Earnings Call Transcript
HDFC BANK LTD (HDB)
Earnings Call Transcript - HDB Q3 2024
Operator, Operator
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. 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.
Srinivasan Vaidyanathan, Chief Financial Officer
Thank you, Nirav. Good evening and welcome to all the participants. An earnings presentation deck is available on our website for your reference. Before we review the earnings, let's briefly discuss the macroeconomic environment that influenced the quarter. We saw strong domestic activity, supported by significant spending in capital expenditure, improvements in domestic manufacturing, and solid performance in the services sector. GST collections increased by 13% year-on-year. Both manufacturing and services PMIs remained in the expansionary zone, and improved consumer demand, fueled by sector spending, led to robust growth across various areas. The interest rate remains at 6.5%, with an unchanged stance on the withdrawal of accommodation, as well as a modest reduction in the inflation forecast for the latter half of the year. Looking ahead, the economic landscape is set for strong growth. Year-on-year GDP growth for financial year '24 is estimated at approximately 7%, with a projected GDP growth rate of about 6.5% for financial year '25, keeping India among the fastest-growing major economies globally. Let's review the key factors in the bank's growth journey. Gross advances reached INR 24.7 trillion as of December 31, reflecting a sequential increase of INR 1.1 trillion or 4.9%. Retail advances rose by 3.3% quarter-on-quarter, mainly driven by strong mortgage performance with disbursements of INR 460 billion this quarter, an 18% increase year-over-year. The CRB business also maintained its strong momentum, recording 6.7% quarter-on-quarter growth. The wholesale segment, excluding non-individual loans of HDFC, grew by 1.9% sequentially. Our focus on primary deposits remained steadfast. Total deposits at the end of December amounted to INR 22.1 trillion, with retail deposits constituting 84% of the total. Retail deposits grew over INR 530 billion or 2.9% this quarter, while non-retail deposits decreased by INR 118 billion, resulting in total deposit growth of INR 411 billion or 1.9%. Current account deposits were at INR 2.6 trillion, growing by INR 80 billion or 3.2% sequentially and INR 280 billion or 12.3% year-on-year. Savings deposits at the end of December were INR 5.8 trillion, increasing by INR 99 billion or 1.7% sequentially and over INR 430 million or 8.3% year-on-year. Overall CASA deposits stood at INR 8.4 trillion, yielding a CASA ratio of 37.7%. Term deposits reached INR 13.8 trillion as of December end, with a growth of INR 232 billion or 1.7% during the quarter. Regarding our distribution expansion, our branch network numbered 8,091 as of December end, an increase of 908 branches over the last year. We added 146 branches during the quarter, averaging 1.6 branches per day. Payment acceptance points reached 4.8 million, a 25% year-on-year growth, aided by the growing adoption of the Vyapar app. Our rural outreach in the CRB expanded to 210,000 villages, an increase of 60,000 villages compared to last year. In terms of customer relationships, we added 2.2 million new customer liability relationships in the quarter and approximately 7.4 million in the current fiscal year, bringing our total customer base to 93 million. To further this engagement, we’ve increased our workforce by 41,000 in the past year, and added 10,000 in this quarter. We issued 1.6 million new credit cards this quarter, bringing the total card base to 19.9 million. The balance sheet remains stable, with a liquidity coverage ratio of 110%, a capital adequacy ratio of 18.4%, and a Tier 1 ratio of 16.8%. For net revenues, we recorded INR 396 billion this quarter, a 25.8% increase year-on-year. Net interest income, which represents 72% of net revenues, was INR 285 billion, growing by 23.9% compared to last year. The core net interest margin was at 3.4%, while the net interest margin based on interest-earning assets was 3.6%, unchanged from the prior quarter. Total other income reached INR 111 billion. Fees and commission income, which makes up nearly two-thirds of other income, stood at INR 69 billion, a 15% year-over-year increase. Retail clients accounted for about 94% of fees and commission. Foreign exchange and derivatives income was INR 12 billion, up 12% from last year’s INR 11 billion. Net trading and mark-to-market income was INR 15 billion for the quarter, compared to about INR 10 billion in the previous quarter. Other miscellaneous income of INR 15 billion includes recoveries from written-off accounts and dividends from subsidiaries. Operating expenses for the quarter were INR 160 billion, reflecting a 28% increase from the prior year. The cost-to-income ratio was 40.3%, and the cost