Thank you. Good evening, ladies and gentlemen.

Welcome to DCB Bank's quarter three earnings call. At the outset, I'd like to run you through the headline numbers.

Customer advances have grown YoY by 18.46%. Customer deposits have grown YoY by 19.54%.

Profit after tax has grown YoY by 22%, despite a one-time impact of ₹26.87 crores. We'll come to that in a minute.

Consistency, predictability, and repeatability, I keep saying this every meeting, every interaction with all of you and as well as the management team. This continues to be a key cornerstone of our business strategy.

You've been seeing the results of this over many quarters now. I'd like to give you some finer details and texture on both the top-line and bottom-line numbers.

NIM continues its upward momentum, clocking 3.27% for the quarter thanks to reduced cost of deposit, which now stands at 6.86%, that's a 10 basis point drop in the quarter. It's pertinent to note that the net interest income as a percentage of total asset of Q3 this year is higher than the net interest income for Q3 of last year.

Q3 of last year, remember, was prior to the rate cut cycle. The fee growth continues to be encouraging.

What's more, the core fee income at ₹182 crores, led by third-party distribution, trade finance, and processing fees, is looking robust. On the cost front, we have taken an impact of ₹26.87 crores on account of the new labor code.

Despite this, our cost to income is at 16 61.84, which is lower than Q3 of last year. Cost to average assets is the same as of Q3 of last year.

I would clarify that the quarterly incremental impact of the wage bill would be marginal. Also, what is pertinent to note is that we have grown 18.5% in advances and 19.5% in deposits with less number of employees than we had in Q3 of last year.

We had 11,339 people same time last year. We have 10,981 people now.

Our focus on organic sourcing vis-a-vis DSA sourced business, vendor renegotiation, impact of digitization, and improved use of AI is helping us rein in the cost. The jaws are widening, with income growing at 16% and expenses, including the one-time, growing at 15%.

This has resulted in the operating profit growth of 19% YoY. On the portfolio quality, our credit costs are benign at 0.37%, much below the minimum stated goal of 0.45%.

What is truly heartening for us is that our slippage ratio for the quarter at 3.08% is the lowest we had in 18 quarters. Our GNPA at 2.72 is the lowest we had again, strangely, in 18 quarters.

Our net NPA at 1.1% is the lowest we had in the last 11 quarters. The net outcome is that we have posted our highest ever quarterly profit of ₹184.74 crores with an ROA of 0.91 and an ROE of 12.73%.

Let me talk something hypothetical. It's interesting to point out that without the one-off regulatory expense impact, our PAT would have been ₹205 crores, ROA would have been 1.01%, and ROE 14.10%.

As far as future goals, we continue to remain confident about our guidance of 18 18% to 20% growth year-on-year and the 13.5% ROE in '26-'27 and 14.5% ROE for '27-'28, that remains unchanged. Now, I'd leave the floor open for questions or clarifications.

Operator? If you can unmute everybody in the call, please.

Good evening, sir. Thanks for the opportunity.

Hi, Akshat.

Hi, sir. Congrats on a very good set of numbers.

Apologies if I missed part of initial remarks as there was another result call at the same time. My first question is on fee income momentum, which was very strong at 15% QoQ.

If you can provide some insights, what's driving this? Is it all core?

Do we think we can sustain this level of momentum?

Mostly the core fee income has come from a very decent third-party distribution fee income which we got. The asset growth has been good, the processing fee, by definition, looks very good.

Traditionally, Q4 is a good quarter for both third-party distribution and also for loan growth. In the short term, I see that coming through.

What we are seeing on a go-forward basis, I think a fee of 1% of the average assets is something which we should be getting through. Currently, let me tell you, we are at 1.1%, but on a go-forward basis, 1 seems very, very achievable on a consistent basis.

Very well, sir. Sir, my next question is on margins.

How much of NIM expansion was related to tax refund? Was it 2 bps?

How should we think about the expansion from here in terms of residual deposit repricing, continued benefit from HL to BL transition, as well as hybrid fixed mortgage leg moving to floating? Is incremental flow for BL to HL still 60 to 40, or has it improved further?

Let's go one by one on this. BL continues to be a large share, even more than 60%, of the incremental sourcing.

