate of growth of deposits as well as on the CD ratio, given where it is. So let's talk about that. Now on the deposits if you see. Firstly, on the deposits I do want to mention that how we approached it here. At an overall level, our deposits grew by INR 411 billion. At an overall level, our deposits were at that level. Yes, yes, I am closer to the mic. I think somebody is saying they can't hear. So INR 411 billion. That's the total growth that we had. Within that, if you see the retail deposit growth of INR 530 billion and 2.9% during the quarter. However, nonretail deposits reduced by INR 118 billion, INR 118 billion quarter- on-quarter it reduced, almost 3.3% reduction sequentially in the nonretail deposit. Again, very price- sensitive. We chose not to participate and get that price thing up. And we wanted to focus more and more on granular there. So that's one. And if you think about the individual component of various deposits, we did -- I talked about the current account growing at 3.2%, and within the current account, the retail current account constitutes 72% and has been growing 3.8% sequentially.…

Sir?

Yes. I'm here. So I'm getting -- you can't hear? Can you hear?

Mahrukh, can you hear us?

Okay, I will go ahead. Probably she is -- you can hear, Nirav?

Yes, sir, I can hear you fine.

Hello?

Yes, Mahrukh, now you are audible.

So getting to our CD ratio as such, right? Yes, the LDR, which is the CD ratio that you alluded to, it's a little more than 110% as we close the quarter. Over a period of time, if you see in this quarter, how did we manage the balance sheet. We had INR 1.15 trillion growth in loans, if you see. And we funded that through INR 411 billion on deposits. And you had investments going down by about INR 485 billion and cash and cash equivalent by about INR 96 million. So essentially, we funded that by the balance sheet somewhat coming -- not on the asset side. We got that self- funded through some lower investments. That is what we're seeing in the LCR ratio going down 110%. So some of the securities came down and cash came down as the ICR ran down on October...

I'm unable to hear you.

Nirav, can you hear?

Yes, sir. Sir, line for Mahrukh has dropped. We'll move to the next participant. Next question is from the line of Pranav from Bernstein.

I think a question, again, related to deposits, the one question. When you think about deposits this quarter instead of say INR 400 billion that you treated, if you had to double or triple that number, which is the biggest constraint? Is it the LCR, which is a constraint, or is it simply the cost of deposits, or is it the lack of good lending opportunities? Where are you seeing the biggest constraint?

Yes. The biggest constraint is in the area of deposits, right? And if you look at what has happened in the system, very important to look at the liquidity in the system, how it has moved. If you see, it has been positive ever since Q1 '20. The system liquidity has been positive since Q1 '20. And now it has moved to a negative territory. All the way, if you look right now, this is the first quarter -- full quarter that Q3 that it is a negative INR 664 billion, right? That's the negative situation in the quarter system has gone down by, that's the average that you're seeing. So it's the lack of liquidity in the system. Rightfully so if you look at how RBI has managed, there is no rate change that has happened. But the inflation that spiked 4 months ago, 5 months ago, has been managed through liquidity constraints, right, through working on the liquidity side. That is what has happened on a temporary basis. But over quarter-to-quarter, this is happening, but it is coming after more than 3 years, 3.5 years, right? We are seeing liquidity on the negative, which has been there. If you look at last 10 years, there have been several quarters in the past in '13 or in '15, 2013, 2015, where it has been negative. But this order of magnitude negative is very recent, in the last 3 months it has become negative. So that deposit is an important ingredient, that is the important constraint to growth, right? And we are at it. And within that, I will tell you retail has done reasonable. We would have liked retail to do 50% more, 80% more than where we did. But it is the wholesale, if you see not just a lack of growth, it's a degrowth in the nonretail on the deposit side. That is where it is very price sensitive. We chose not to participate in that price as much as possible. We have avoided that so that we can consume some liquidity that we have and at the same time, make progress on the asset side. But that can't continue for long, as you know. LDR ratio is at 110-something. So we do need deposits to be kicking in for the loans to be operating. That also answers what Mahrukh was asking, very similar thing that you're asking. Yes, we do need the deposits to be coming in.