to assets was 1.9%. Looking at asset quality, the GNPA ratio was at 1.26%, down from 1.34% in the previous quarter and 1.23% a year ago. Within this, about 15 basis points were classified as standard, while the core GNPA ratio stood at 1.11%. The net NPA ratio for the quarter was 0.31%, compared to 0.35% in the last quarter. The slippage ratio for this quarter was around INR 70 billion or 26 basis points, down from about INR 78 billion in the last quarter. Recoveries and upgrades in the quarter totaled INR 45 billion, while write-offs were about INR 31 billion, with no NPA accounts sold during the quarter. Total provisions reported were around INR 42 billion, with specific provisions totalling INR 30 billion, compared to INR 29 billion in the prior quarter and INR 28 billion year-on-year. The current quarter’s provisions included additional contingent provisions of approximately INR 12 billion related to investments in AIF on a prudent basis. The fair value of AIF increased by INR 5 billion, but we are taking 100% provisions at book value. Core specific loan-loss provisions were around INR 26 billion, up from INR 25 billion in the prior quarter. The provision coverage ratio was 75%. Contingent and floating provisions were approximately INR 154 billion at the end of the quarter, with general provisions at INR 105 billion. Total provisions, including specific, floating, contingent, and general, accounted for about 159% of gross non-performing loans, in addition to the collateral held in many cases. The bank holds contingent provisions of INR 12 billion on a prudent basis for AIF. Floating, contingent, and general provisions, excluding contingent provisions for AIF, amounted to about 105 basis points of gross advances at December end. The total annualized credit cost ratio for the quarter, excluding the contingent provisions previously mentioned, was 49 basis points, consistent with the prior quarter. Recoveries accounted for 13 basis points of gross advances for the quarter, compared to 16 basis points in the previous quarter. The total credit cost ratio, after accounting for recoveries, was 35 basis points in the current quarter compared to 34 basis points last quarter. Profit before tax stood at INR 194 billion, a 19.8% increase year-on-year. With INR 15 billion of tax provisions deemed no longer necessary due to favorable orders, net profits after tax for the quarter were INR 164 billion, representing a 33.5% year-on-year growth. Summaries of subsidiaries are available in the presentation. For HDB, the quality of the portfolio continues to improve, with a gross stage 3 ratio of 2.25% as of December, down from 3.73% at the end of the previous year. Provision coverage on the Stage 3 portfolio was at 68%. Profit after tax for HDB for the quarter ending in December grew to INR 6.4 billion from INR 6 billion for the quarter ending September 30. The annualized ROA and ROE for December were 3.1% and 19.9%, respectively. Earnings per share for the quarter were INR 8.04, with a book value per share of INR 164.6. For HDFC Life, on an IGAAP basis, profit after tax for the quarter ending in December came in at INR 3.7 billion, a 16% year-on-year increase. The embedded value in India improved by 20% year-on-year to INR 451 billion. For AMC, the quarterly average AUM was INR 5.5 trillion, reflecting a 24% year-on-year growth, with profit after tax for the quarter amounting to INR 4.9 billion, which is a 33% growth from last year. Earnings per share for this quarter reached INR 22.9. For HDFC ERGO, profit after tax on an IGAAP basis for the quarter ending in December was at INR 1.3 billion, a 6% year-on-year growth, with a solvency ratio of 187% at the end of December. For HSL, our securities company, the total reported net profit for the quarter after tax was INR 2.3 billion, compared to INR 2 billion in Q2 '23. The earnings per share totaled INR 144, and the book value per share was INR 1,253. On the ESG front, we are enhancing our CSR commitment with multiple projects across India aiming to tackle critical developmental issues such as sustainable livelihoods, education, soil and water conservation. Key ratings and awards are available for reference. In conclusion, our results showcase strong growth across various metrics, driven by our dedicated employees working collaboratively with customers to implement our business model, which has led to a sequential advances growth of 4.9% and a 2.9% increase in retail deposits. Profit after tax rose by 33% compared to the previous year, resulting in a return on assets of about 2% and return on equity of roughly 15.8%. The earnings per share reported this quarter stands at INR 21.6 on a standalone basis and INR 22.7 on a consolidated basis. The book value per share on a standalone basis is INR 556, and INR 576 on a consolidated basis. I will now ask the operator to open the line for questions.