Okay? I think that's a good call that we took.

It is helping us both in terms of interest income, as well as in terms of bounce rate as well as the NPAs. Number two, there are mixed activities happening on the margin front.

The full impact of CRR is not boxed in yet. That's a positive for Q4.

What is not so very positive is that the full impact of the 25 basis point repo cut has also not been boxed in and that you'll see the full impact coming in in the coming quarters. You've seen the 10 10 bps reduction in cost of deposit.

You would also see our borrowings come down dramatically, and I want you to pay attention to both these items. Because we have a long duration term deposit, our belief is that until Q2, there is clear visibility of reduction through repricing.

The challenge we have is if we continue to renew term deposits the way we do, then we'll see the benefit of it coming in all the way to quarter two of next year, probably even quarter three. That's one one element.

The second element is we had a total borrowing of ₹8,400 odd crores. Now it is about 4,700.

Our ability to get lower cost of deposit by giving away borrowing, which is more expensive, is coming into play very quickly. That's also one of the reasons why, if you see the balance sheet is growing only 14%, whereas clearly we're growing our key areas of customer deposits and loans and advances at a much, much higher pace.

In short, we see the upward movement of NIM should continue definitely till Q1, Q2, unless some repo rate action is done by RBI in the near future.

Right, sir. On that follow-up on that, the tax refund part, was it 2 bps this quarter?

The hybrid fixed mortgage leg moving to floating, how do we see about that for all these quarters?

The pattern has been following over the last two years. We haven't changed that.

In every month, we see some bit of repricing happening on the fixed to floating conversion, but that's very marginal, very, very marginal which comes in.

Right, sir. The tax refund this quarter, is it 2 bps for impact this quarter of the 4 bps?

I'm

sorry. Are you talking about the taxation impact?

Tax refund, sir. There's a note in

Oh, no, no, yeah, yeah. There's a ₹4 crore of interest on tax, rather, not a tax refund.

Of course.

Right, sir. My last question is, sir, on asset quality.

Roughly ₹73 million floating provisions were added this quarter. Is it all for the expected ECL implementation?

What kind of recurring impact are we likely to see with the

As a bank, we want to get to 1% or less NNPA as soon as possible. We're doing all that it takes to ensure that net NPA comes down to 1% or below.

We're sure about the direction. How soon we'll reach there, we'll get to know soon enough.

If you see, it's a bounce rate coming down, slippage coming down, gross NPA coming down, net NPA coming down, gross NPA is a net outcome of all these activities that you're doing. We're very clear it's not meant for ECL.

It's just that you see our recoveries and upgrades as a percentage of our fresh flow is 86%. That's like we had never touched that before.

We intend to not only touch, we need to continue that and maybe even go better with the improved new vintage bounces and new sourcing portfolio quality. It's got nothing to do with ECL.

Right, sir. Thanks a lot for answering my all questions, and congrats again.

Thank you very much.

Yeah. Hi, sir.

Thanks for the opportunity, and congratulations on a good set of results. Hello, sir.

Sir, my first question is on NIMs. Sir, NIM improvement has majorly, I think, come from higher CD ratio and balance sheet improvements which you have undertaken on the borrowings side.

Because if I look at your spreads, they seem to have dropped QoQ. Yield on advances has fallen at a faster rate than the cost of funds this quarter.

Going forward, with 25 bps rate cut impact going to be seen in Q4, when do you see cost of funds falling at a faster rate than the yield on advances?

I want you to look at the COD, cost of deposit, on a base of almost ₹65,000 crores. Okay?

On a ₹65,000 crore base, you're dropping 10 bps. You have to compare it with average assets where there's a drop to 10 point average yield drop by about, right?

10.98. 10.98%.

Where the momentum which we'll get will be from continued cost of deposit coming down. If you were to see the fall in cost of deposit is sharper than the fall in cost of funds, which basically means that the impact of cost of borrowing is much lesser.

I understood that point, sir, but if I look at your yield on advances, they are falling by 13 bps this quarter as against a drop of 10 bps in the cost of deposits.

With

25 bps rate cut impact to be seen in Q4, do you see the yield on advances falling faster than the cost of deposits in Q4 as well?