Next question is from Suresh Ganapathy from Macquarie Research.

Srini, so just want to understand what is going to drive the margins in the future. Because if I look at it this quarter, you sold of INR 50,000 crores, your LCR is at 110%, you can't go below that. There is no excess liquidity assets at 110% LCR, right, and funding costs may remain elevated. So when you are saying I want to go from 3.4% to 3.7%, incremental CASA mobilization is getting to be a challenge. . Term deposit growth is high. Your HDFC Limited borrowings are sitting there at 7.5%. So deposit growth is finding difficult to meet your own loan growth requirements. When are you going to replace the HDFC Limited liabilities. So amidst all these challenges, what will drive your margins, say, from 3.4% to 3.7%, say, over the course of next 18 to 24 months? Will it be yield on loans? Because it doesn't look like it can go through cost of funds? That's the first question. If you can elaborate the movement in margins. Some indication as to what will be the components and how are you going to manage the HDFC Limited liability replacement with deposits, point number one? And the second thing is, 1,500 branches doesn't look like it's happening this year because we have only opened 290 branches -- sorry, 270 this year. You're going to fall short of your 1,500 branches target by a wide margin. What is the thought process there? Over to you, Srini.

Okay. Yes, thank you. I'll take the second one first. From a branches point of view, yes, there are a little more than 500, 550 branches in the pipeline as we closed the quarter. And we are targeting somewhere maybe 800 to 1,000 branches or so, right? If we do 1,000 branches, it would be good. A little more than 500, 550 branches are in the pipeline. So that's something on the branches. 1,500 is not something that will happen by March, right? 1,000 is something that is possible. But at this time, we are having about 500 plus in the pipeline, that's 570 more precise in the pipeline. The second aspect of it is in terms of your levers for margin and the deposits as such at total level. If you look at the mix of products that we are having, the mix of products, one of the important lever is the retail mix to be enhanced, right? Retail mix has been continuously coming down. And that is something that will help us to go. And of late, in the recent times, if you see, we haven't had that kind of a market rate of growth on the unsecured as such. Our personal loan has been growing 2% to 3% over the last 2 quarters. So we do have opportunity space there. That's part of our credit kind of process, where periodically, they calibrate up and down. And now we believe that the overall credit both from an NPA point of view and credit cost point of view are at a benign state. And so whatever testing and other things may do, we are positioned to have a good growth there. That's one. Retail asset growth, particularly the nonmortgage retail asset, where there is a yield, needs to come…

Okay. And just one final question on cost saving. You guys have said you will bring down from 40% to 35% over the course of next 5 years. I know it's a long journey, the fact that you're opening lower number of branches. Can we get to see some benefits, not quantifying, but some benefits in that reduction next year FY '25? At least there has to be a journey in that 500 basis point reduction, right? So we were at 40 point, I don't know, 4 last quarter, and we are at 40.2 or something like thereabout, I mean, around the same range. Do you think it can really come down in the next 1 year or so?

We are with you, Suresh, on that. Yes, we do expect normally -- while we don't give a forward-looking outlook, but on the cost to income, we have always said that we want to take it down to the mid-30s. And that we will progressively take it down on not just towards the back end, but there should be an expectation that the cost to income should be improving. And it is a function of certain efficiencies through better digital offering, that's one. Several things that are in the pipeline on technology rationalization is one that is a good tailwind that should account for it. And the second thing is that as we work on some of these margins, which is both the asset mix, the CASA mix and the borrowings mix moving towards deposit, as we work towards that, the numerator is also an important contributor to get to that.

Next question is from the line of Rahul Jain from Goldman Sachs.

Two, three questions. Number one, the whole debate between LDR and LCR. For you as a management team, what is it that you're focusing on? I know you've put out a certain trajectory for LDR, but right now, the LCR has kind of come off to 110% as the previous participant pointed out, 110%, clearly, there's not really much room for it to go down. So what really is a key number to focus on for you all?