Operator, Operator
The first question is from Mahrukh Adajania from Nuvama.
Mahrukh Adajania, Analyst
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 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 of 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 your 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 two quarters?
Srinivasan Vaidyanathan, Chief Financial Officer
Thank you, Mahrukh, for your question. If I miss anything, please feel free to ask again. Let’s start with your first question regarding deposits and the CD ratio. It's a broader topic that many may be curious about. Firstly, any discussions with the RBI are confidential, so I can't disclose specifics about our dialogue with the regulator. However, your main question revolves around the growth rate of deposits and the current CD ratio. Regarding deposits, we experienced a total growth of INR 411 billion. Specifically, retail deposits increased by INR 530 billion, reflecting a growth of 2.9% during the quarter. Conversely, non-retail deposits fell by INR 118 billion, which is a decrease of approximately 3.3% sequentially. This change is largely due to our decision to prioritize more granular deposit growth rather than engaging in competitive pricing for non-retail deposits. In terms of specific deposit components, our current accounts saw a growth of 3.2%, with retail current accounts making up 72% of this segment and growing by 3.8% sequentially. I will elaborate more on savings accounts shortly, but there are two key trends to note: first, due to the current interest rates, there is a noticeable preference for time deposits; and second, we are observing considerable spending from customers, with transaction volumes showing an increase of 18% to 20%. In analyzing our cardholder metrics, for every 100 units of outstanding card balances, customers maintain about 5.4 times that amount in their deposit accounts. This indicates a capacity for increased spending. To enhance our customer base, I've previously mentioned that we have attracted 2.2 million new customers. As for the overall impact on deposit growth moving forward...
Mahrukh Adajania, Analyst
Sir?
Srinivasan Vaidyanathan, Chief Financial Officer
Yes, I'm here. Can you hear me?
Operator, Operator
Mahrukh, can you hear us?
Srinivasan Vaidyanathan, Chief Financial Officer
Our loan-to-deposit ratio is just over 110% as we close the quarter. During this quarter, we managed our balance sheet by achieving a loan growth of INR 1.15 trillion. We supported this growth with INR 411 billion in deposits, while investments decreased by approximately INR 485 billion and cash and cash equivalents fell by about INR 96 million. Essentially, we funded our growth through a reduction in investments rather than on the asset side. This is reflected in the decrease of the liquidity coverage ratio to 110%. As some securities and cash reserves decreased, the interest coverage ratio declined in October.
Mahrukh Adajania, Analyst
I'm unable to hear you.
Srinivasan Vaidyanathan, Chief Financial Officer
Nirav, can you hear?
Operator, Operator
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.
Pranav Gundlapalle, Analyst
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?