The full impact of the 50 bps rate cut which happened in the previous quarter is taken in Q3, the full impact. What you're seeing is a lagged impact.

For the 25 basis point repo rate cut which happened in Q3, the impact you will see happening in Q4. The full impact you will see happening in Q4.

It's a lagged impact which you're seeing from a yield reduction perspective. Whereas the NIM growth is fully predicated on our term deposit and our savings account interest rate going southward.

We have done this playbook once, not once, twice. For the last two quarters, we've seen this happening.

We're confident that we'll be able to grow as we grow 19.5% at a lower cost of deposits, 6.86. Third thing, which is very important, I will tell you, is on granularity.

Our top 20 has gone down to 6.61. It's all the three.

Many of you who have been in the Investor Day presentations that Ravi and I did, we said that it is not two out of three or one out of three, it is all the three together all the time. We're very confident that our cost of deposit will come down, the growth rate will continue in the 18 to 20 range, and in addition, we'll also be able to maintain the granularity.

Understood, sir. Now, sir, if I look at your growth in deposits, this quarter a large part of growth has come from bulk deposits.

Should one consider this as a one-off, or considering the rate reduction we have done on the deposit side, there has been some impact on garnering retail deposits?

You would see that our ratio of retail to bulk remains the same at the portfolio level, and there is no reason to believe that it will be any different. I don't see a big change in bulk deposit versus retail deposit.

Having said that, the reduction of rates on both is on par. The reduction in the rate of interest on both bulk deposits and retail deposit Q2 Q3 over Q2 is practically the same.

You're getting the benefit from both retail and bulk deposit repricing.

Understood, sir. Sir, just lastly on this advance growth, there is this others under advances book which have grown strongly this quarter.

What is this book?

It's some ₹2,000 crore book. It's not a large book.

It's a ₹2,000 crore book, one second. Which is a mix of all things.

Page number, hold on. Page number 21.

Some loan against term deposit, those kind of things. The largest component here will be about ₹600, ₹700 crore of loan against term deposit.

This is a mixed bag of whatever is not mentioned in the other products.

Got it. Sir, mortgages have been flatish now for the last three, four quarters, when do you see that returning to the normal level of growth rates which we expect from DCB?

I think 12.4% is our YoY growth on mortgage. We have really curbed DSA sourcing.

We are running a higher organic book, and more importantly, our HL growth have been curtailed, and there's far more BL that we are doing. I would tend to think that mortgage will come back to a 18% plus growth, similar to the bank growth in the next full year.

The reason for that is simple. People take time to get used to the new way of thinking and implementing that.

We've done it consistently for the last 9 months, we would tend to think for the whole of next year, mortgage growth will be higher equivalent or higher to the bank's asset growth. Sure,

sir. Thanks for answering the questions, and all the best.

Thank you very much.

Just a couple of questions. One on

Yeah, go ahead.

No, no, there is a lot of response. I could hear Mahesh.

Hi, sir. Congratulations on the good quarter.

Just one question.

Thank you very much.

Yeah. Just one question, sir.

On the RWA, it has jumped almost 80, 90 basis points QoQ. Just wanted to check if this is a function of the loan mix or there are anything else?

Our RWA is well below the 50% mark. I don't know.

One second, just hold on.

I'm just saying probably because of the [unclear]

One second, huh? I think it was a scale issue because the graph, this movement of risk-weighted asset is 40,000

48, 48.

Yeah. One second, Suraj.

Just check it out. Sure.

I just checked this out. The RWA movement is 5%, which is similar to the overall growth of the book.

It is grown in similar terms to the asset growth, the QoQ asset growth.

Sure, sir. Probably we'll get back.

Yeah. On a 7% asset growth, we had a RWA increase of 5%.

Sure, sir. Okay.

Yeah. Hi.

Good evening, sir, and thanks for the opportunity. Congratulations on a steady quarter.

I believe, sir, if I remove this one-off staff cost provision, then the ROA would have been around more than around 1%, right?

1.01.

Right. What you had said in the strategy meeting that we are very much on track 1% mark.

Except for this one-off, we would have been there, right? Hopefully, margins, asset quality, there's no imminent pressure as such, right?

As you said, the third-party income should be slightly better seasonality. Hopefully, NIM should also be stable, if not improving, or maybe improving.