Okay. Listen, both are important. It's like you need to walk and chew gum, right? You need to do both, which means LCR, as we have said before that we'd like to operate between 110% to 120%. We were at several quarters, 113%, 114%, 115% thereabouts. Then for a quarter, we went up, and then we have consumed -- as we see in this quarter, we have consumed, right? So it is important around that level to keep that level of cushion to some extent, right? That's one on the LCR. LDR is important, right? We do want to ensure that the mix of funding moves more towards deposits. So LDR is important from that sense. And if you see, currently 110%. Then if you look at where can this go. Where can this LDR go? You look at our LDR prior to merger, it's very important, right, a recent discussion that is developing. Prior to merger, our LDR was at 85%, right? Then now it's at 110%. And if you remove the merger effect of the assets and the deposits on this, the LDR is more like a 89%. And if you look at our historical range of what the bank has operated LDR over a long period of time, around that 85%, 87% that's kind of a range that's where we operated, historically, if you think about our LDR, that's where we operated. So the -- and today, if you strip out the merger effect, it's about 89%. So essentially, the LDR is a function of what has happened on the merger. It's about 2 quarters run on the merger, which we have run through 2 quarters, and we do have a kind of a path where we do want to replace borrowings with deposits and grow further loans with the deposits. That's the kind of a thought process. And so you should expect the LDR to go down progressively over several quarters to come.

Yes. The reason why I asked this question also, Srini, is because we've bottomed out on LCR and we can't really go down any further. LDR is clearly elevated. So clearly, loan growth outlook and the visibility there on is looking a little difficult given the environment that we are in. So what do we prioritize, growth or margins? Regardless, growth and clearly, the loan growth has to come off for us to start bringing these ratios to a more acceptable range. Or if you have to grow, then margins [indiscernible] off because you'll have to offer the increase in deposit rates further. So how are you trying to balance the 2?

Okay. So I do want to mention one thing, right? We are not caught up, and we are not into one level of rate of growth as such, right? If you look at our rate of growth, there are sometimes we are slower, sometimes we are faster. But all we have done is that over a period of time, we have always doubled in every 4 to 5 years. That's what we have done, right? Quarter or even a year can be different. But over a period of time, that is what we have done. So growth is not something that we are [indiscernible] this is the rate of growth that we want. Over a period of time, we want to because that's the investment we have done, we need to harvest returns on those. So we are focused on returns. So that takes you to the margin, right, would you focus on margin or growth. We certainly do not want growth for the sake of growth. If you look at our wholesale growth, we had 1.9% in the quarter. Enough demand was there. There were several banks undercutting and taking, and we'll let that move on, right? We don't need to be participating if it does not give returns, we don't want to be there. And so that's something that we are focused on. We want to do the products that are going to give us the returns. Now on the margin, very important that you talked about the margin. Margin is important, but the first passing is about the returns. What does it give from an overall ROA point of view. That's first part. Then it comes because when you do a product pricing or a product charge to do to a customer, you're looking at returns more than the margins as such. Margins to the extent that the mix appropriately gets calibrated, the margins -- for us, we have never had this margin conversation because our mix has been predominantly retail and the retail rate of growth over a decade, if you see, has always outstripped the wholesale. So there was not a necessity. There was no conversation about any margin because it comes with a hefty margin. And it comes with a credit cost also. And our credit cost is at a very benign state of sub-50 basis points right now. And if you look at our credit cost, adjusted for the mortgages, you'll see that the mortgages because of the denominator in the lower loss rates, the -- when credit cost, what does the mean on the credit cost, call it 70, 80 basis points that's the mean and pre-mortgage merger 100, 110 basis points. So what we -- what -- due to the mix change that has impacted the margin that has come through in the credit cost line. So certainly, we are focused on profitable growth. But I hope that answers you in some manner that you are trying to seek.