Srinivasan Vaidyanathan, Chief Financial Officer
The main limitation is related to deposits. It's essential to examine the liquidity in the system, which has shown positive trends since the first quarter of 2020 but has now shifted into negative territory. Currently, we are experiencing a negative INR 664 billion in system liquidity for this full quarter, marking a significant decline. The lack of liquidity is concerning, especially considering how the Reserve Bank of India has managed the situation without altering interest rates. The inflation surge a few months ago has been managed through tightened liquidity measures. Over the past few quarters, especially after more than three years, we find ourselves in a negative liquidity environment, which has not been seen in recent times. While the retail segment has performed reasonably well, we would have preferred a 50% to 80% increase in performance. The wholesale sector, however, is not just experiencing stagnation but actual decline in non-retail deposits, which are highly influenced by pricing. We opted to minimize our involvement in this pricing to preserve some liquidity and progress on the asset front. However, this strategy cannot be sustained indefinitely, as our loan-to-deposit ratio is over 110%. Therefore, we urgently need deposits to ensure our loans can be effectively issued.
Operator, Operator
Next question is from Suresh Ganapathy from Macquarie Research.
Suresh Ganapathy, Analyst
Srini, I would like to understand what will drive margins in the future. This quarter, you reported sales of INR 50,000 crores, and your LCR is at 110%, which is the minimum. There are no excess liquidity assets at that LCR, and funding costs may remain high. You've mentioned a goal to increase from 3.4% to 3.7%, but mobilizing incremental CASA is becoming challenging. While term deposit growth is strong, your borrowings from HDFC Limited are at 7.5%. With deposit growth struggling to keep up with loan demand, when do you plan to replace the HDFC Limited liabilities? Given these challenges, what steps will you take to increase margins from 3.4% to 3.7% over the next 18 to 24 months? Will it depend on loan yields, as it seems unlikely to come from fund costs? Additionally, it seems unlikely you'll achieve the target of opening 1,500 branches this year, as you've only opened 270 so far. What are your thoughts on that? Over to you, Srini.
Srinivasan Vaidyanathan, Chief Financial Officer
Thank you for the question. Addressing the second inquiry first, at the end of the quarter, we have a little over 550 branches in the pipeline, and our goal is to reach between 800 and 1,000 branches. While achieving 1,000 branches would be ideal, we currently have approximately 570 branches lined up. Reaching 1,500 branches by March is not feasible; however, 1,000 branches is attainable. Regarding margins and deposits at the total level, one key lever is enhancing our retail product mix, which has been decreasing recently. We recognize opportunities in unsecured lending, as our personal loans have seen 2% to 3% growth in the past two quarters, indicating potential for improvement. Our credit metrics suggest we are in a favorable position for growth, and we aim to boost retail asset growth, especially in non-mortgage areas. We have a substantial pre-approved database among existing customers, and we are targeting offers to those 5.6 million customers as well. To improve our CASA ratio, which currently sits at 37.7% compared to the pre-merger level of around 42%, we believe it will rebound as customer spending normalizes and we continue to acquire new customers. In this quarter alone, we gained 2.2 million new customer relationships, contributing to a total of 7.4 million in the last nine months. It is crucial that we cultivate these new relationships. Also, while our borrowings have increased from 8% to 21% of our balance sheet, we recognize the need to transition to deposit funding. We have started to issue long-term affordable housing and infrastructure bonds, which behave economically like deposits. The benefits from these bonds, which help us avoid certain costs, can enhance our overall financial position. Overall, we have sufficient assets to support our infrastructure bonds.
Suresh Ganapathy, Analyst
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 the next 5 years. I know it's a long journey, the fact that you're opening a 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 40.4 last quarter, and we are at 40.2 or something like that, around the same range. Do you think it can really come down in the next 1 year or so?
Srinivasan Vaidyanathan, Chief Financial Officer
We agree, Suresh. While we typically don’t provide a forward-looking outlook, we aim to reduce our cost to income to the mid-30s. We expect to make gradual improvements, and it’s important to note that we anticipate enhancing the cost to income ratio. This improvement will be driven by efficiencies gained through better digital solutions and various technology rationalization efforts that are on the horizon. Additionally, as we refine our margins—focusing on the asset mix, CASA mix, and shifting towards deposits—the numerator will significantly contribute to our progress.
Operator, Operator
Next question is from the line of Rahul Jain from Goldman Sachs.
Rahul Jain, Analyst
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?