Right? That assessment looks fair, right?

It looks reasonably fair, but I don't want to comment on a quarter four as much as, yeah, that over the next few quarters, that's exactly the way we see it. Also, secondly, in the strategy meet, I spoke more about 13.5%, 14 14.5% ROE and not about ROA.

The same way, 1% 1.01 ROE also translates to 14.1% ROE in this current quarter. Yeah.

They are related honestly.

Sure. Secondly, sir, you have multiple savings rate, right, and depending on your customer profile.

Those rates have also changed given the competitive dynamics. Do you have the blended number of, let's say, what is the blended savings rate cost for us, and maybe how that has behaved versus last quarter or maybe last two, three quarters?

Jai, there is one one way I can answer that without having to reveal more than I need to, which is kindly look at the cost of fund reduction. Q1 to Q3 sorry, Q1 to Q2, 7.18 became 7 7.01.

Our cost of deposit moved from 7.12 to 6.96. That's a 16 basis point reduction.

You're seeing that?

Yes.

Whereas in the current quarter, there is a 10 basis point reduction. You can imagine why.

Because in Q2, we reduced the savings account rate. Savings account rate is not like every time you make that cut.

You can't cut deeper than what you're cutting. Currently, we are at 1.5% at the lowest end of the scale.

The difference, honestly, between the delta of 16 bps and 10 bps is the impact of savings account cut. One way of looking at it for the future is that you'll get the benefit from TD going forward.

There may not be too much benefit coming from SR reduction, unless there is more repo rate cut happening in the future. You got me?

Right.

Yes, sir. I got that.

Okay. Sir, on SME book, right?

We also have a strategy of moving towards maybe slightly bigger ticket size and capturing the OD as a tool to protect and retain, and maybe acquire more SME customers. Where do I look that SME, because the SME number that we give in the product mix table, right, is that the right number to assess that strategy?

Because that number of ₹2,249 is QoQ YoY, both parameter is somehow not impressive. Which is the number?

Should I include this along with corporate, or how is it?

Jai, they are in a embryonic stage, right, where we just put in the people in various locations, we found a credit folks, we're setting up the team, right? Now it is working in four locations.

There is another six more locations where it has to come in. You'll see the impact of it happening in about I don't know, three, four quarters time, where it's a meaningful impact.

Right now, it is about getting the right people, putting the right structure. We've got the NSM, we've got the RSMs, the people in certain locations.

It's a build-up. This is a long game.

This is clearly a long game.

Right. Sure.

Sir, your mortgage, what is the proportion of HL and BL, broadly, of this ₹28,000 crore loan book?

See, it used to be 50-50. Now it is less than 50-50, like HL is less than 50, number one.

Number two, if you were to look at our investor presentation maybe about four quarters back or maybe six quarters back, that mortgage used to be 54%. Now it has come down to 51%.

Okay? Clearly there is a increased focus on the BL there on the lower ticket effort less than affordable housing segment, etc.

There is a bit of a withdrawal and there's more focus and growth coming in the BL. While sourcing has really skewed in favor of BL, which is what the management action for the last 2, 2.5 years was, the impact of it you're seeing on the portfolio now.

It's becoming big enough to being visible in the portfolio.

Right. Sir, on your capital raising, any sort of a timeline, you just had this $10 million infusion, but from a capital perspective, do you have any timeline in mind?

We have both timeline-based as well as event-based. We are pretty much clear of how much we want to take and at what rate we want to take it.

Right now, there is no urgency for capital, but for future growth, we require it. The belief is that if you're able to increase your book value by ₹5 every quarter for the last n number of quarters, and the future also, we are reasonably confident about repeating our business in the similar fashion.

I think there'll be an opportunity coming in. At some point in time, I really do see us raising capital because our ambition and our growth rate will require capital earlier than later.

Sure, sir. Last question, sir.

Have you done any assessment of the ECL requirement, because now it is five quarters away, you have secured book, but still have you done any assessment that if you were to transition, what kind of a additional provisioning or one-time provisioning the bank may need to make?

We've been doing it paralelly for Ravi, how long now?

Almost four years now,

pro forma. Three, four years we've been doing paralelly.

It doesn't keep you awake in the night. Let me put it that way, Jai.