Just 2 small questions. The branches, you said this year maybe 1,000. So is this a new trajectory that we're looking at? Or you'll go back to 1,500 or thereabouts in the following years?

See, again, I'll tell you one other constraint that we are also working through on the branches with this URC. This URC is something that is required, right? The mix between the unbanked rural center and so on. Selecting that availability. What is that URC that is available so that we are able to get that mix appropriately. So there is a targeted percentage with a regulatory target on URC that is more internally we would do, but we need to have a mix between the URC and the non-URC so that we can grow progressively across in a balanced manner within the regulatory approval. So that is what it is. So if you look at whether we go back to 1,500, I think Sashi has alluded to that over a period of time, we do want to get to the 13,000, 14,000 type of branches, not just for the sake of branches. It is the geographical presence that we can have so we can tap into the pockets of both the deposits and lending opportunity in that area. So it's not just deposit, deposits and also the lending opportunity in the area. So we would be there, but there is no hard kind of -- we're not going to push ahead with only one number. But currently, this is what we are seeing.

I will be very generous with your time. Just a small question on the infra bonds. So you raised some money in the last quarter, I think INR 7,000 crores, INR 7,500 crores. Do you have eligible assets even sitting on the balance sheet against which you can keep raising this infra bonds? And how much would that be?

We have eligible assets close to INR 1 trillion, as I mentioned. So that's part of -- which is -- it can have a qualification in the sense that you may have PSL benefits because we will take it off the top line to the extent that you're able to tack the bond and the affordable housing. And you will get the other benefits that I mentioned that the cost on the PSLC or the deposit insurance, those things are obviated. But still, any day, we need CASA. But to the extent that there are time deposits, the economics is better than even -- slightly better than the term deposits due to these. Yes, there are enough asset room, if that's the question, do we have enough assets on the asset side to face off against these infra bonds, yes.

Next question is from the line of Kunal Shah from Citi Group.

So given that the overall liquidity is tight plus the deposit traction all said and done this quarter has not been very encouraging. So when do we see in terms of tweaking the rates, given that now at least the repo rates have sustained, would we ever look at raising deposit rates beyond 7.2% just to make sure that we are on our target to get the deposits and at least sustain the growth momentum even on the asset side. So will there be a thought -- no doubt, you have earlier said that we will look at branch expansion that's going pretty slow. Even in terms of like activation of the field force still not that great response. So at what time do we look at tweaking the rates just to ensure the deposit traction is what we were envisaging earlier, yes?

Okay. See, deposit pricing is not a tool that we are having in our sales and relationship process, which means it is not a driver. The conversation would never go to say, I'm the best price deposits, come here. It's not a conversation because that's how -- if you look at some of the comparative pricing on our deposits with our peers, we are more or less in that line, right, with our top peers, that's the kind of a pricing that we are positioned to. So we're not trying to differentiate on the pricing. We're trying to differentiate on other offering features. That's one on that. Second, in terms of the market share, you touched upon the growth rate and the market share. I do want to allude to say that we do believe that on an incremental basis, 18%, 20% market share, we do garner, right? That's part of the -- whatever is the size that we have got, whatever is the level at which we are growing, we continue to maintain that superior rate of growth to the market, gaining market share on an incremental basis, getting that in the high teens to 20 type of incremental market share. Rates are not a play. And that is part of the reason why the non-retail deposits de-grew by 3.3% in this quarter.

Yes. Okay. And secondly, with respect to tax write-back. So last time when there was a write-back, you indicated that maybe it might not repeat and we should see it normalizing towards 25-odd percent. But that benefit is still continuing. So if you can highlight in terms of, is it expected to continue what is leading -- actually leading to this kind of -- or maybe a lower tax rate, I would say? Or may this is like the investment gains, which have been there. It's on that if you can just highlight that, yes.