Srinivasan Vaidyanathan, Chief Financial Officer
Both metrics are important. It's necessary to manage both simultaneously. We aim to operate the LCR between 110% and 120%. Recently, we've been around 113% to 115%, but we experienced an uptick in one quarter, and now we've consumed some of that. Maintaining a buffer at this level is crucial. Regarding the LDR, we want to shift our funding mix more towards deposits. Currently, our LDR is at 110%, which is an improvement from the 85% we had before the merger. If we exclude the merger's impact, our LDR would be closer to 89%. Historically, our LDR has fluctuated between 85% and 87%. Now, stripping out the merger effects, we're at about 89%. The LDR reflects the changes from the merger and we've gone through two quarters post-merger. Our strategy is to replace borrowings with deposits and grow loans accordingly. Therefore, you can expect the LDR to gradually decline over the upcoming quarters.
Rahul Jain, Analyst
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 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 could come off because you'll have to offer the increase in deposit rates further. So how are you trying to balance the two?
Srinivasan Vaidyanathan, Chief Financial Officer
I want to clarify that we are not locked into a single growth rate. Our growth can vary; sometimes it's slower, other times it's faster. However, historically, we have doubled our growth approximately every 4 to 5 years. While quarterly or annual figures may fluctuate, our long-term trend remains consistent. Growth is a priority for us, aligned with our investments, and we are focused on achieving returns. Regarding margins, we emphasize returns over simply pursuing growth. Our recent wholesale growth was 1.9% for the quarter, indicating sufficient demand, but there are competitive pressures with other banks undercutting prices. We choose not to participate in pricing strategies that do not yield returns. When it comes to margins, they are certainly significant, but our primary concern is overall return on assets. When pricing products or setting charges, our focus is on returns rather than just the margin itself. We have not engaged in extensive discussions about margins because our retail mix has historically outpaced wholesale growth, resulting in naturally high margins, coupled with manageable credit costs, currently under 50 basis points. If we adjust credit costs considering mortgages, the average sits around 70-80 basis points, which was previously about 100-110 basis points before mortgage consolidation. Changes in our mix have affected margins seen in our credit cost line. We are committed to profitable growth, and I hope this provides clarity on the balance we are striving for.
Rahul Jain, Analyst
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?
Srinivasan Vaidyanathan, Chief Financial Officer
We are currently addressing a constraint related to the branches in connection with the URC, which is a necessary component. We need to balance the mix between unbanked rural centers and the available URC to ensure appropriate distribution. There is a regulatory target for URC that we consider internally, but it's essential to create a mix with non-URC to achieve balanced growth within regulatory limits. As for our branch expansion, we're aiming for around 13,000 to 14,000 branches in the long run, not just for the sake of increasing numbers, but to enhance our geographical presence and tap into both deposit and lending opportunities in those areas. Our focus is not solely on one specific number; we're assessing the situation as it evolves.
Rahul Jain, Analyst
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 these infra bonds? And how much would that be?
Srinivasan Vaidyanathan, Chief Financial Officer
We have eligible assets nearing INR 1 trillion, as I mentioned. This means you may qualify for PSL benefits since we will deduct it from the top line to the extent that you can secure the bond and affordable housing. You will also receive additional benefits such as the cost on the PSLC or deposit insurance being waived. However, we still require CASA. The economics for time deposits is slightly better than term deposits because of these factors. Yes, we do have sufficient assets to handle these infra bonds.
Operator, Operator
Next question is from the line of Kunal Shah from Citi Group.
Kunal Shah, Analyst
Given that overall liquidity is tight and the deposit traction has not been very encouraging this quarter, when can we expect adjustments to the rates? Considering that repo rates have stabilized, will there be any consideration to raise deposit rates above 7.2% to ensure we meet our deposit targets and maintain growth momentum on the asset side? Additionally, while you previously mentioned plans for branch expansion, progress has been slow, and the response to activating the field force has been less than ideal. When will we consider adjusting the rates to achieve the deposit traction we initially anticipated?