Right? It's more or less in line.

With the increasing and improving asset quality, things will only get better, but you will not be able to get the benefit. It's the higher of the two.

We are focused on getting our portfolio quality right. Like I told the gentleman earlier also, get the NNPA down to 1 or less, right, and keep moving in the direction.

Right? When all these things are aligned, slippage ratio is down, GNPA is down, NPA is down, SMA also is down, bounce is down.

Just keep getting that right, and ECL will take care of itself. Honestly, when you look at it, there is hardly anything to worry about.

All right, sir. Thank you, and all the very best.

Thank you. Thank you very much.

Sorry, I got dropped. Just one question.

In the past, in a slightly difficult deposit environment, usually DCB has found its cost of funds kind of going faster. We seem to be getting into one such situation again.

If you could just kind of tell us how are you seeing the next couple of quarters on the deposits front?

I'll give you a bit of a contextual answer on this, Mahesh. As a bank, for the last, let's say, about 10, 15 years, the reason to buy has always been price.

That's changing. That has changed.

Close to 3,000 odd employees in the branch banking system are now fighting a battle in the market where the reason for coming to us is not the pricing alone. Is not the pricing in itself.

People are finding it a bit difficult. A low-cost liability franchise is absolutely essential for us in the medium to long term.

Pretty much happy with the way the last three quarters have panned out, because we got all the three things right. I know I'm repeating this, but the cost of deposit, the growth, and the granularity.

Getting it all right is not easy. Getting 3,000 people who always been selling based on we are one of the highest, that's kind of moving away.

I have the September data, I don't have the December data. The difference between our retail peak rate and the peak rate of six biggest banks in India is now down to 60 bps.

We're converging. That the people are learning.

We're getting there, and we're not losing time or growth while we are making this change. Pretty much confident about getting this momentum going.

One last thing, I don't know, Mahesh, whether you saw the strategy presentation which we did for the Investor Day. We have a pretty good base of neo customers who are coming for us primarily for low-cost forex card purposes.

We're finding that cross-selling the savings account and deposit to them is a big opportunity. Half a million customers we have on that base.

It's not a traditional self-employed customers. We're getting the benefit of that also slowly.

We're getting it. Each incremental month is a better month in terms of higher savings account balance from this neo customers who are primarily salaried and definitely affluent and high net worth.

Perfect. Second question, sir.

On the ground, is the demand for the SME type of products as robust as what we're seeing in the numbers, or is this a little bit unsustainable, that one is seeing on this issue?

I think for the customer segment that we are in, there clearly is a demand. I can see it from both sides: us losing our good portfolio customers to competition for a higher exposure or for a lower cost.

There clearly is demand there. In the front line, if you see our leads to conversion, we're seeing that there's real competition happening.

If you're not able to disperse in time, customers have multiple offers, and they're going away. Increased login is happening.

For example, December logins are very, very similar to March login. March is usually a special month, right?

We're neck-to-neck on that as far as the logins are concerned. Conversion still is a bit more conservative, but definitely there's a requirement and from multiple regions.

It's not region-specific. Across India, I'm finding that there's a increased demand.

When you speak to DSAs also, you're seeing the same thing happening. In this segment, there is competition.

Hello.

The follow-up which it seems is that the growth that one is seeing out there, is it because lenders are more than happy to lend, or are borrowers genuinely wanting to see that credit coming through in their respective companies? That's the direct target of the question.

Clearly, I I would tend to it's a it's a latter. It is It is that there is a there is a requirement.

There There is a There is a hunger.

Perfect. Okay.

Thank you.

Sir, my question has already been answered.

Thank you very much. If you have any Thank you.

more questions, you can ask.

Hi. Congratulations on good set of numbers.

Am I audible?

Thank you, Khushwant. You are audible.

I've got two questions. One is is more immediate, and one is more strategic.

I'll ask immediate one first. I recall, the beginning of the year presentations and we had given the guidance for this year, we had mentioned that we should be achieving a ROE and I'm talking about when when we did March 20 '25 results, that this year we'll be targeting or, the guidance was closer to 14% ROE.

Now when I look at what we have achieved in 9 months and I annualize it, 9 months based on 9 months PAT, we are around 9.4% kind. If I annualize it, we are close to 12.5%, 12.6% ROE.