The tax benefits that we booked in are consequent to 2 things. One, there were certain favorable orders received relating to eHDFC Limited past assessment. So that's one. And two, there were some favorable orders received relating to the bank for the past year. So that is based on those assessments, determine that the portions are no longer required. That's -- and it depends on time to time. And there is no such kind of a routine timing that I can predict when these orders come and when we get done. But yes, these are episodic from that sense. We receive favorable orders, the assets and we take it. And in this quarter, we have had 2 of them like that, yes.

Okay. So all orders which have been received, which have been favorable, they are more or less accounted for now and [indiscernible] spend?

More or less.

Okay. And lastly, if you can highlight in terms of the maturity of the borrowing, HDFC Limited borrowing over next 1 year, which is falling due, okay? And any quarter, we would see any kind of volatility in that maturity?

Maturity profile is 20,000, 25,000. There is no big maturity at least over the next 2 to 4 quarters. It is unevenly there. There's not a spike of INR 1 trillion going away in a quarter or INR 0.5 trillion going away in a quarter that kind of profile. And I think annually, we do publish the profile of those, and you should soon get to see that, yes.

Next question is from the line of Chintan Joshi from Bernstein.

Can you hear me?

Yes, Chintan. Go ahead.

So can I go back to the LD ratio discussion? What I'm hearing from you is that it does need to come down, but also growth will remain intact. So I'm trying to square the circle, how -- like the only way LD ratios improves is if you grow deposits faster than lending. Is that what we should expect by FY '25? And the pace of that, if you can talk about -- do you have some target in mind? Or do you look at market conditions and do your best? How should we think about this?

Thank you. One thing I do want to mention is that the growth rate -- sustainability of the growth rate is not irrespective of what the CD ratio is. CD ratio has to improve, right? As I mentioned, typically, we have been in that mid-80s to high 80s. The merger took it to where it is today, past the 100%. And over a period of time, we do need to bring it down. So we can't keep the CD ratio to be growing all the time. That's not a proposition that we are envisaging. So that takes the second part of what you asked in terms of the deposit growth and how you should think about the rate of growth. Yes, we do envisage that the deposit rate of growth should outpace the loan rate of growth. And for the CD ratio to progressively come in and for the economics to work, the deposit rate of growth should be at least 300, 400 basis points higher than the loan growth, only then the economics will work better. So yes, that is kind of a thought process that we have.

Sir, the other question I have is on borrowings and debt securities. If I look at HDFC Limited balance sheet as of FY '23, there was about INR 1.7 trillion that was going to mature over the next year as of FY '23. However, we have not seen that mature. If anything, borrowings have gone higher today than the pro forma combined FY '23 balance sheets. Is this -- what was the thinking behind this? Because one way of looking at this is there was an opportunity to reduce borrowing, but it was not taken because there was profitable lending growth out there. Is that the way you thought about it? Or if you can explain that thinking would be helpful.

Okay. See, in this time period, now 2 quarters have gone by after the merger. And the borrowings have remained or actually gone up in this quarter by almost INR 209 billion it has gone up, out of which about 7,500 is infra bonds, which economics work well, we have taken that. The rest are either market borrowings or other treasury-related actions, right? So it is only one item which is the infra bond, which is the borrowing as such that has gone up. The rest are market-related activities, which are there, right, in that borrowing. The other aspect of it is that should you expect this to go down at the maturity, I think another person was asking about the maturity itself over the next several quarters. Yes, there are maturities coming, and we envisage to the extent that economics work, we will have a similar replacement. If not, it has to be replaced by deposits. And that is part of how the rate of growth of deposits need to outpace the loan growth. Otherwise, we will not be able to keep up with the loan rate of growth.

Understood. And finally, on the CRB business, which is growing really fast. What is the overall lending yield of the CRB loan book so that we can understand what is the mix impact on the overall lending yield from the CRB given that it's growing so fast?