Srinivasan Vaidyanathan, Chief Financial Officer
Deposit pricing is not a factor in our sales and relationship strategy, meaning it doesn't drive our conversations. We don't say things like, "I have the best deposit rates, come to us," because our deposit pricing is generally in line with our top competitors. We're not focusing on differentiating based on pricing but rather on other features of our offerings. Regarding market share, we believe we can achieve, on an incremental basis, around 18% to 20%. Regardless of our size and growth level, we're maintaining a superior growth rate compared to the market and gaining market share in the high teens to 20% range. Rates are not a factor in this, and that's partly why our non-retail deposits decreased by 3.3% this quarter.
Kunal Shah, Analyst
Yes. Okay. Regarding the tax write-back, last time you mentioned that it might not happen again and we should see it normalizing towards around 25 percent. However, that benefit is still ongoing. Could you clarify whether this trend is expected to persist and what is contributing to a potentially lower tax rate? Is it related to the investment gains that have been occurring? If you could provide some insights on that, it would be appreciated.
Srinivasan Vaidyanathan, Chief Financial Officer
The tax benefits we recorded are due to two factors. First, we received favorable orders concerning HDFC Limited's past assessment. Second, there were some positive orders related to the bank from the previous year. Based on these assessments, we determined that certain portions are no longer necessary. This process is not routine, and I cannot predict when these orders will arise, but they are episodic in nature. When we receive favorable orders, we recognize them as assets. In this quarter, we had two such instances.
Kunal Shah, Analyst
Okay. So all orders which have been received, which have been favorable, they are more or less accounted for now?
Srinivasan Vaidyanathan, Chief Financial Officer
More or less.
Kunal Shah, Analyst
Okay. And lastly, if you can highlight in terms of the maturity of the borrowing, HDFC Limited borrowing over the next year, which is falling due, okay? And any quarter, we would see any kind of volatility in that maturity?
Srinivasan Vaidyanathan, Chief Financial Officer
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.
Operator, Operator
Next question is from the line of Chintan Joshi from Bernstein.
Chintan Joshi, Analyst
Can you hear me?
Srinivasan Vaidyanathan, Chief Financial Officer
Yes, Chintan. Go ahead.
Chintan Joshi, Analyst
Can I revisit the discussion on the LDR ratio? What I'm understanding is that it needs to decrease while still allowing for growth to continue. I'm trying to reconcile this—does improving the LDR ratio mean we need to see deposits grow faster than lending? Can we expect that by fiscal year '25? Additionally, can you share your thoughts on the pace of this growth? Do you have specific targets, or do you assess market conditions and adjust accordingly? How should we approach this?
Srinivasan Vaidyanathan, Chief Financial Officer
Thank you. I want to emphasize that the sustainability of our growth rate is linked to improving the CD ratio. We typically operate in the mid to high 80s, but the merger has pushed it above 100%. Over time, we need to lower it as we cannot allow the CD ratio to keep increasing indefinitely. Regarding your question about deposit growth and its rate, we expect that the deposit growth rate should exceed the loan growth rate. For the CD ratio to improve and for our economics to work effectively, deposit growth should be at least 300 to 400 basis points higher than loan growth; only then will the economics function better. That encapsulates our thought process on this matter.
Chintan Joshi, Analyst
I have another question regarding borrowings and debt securities. Looking at HDFC Limited's balance sheet for FY '23, there was about INR 1.7 trillion set to mature over the next year. However, we haven't seen that maturity, and in fact, borrowings have increased compared to the pro forma combined FY '23 balance sheets. What was the reasoning behind this? One perspective is that there was an opportunity to reduce borrowing, which wasn't taken because of profitable lending growth. Is that how you viewed the situation? If you could elaborate on that thinking, it would be appreciated.
Srinivasan Vaidyanathan, Chief Financial Officer
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 needs to outpace the loan growth. Otherwise, we will not be able to keep up with the loan rate of growth.