Where do you see, closing this year, particularly given the fact that, a lot for in Q4 is dependent on the fee income? Are we likely to hit our targets for this year or we're likely to fall short?

I want to clarify, the guidance given was 13.5% ROE for 2026-2027 and 14.5% ROE for 2027-2028. We haven't necessarily given our guidance for this current year.

As far as the progress is concerned, growth of 18% to 20%, and we tend to repeat ourselves. If you see the last three quarters, you would have seen it's a repetition of every quarter is similar to the previous quarter in a top-line growth sense as well as in a bottom-line sense.

For next year

Sure.

Sorry, Khushwant, just one more thing. In fact, we did not know that there's going to be a wage bill impact.

We did not know that there's going to be a repo cut, but still we still posted whatever the bottom line that we posted. In the same vein, we're very confident that the 13.5% ROE, which we gave a guidance for in 20 2026-2027, reasonably confident of achieving it.

Similarly, for 2027-2028 as well.

Sure. The reason I asked this was because March is heavy on fee income.

The usual banking business will play out the way it will play out, given that growth, given by doing asset quality and given by repricing of term deposits. I wanted to check on with you on confidence you have on the fee income side given the competition that exists

and

it's becoming really more cut-throat. Any color on that?

I really don't comment on the next quarter, but in general, the fee looks kind of robust. NIM, you heard the story.

Every quarter we

should be NIM are very clear.

Yeah. That benefit coming through.

This exceptional expense of ₹26 odd crore

₹27 crore.

yeah, would look more like a ₹1 crore incrementally for quarter. That's hardly anything then.

So

Understood. On the long-term perspective, we've seen some articles being written around and that IRDAI may be considering reducing commissions that are payable on insurance products.

Given that fees is an important part of our annualized P&L, how do we see in long term impacting us? Do you have any thoughts on this that you would want to share from a vision point of view, 3 years perspective?

Because there have been a lot of articles on this and it's from regulatory movement also. Yeah.

Third-party distribution is a big component of our fee structure. What we're doing is that using this time to feverishly build the trade finance volume.

Some other investor and analyst had asked this question about the ₹3 to ₹15 crore mid-segment SME segment that we're entering into. The whole idea is that we have to build a third, fourth string in our fee bow, and I believe that TF, trade finance, is an important component.

We want to build it up. That's an area of opportunity which we have because we do cater primarily to self-employed customers who have a trade finance need.

Many people on this call would have heard it ad nauseam, but for a long, long time we have been treating customers as products, giving a fill it, shut it, forget it kind of product when we should be getting into relationship with the self-employed customers and meeting surplus, deficit, insurance, and trade finance need for the customer. That's something which you started about 6 months back.

The progress is painfully slow, but in this job you've got to be extremely patient because nothing happens overnight in retail banking, and we are primarily a retail SME-oriented bank. Over a period of time, you will see the benefit of it happening in about 2, 2.5 years.

You will see the snowball turning into an avalanche, or we hope.

All right. Thank you.

Thank you so much, and wish you all the very best.

Thank you very much.

Yeah. Hi.

Congratulations on a good set of numbers.

Thank you, Ravi. Yeah.

Most of my questions have been answered. Just one, just wanted to kind of check.

We've seen a lot of increase in commodity prices generally speaking in the last couple of months. Typically what we've seen is whenever commodity prices see these kind of increases, you see working capital across the board go up.

Have you kind of witnessed any on-the-ground increased demand on SME/MSME side on credit growth owing to this? Typically we have credit growth either due to higher capex or due to working capital requirements.

If you could just share what do you see on the ground on credit off-take, because after a long time, we've seen aggregate system-level credit off-take to hitting about 14-odd percent, right, like a 14.5. If you could just share something, what do you see at the ground, it would be great.

For the SME, the self-employed segment, we are seeing uptick not in the CCOD, but in installment loans. That's where we see the movement happening.

In fact, quite contrary to what you're saying, we are, in a way, struggling on the SME book. As you'd have seen, it has been stuck at the ₹2,200 crore level for some time now.

We clearly don't have a working capital problem in that sense of the word, but we do have a working capital problem in the sense that we don't have enough of it. Clearly on the installment lending, there is demand happening.