Okay. The CRB yield comes in about between 9% to 11%, depending on product. There are certain products that go above that. There are certain products which are around that 8.5%, 9%. But on an average, it's slightly above 9% type of yield at an aggregate level. But there are several products, as you know, within the CRB segment from business banking to emerging corporates to agriculture loans to SLI loans to the commercial vehicle and so on and so forth. So it's a different price point. But on an aggregate average, if you look at it, it's north of 9%.

So it is in line with the overall group lending yields. It's not above the average of the balance sheet, it is in line with it.

It's a good assumption. Yes, it is not above the average. It is at that level, not dragging the overall average down as such in any meaningful manner, yes.

Next question is from the line of Nitin Aggarwal from Motilal Oswal.

Srini, 2, 3 quick questions. One is on the Bandhan Bank stake sale that has happened in this quarter. So if you can quantify the gains on the sale, how much has flown in this quarter from that?

See, I talked about that INR 15 billion or so on the overall, I mentioned. So not necessarily -- I won't talk about any individual particular item, right, but from an overall point of view, I did talk about the mark-to- market and trading treasury investment portfolio income INR 14.7 billion, INR 15 billion, right, which is there.

Right. So this is included in the total, but you're not like giving the separate number for that.

It is included. Yes.

Okay. And secondly, on the Credila, have you booked the gains in this quarter or it will come in 4Q? Like how are you looking at that?

Okay. No, Credila, nothing has been booked in the December quarter. We are waiting for regulatory clearance before the transaction can close. So we are working through -- or the potential purchaser is working through certain things to provide. And we are hopeful to close soon, but there is no particular concrete time that I can give, right? They have to go through approval process before it can conclude.

Okay. And lastly, on contingent provisions. This quarter, we have made INR 1,200-odd crores of contingent. So any particular levels you want to reach or is it just like the flowback of the excess gains that we are having right now that we are using that? So any thoughts around how do we look at this contingent provision number?

Okay. See, the contingent provision that we built in the quarter, INR 12.2 billion, we attributed on a prudent basis towards the AIF, right? There is RBI regulation to account for and look at AIF in a specific manner. So we took the chance to say on a prudent basis, we need to provide, and so we did build a contingent provision against this. As I mentioned, the fair value of the AIF is almost INR 5 billion more than the carrying book value, but we made 100% provision on a prudent basis. So again, we evaluate this quarter-to-quarter. But that's the process, that's a regimented process to look at it quarter-to-quarter. There is no such targeted level of build or release that we have. We will assess it every quarter and certainly at every year-end.

Next question is from the line of Abhishek Murarka from HSBC.

Okay. So one question is on the unsecured loans. So after the RBI circular on risk-weighted assets and all. So there's much that has been happening NBFC as well. What is your approach? So part one, what is your approach to unsecured loans, especially personal loans? Will that slow down? If yes, when you were talking earlier about bringing up the yield on nonmortgage retail assets, how does that affect that strategy? And second, on NBFCs, again, what's the approach? Will you limit the percentage mix? Or will you sort of limit the absolute exposure? How do you plan to move ahead?

Okay. Yes. Let's look at the retail unsecured that you alluded to. See, the retail unsecured is extremely profitable product, and we like it. And it has to go through our credit filter. And we've been in that for a long time. And one of the best scorecards we believe we have that. If you look at the delinquency profile on that, it's fantastic. The delinquency profile, the NPA profile is better than the secured book that we have. So we like it. There are times it gets calibrated up and down, and we are confident of growing the book. And let me tell you one important thing on that unsecured as such. Premerger, on the retail book, our unsecured component was 41%. Postmerger, it is about 22%. So if anything, we created more kind of a runway for faster growth. But when we say faster growth, we are not talking about something that is a 25%, 30% thereabouts kind of rate of growth. For us, faster growth is to go into high teens to 20% type of rate of growth. That's what we have had in the past. That's why I'm more than telling you what we will do and trying to tell you what we have done. And we think that, that is what we will do rather than do something new about it. So we have enough headroom, enough runway and opportunity on that. It's an extremely profitable product. So that's something to keep in mind on the unsecured. NBFC, see, our approach to NBFC has always been one for lending, we do want that. For corporate houses, part of various NBFCs affiliated to corporate houses, something that we work with because that's a much broader relationship across the corporate group that we have. So that is quite profitable, and we like it and we work through that. One thing that I do want to mention is that, yes, the risk weights do add in terms of the capital that is required for it. Irrespective of that, we look at the profitability. They are quite highly profitable at the enhanced risk weight, both ROA or ROE that you see, and we like to go with that.