Chintan Joshi, Analyst
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?
Srinivasan Vaidyanathan, Chief Financial Officer
Okay. The CRB yield comes in at 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 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%.
Chintan Joshi, Analyst
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.
Srinivasan Vaidyanathan, Chief Financial Officer
It's a good assumption. Yes, it is not above the average. It is at that level, not dragging the overall average down in any meaningful manner, yes.
Operator, Operator
Next question is from the line of Nitin Aggarwal from Motilal Oswal.
Nitin Aggarwal, Analyst
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?
Srinivasan Vaidyanathan, Chief Financial Officer
I mentioned the overall figure of around INR 15 billion. While I won't discuss any specific item, I did highlight the mark-to-market and trading treasury investment portfolio income of approximately INR 14.7 billion to INR 15 billion.
Nitin Aggarwal, Analyst
Right. So this is included in the total, but you're not like giving the separate number for that.
Srinivasan Vaidyanathan, Chief Financial Officer
It is included.
Nitin Aggarwal, Analyst
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?
Srinivasan Vaidyanathan, Chief Financial Officer
Credila has not been booked in the December quarter as we are awaiting regulatory clearance before the transaction can close. The potential purchaser is currently addressing certain matters to facilitate this process. We are optimistic about closing soon, but I cannot provide a specific timeline as they must navigate the approval process before it can be finalized.
Nitin Aggarwal, Analyst
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?
Srinivasan Vaidyanathan, Chief Financial Officer
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.
Operator, Operator
Next question is from the line of Abhishek Murarka from HSBC.
Abhishek Murarka, Analyst
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 in 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 non-mortgage 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?
Srinivasan Vaidyanathan, Chief Financial Officer
Okay. Yes. Let's look at the retail unsecured that you alluded to. See, the retail unsecured is an 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. Pre-merger, on the retail book, our unsecured component was 41%. Post-merger, 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 with 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 and ROE that you see, and we like to go with that.
Abhishek Murarka, Analyst
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?
Srinivasan Vaidyanathan, Chief Financial Officer
Correct. The way to think about it is that directed lending, particularly to priority sectors, is our top preference. Some of our non-banking financial companies (NBFCs) are government-sponsored and do not engage in consumer lending at all. It's important to differentiate here. The circular does not differentiate between various categories of NBFCs, so our NBFCs do not necessarily have to focus solely on consumer lending or on segments that are below the bank-targeted lending categories. There are government-sponsored and linked NBFCs with whom we maintain strong relationships.
Abhishek Murarka, Analyst
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?
Srinivasan Vaidyanathan, Chief Financial Officer
Thank you for your question. I appreciate your interest. I would like to highlight a few key areas that we will begin to publish and share with you. First, we are focused on savings accounts because we aim to provide our customers with more than just mortgage products. In December, for instance, we reported over 40,000 first disbursals. Notably, about half of these were for new bank customers, and among this group, nearly 65% have opted for a savings deposit. This entry point includes a deposit balance equivalent to at least one to two months' EMI, averaging between INR 30,000 and INR 35,000 from our customer base. We will be monitoring this, with the goal of increasing penetration rates to 90%, 95%, or even 99%. Next, we are just starting our credit card offerings and will provide updates on this product as well. Additionally, we will offer products related to consumer durables, recognizing that customers may utilize these options as they prepare to move into their new homes. Over time, we also plan to disclose insurance penetration levels. Other products, such as demat accounts and mutual funds, will follow soon. Overall, we have nine products to introduce, three of which will be digitally enabled, and we are excited to share these developments with you.
Abhishek Murarka, Analyst
Sure. Really had to get some more granularities because that will help us figure out how the cross-sell effort is going.
Srinivasan Vaidyanathan, Chief Financial Officer
Thank you. We will put up a page or two from next time and we will have that.
Operator, Operator
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.
Srinivasan Vaidyanathan, Chief Financial Officer
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.
Operator, Operator
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.