The kind of login volumes that you're seeing is indicative of a decent demand. The performance of those customers also are reasonably good.

Post-pandemic, this perhaps the best few quarters I've seen in terms of new vintage bouncing.

Okay. Sir, just one thing.

Over the last 1 year, I think you've kind of mentioned at various occasions about our idea to get higher yields or, in a sense, also higher employee productivity in that sense, right? On mortgages, for example, our ticket sizes on an average, our idea was to increase the average ticket sizes.

Second was we were working on this product for merchant ODs where we had said that we were competing with the NBFCs, and an OD is a very, very important product. If you could share I don't know it's not generally gets covered in our presentation, but if you could share on both those counts as to what's been the average ticket size increase that we've seen on the mortgage side, and how's the traction been on the merchant OD on the product?

Let me tell the good story first. Clearly, we're seeing an uptick in the mortgage disbursal.

It is marginal if you talk it from an average ticket size perspective. Let's say approximately ₹27 lakh going to ₹32 lakhs.

You may say it's only ₹5 lakhs, but that ₹5 lakh actually is a 19% growth,

Right.

okay, which is what the bank is growing by, right? 18.5%, 19% is what we are growing by.

We're clearly seeing that the increase in ticket size coming through. That's a tick box for us.

The BL to HL has been a tick box, clearly. That has come through very, very clearly through.

We haven't been very successful on the OD part, and we didn't expect to be successful overnight also. Because what we're doing is we're going back to our term loan customer, and then getting into the relationship.

The relationship is not built over a phone call. These are customers who have been with us for 4, 4.5, 5, 6 years, and we haven't had too much of interaction with them.

We're just going and starting the wooing process. Some amount of relationship is happening.

It will take time. When it works, you will get the incremental benefit coming through for a pretty long time.

On merchant OD, on OD of all sorts, it's still in the infancy kind of area. I haven't seen real good progress happening yet.

Effort is on, and it's only a matter of time. Right?

We should be able to get the benefit of the work that we're doing. Once the relationship matures, you should be able to get the benefit through.

The benefit is not just OD. It is that the relationship will translate to current accounts, which are happening.

It is translating a bit in trade finance and OD, which you spoke about, and it's happening very well in terms of insurance. By the time we get the story right, I would tend to think it'll take another 12 to 18 months before it becomes large enough for it to make a difference to our lives.

The

effort is still on.

Great. Thanks a lot, and all the best.

Thank you very much.

Hello. Yeah.

Hi. Good evening,

and

thanks for the opportunity. Congrats to Praveen and the entire team for another great quarter.

Thank you very much. I quite like the "another."

Very nice to hear that.

Very consistent performance. Pretty happy about that.

Three questions, Praveen. One is about the fee growth.

You talked about it and the effort that the bank is taking. The growth rate that we are seeing in terms of even the sequential growth, YoY growth, all looks very strong.

How sustainable is this, and can one build a fee growth significantly higher than loan growth in the coming years? How do you look at that?

Nitin, it's a very important question because a lot of people ask me this question. In the beginning, I used to get totally confused with this question.

Now I understand the question much better. Our fee growth is less linked to loans.

It is more linked to deposits.

Okay.

When earlier people used to ask me, I used to get totally befuddled by the question as to what is the correlation, because I don't have experience of another bank. In our bank, the processing fee is a component.

Look at where the other fees are coming from. You're getting fee from third-party distribution, which is more liability-linked.

Trade finance, largely still liability-linked. FX income is DCB Remit, foreign remittances, etc., liability-linked again.

Penalties and fees are processing fees is one component. ATM fees, again liabilities.

I'm not too sure. For us, we don't even link it to the loan growth.

Okay. Okay.

This quarter, the 15% sequential fee growth that we are reporting, how should one look at this in the coming quarters? Because I believe both deposits and advances you're guiding to grow around 18%, 19% run rate.

Around that, yes. We should see the core fee income continue at a similar rate.

Unless there's some regulatory action happening which one is not aware of. Unless that is happening, we should be having a fairly consistent growth coming through in terms of core fee income.

Let me put it this way, Nitin. While we're at 1.1% total income on average assets, 1% is something which at least from a template sense, 1% is what we look at, fee income we'll look at.