So there will be no sort of approach to limit the, let's say, percentage of overall exposure to NBFCs in light of whatever nudges have come from the regulator, or caution, let's say, that would have come?

Correct. The way to think about it is that where it is to be directed lending, which is priority sector is #1 preference, right? And by the way, some of our NBFCs are government-sponsored NBFCs, right? So -- and they're not into consumer lending at all. And so I do want to distinguish. Of course, the circular does not distinguish between different categories of NBFCs. So our NBFC does not necessarily need to be lending only to consumers or of segmentation, which is lower than the bank-targeted segmentation for lending, no. NBFCs are also government-sponsored, government-linked NBFCs are there, where we have a good relationship with them.

Okay. And just another one on the cross-sell. At the time of the merger, we were talking about how you benefit from cross-selling your products to the customers who are coming to the fold. How do we track that? And when do we start seeing those cross-sell benefits, either in terms of high retail fee or can you start disclosing some sort of cross-sell metrics? So how do we track whether that's really accruing or it's taking time?

Very good. Thanks, you touched upon that. I'll touch you -- I'll give you one and I'll tell you 2, 3 things that we will start to publish and show it to you. One is that, we said we want savings accounts. That's one, because we want to offer the bank not just a mortgage product. So if you look at one month, the last month, the December. In October, we showed to the broader world in terms of how various digital approach that we have taken to offering this bundling of products. Savings account is an important part of the product suite that we offer. Among the disbursals that we had, in 1 month, if you take 40,000-plus disbursals, first disbursals because I'm not counting for the disbursals which are ongoing, right, second installment, third installment, leave that to the side. On the first disbursals that have happened in the month -- in December, roughly half-half existing to bank and new to bank, half-half of that. Among that half, which is the new bank, almost 65% of them we have penetrated with the savings deposit. So we've gone with the 65% penetration to start with, right? I'm talking about the December, where we are. And that penetration comes with the deposit balance, at least 1 to 2 months of EMI, which is INR 30,000 to INR 35,000 on an average we have taken from the customer base where we have opened. So we'll publish this. So one is savings account as a product and what is the penetration on that. That's number one. And I give you an example of 65% of new to bank, first disbursals, we have had that, and we want to take it to 90, 95, 99. We will keep tracking and reporting that. The second one is the credit cards. We're just beginning on that one, we will report on that as a product in terms of how we are offering credit cards. The third is consumer durable. Consumer durable, again, one is the offer. The second one is a drawdown because the customer will not -- we will make that offer on the consumer durable, customer will drawdown a month or a quarter or 6 months later as the house is ready for the person to move in and do. So -- and then over a period of time, we will bring in the other products. So insurance also is something that we'll start to disclose to see the penetration of -- penetration level of insurance. The things like the demat account and the mutual funds and those sort of things, over a period of time, we will come with that. But there are 9 products that we will come up with, out of which 3 are digitally enabled. The rest will be soon, and we will start to report them and show it to you.

Sure. Really had to get some more granularities because that will help us figure out how the cross-sell effort is going.

Thank you. We will put up a page or 2 from next time and we will have that.

Next question is from the line of Anand Bhavnani from White Oak Capital.

I have a question on the consumer behavior. This has more to do with seeing revolve rates on credit card being much lower than pre-COVID levels. Similarly, on the current -- on the savings account side, the growth rate is weak. So, can one surmise that because of good apps available on mobile devices, consumers are now being very active and not giving in to the inertia on both the asset side, the credit cards, they are not revolving. They are just taking personal loan or something? And similarly on the liability side, the consumers are moving away their deposits to an account where they're getting 7%, 8%, whereas we are giving, let's say, 3.5%. So have you done any behavioral analysis on both assets as well as liability side to see how across the broad spectrum of your customers, is there any data to prove through these thesis?

See, in terms of the customers -- you touched upon the revolver. Thank you for touching that. See, the revolvers haven't grown. If anything, actually, in this quarter, we do -- we did see a slight reduction in revolver percentage, right? We're not seeing that. And in some other questions, I would allude to how card bunch of customers. Customers who have credit cards and savings accounts with us and you see their balances are 5x, little more than 5x -- 5.4x their balances is what they have in the deposit accounts. So that is also healthy. It was less than 4 3 years ago. Now it is 5.4. So it has grown. That's the second thing. The third thing in terms of whether some of the digital properties are enabling, less use of card revolving and alternatives. See, in our customer segment, that's not something that we are seeing because it is more of -- the segment that we have chosen and working on is little more higher rate. That means a little higher score customers. I think we have talked about the revolver 1 to 3 months and 4 to 6 months and 6-plus months -- call it, 6-plus months revolvers. Across these 3 revolving categories, we are not seeing pickup happening. So that's part of the customer base, and that's part of the cash that they have, or some of them have got impacted through the COVID and come out of it and not survived and come through it and not indulging in any of these things. And some of them who do, take it for a short period of time, right? So that's the 1 to 3 months category if you see they take for some short personal loan or they don't want a 2-year or a 3-year or whatever the tenor personal loan, they want it for a short period of time, they don't mind taking it. So we do think that the category is very attractive and very nascent because you know that there are only kind of 90 million, 100 million credit cards in this country, and we would expect that to be north of 500 million. So we have enormous room to go. The other aspect is that whether alternative payments UPI or anything, those kind of things or direct debit system, whether those things that would only increase the balances in the savings account. So somebody who is using UPI previously was drawing down cash and paying through. So the cash was going out of the bank. Now the cash is in the bank account and is using UPI. So it only enhances -- anybody using UPI only enhances balances in the account. So there are pluses and minuses across all of these. But at the end of the day, the customer segmentation that we are working with, we're confident that, that will bring in the balances and grow as the economy grows.

Sure. But the question is whether the minuses are overwhelming the pluses because the account opening these days is less like an hour's affair and if a bank is offering 7%, 8%, and we are seeing these banks which are offering 7%, 8% are seeing very high growth rates on their liability side. So is it that the smart customers of yours are now using these properties and it's a structural change and hence, it will be a headwind to our deposit accretion targets?

Okay. But there are two -- again two things I want to respond to. One is the -- if you look at us from a market share point of view, we have been gaining market share. Our market share is at about 10.5%, and it continues to grow. On an incremental basis, I think I alluded to our assessment is 18% to 20%. So that's -- we are keeping up with that. Yes, there may be some customers who go. But from our rate offering point of view, we offer -- you're talking about the savings account rate. But on a time savings account rate is what we offer, 3%, 3.5%. On the time deposit, we are more or less in line with the competition, significant peers. If you see, we are more or less in line with that on a time deposit rate point of view. From a savings account, yes, we do continue to. That doesn't mean somebody else cannot grow. We are growing. And think about it, still the public sector banks from where all of the private sector banks, including the ones that you alluded to offering 7% or 8% on savings account, those are all in the private segment -- private sector segment. And the market share there is coming from some public sector because all the private sector banks are gaining market share.

Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to Mr. Vaidyanathan for closing comments. Over to you, sir.

Okay. Thank you, Nirav. Thank you all for participating. We appreciate you dialing in at this hour. If any more questions, comments or clarifications required, please feel free to reach out to us. Our Investor Relations team would be happy to connect directly to you or with me, and we can have a conversation. Thank you. Bye-bye.

Thank you very much. On behalf of HDFC Bank Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.