Okay. Got it.

The other question is on deposits. If I look at the CASA, while CASA I understand SA has been going down for most banks, but even on the CA front, the mix has been shrinking.

CA deposits over the years has been very range-bound. I understand that the size of the bank and those limitations are there, but any initiatives that we are working on or areas which can help us to improve our CA deposits?

Yeah. Good that you ask this, Nitin.

It's an area of inefficiency or opportunity, depending on the way you look at it. My belief is that the lack of CA growth has an impact, of course, on the cost of deposit, but it also robs us an opportunity in a trade fee income and our SME book.

It's all interconnected. We are aware of it.

We have put up a very, very senior resource to drive the current account. I really don't believe in the big bank, small bank thing.

It's about who's more hungry and who's more process-oriented, who's more digital, and who can get things done. Anyway, we're starting from a very low base.

Getting current account moving is very, very critical for us. While the term deposit rebooking related repricing will help us, it is important to add current account to our arsenal.

It has been flatlining for too long. It's very, very high on my priority list and my team's priority list.

That we haven't got the action going is another matter, but it is real high priority. It's got multiple impact on the bank.

Right. Right.

Lastly, on the ROA, now that adjusted for this labor code impact, we have reached 1% ROA. While I understand our guidance is more hinged around ROE, but can I take that 1% ROA is now kind of a baseline ROA for the coming quarters, or do you see any risk to that?

See, since the guidance of 13.5 is given, we'd like to stick with the 13.5 guidance for the next year and 14.5 the year after. Let me try and answer your question in a slightly less straightforward manner.

We said we'd like to repeat our quarters. That's what we said when the Q2 results came out.

At that time, I have absolutely no clue that there's another repo rate cut happening. We never knew that there's going to be a ₹26, ₹27 crore impact happening because of a labor code.

We still repeated ourselves. At that time also, people asked, "Now that you've shown this, wouldn't you be able to..."

There could be some headwinds of some sort. We don't know which headwind.

Some headwind will be coming in there. The whole predictability, consistency, they're not just terms and words alone, Nitin.

We really want to live by it. Is there an opportunity?

Perhaps there's an opportunity, but You never know, right? It's okay to be a bit conservative in terms of estimation, because the promises that or the guidance that you gave is sacrosanct, and unless something really, really dramatic happened, we don't want to renege on that.

We don't want to go back on that.

Got it.

I'll stick with 13.5 and 14.5 for the next year and the year after.

Right. Right.

No, got it. That's very clear.

Thanks, Praveen. Thank you so much, and wish you all the best.

My pleasure. Thank you very much.

Thanks for the opportunity. Hi.

Heartening to see the continued steady performance. One question on the same.

Could you outline the current share of DSA sourcing in the mortgages segment and how do you see that evolving over medium term? In terms of investments, what investments are needed to build a scalable direct sourcing front end and the way we are looking at building it?

Is there execution risk in this? Can you share some thoughts?

We had a 18% to 20% plus mortgage book and we're growing mortgage with 20% in the last year. This year we're growing by 12.4% so far.

What is happening is while the bank is growing at somewhere between 18% to 20% on assets, we're changing the wheels of a moving train, to speak. We've already invested, reworked the strategy.

There were three big movements which happened in mortgages. I'm using past tense because it's already done.

Now we're seeing the benefits in some sense coming through. The first change we made was the reorientation of BL and HL.

The second was to increase the ticket size. The third was to change the skew of DSA-originated loans to own-originated loans.

Most of you have connects with the DSA. We can check it out in the market also.

You'll get to know that the contribution to DCB Bank has come down. With any national DSA, you can check it out.

You'll get to know that. We have already done what it takes.

It's almost 9 months now, and we're seeing the benefit of that coming through. What we've seen is a lower cost.

What you're not seen is the longevity. We've seen that the non-DSA sourced accounts stay with you for far longer than DSA sourced accounts.

In some cases, you don't even recover the cost of valuation and legal and account fulfillment by the time the customer forecloses and goes away. With a zero foreclosure charges in many cases, there is hardly any recovery possible.

From a long-term perspective, this is the way to go. Do we reveal the DSA and organic?

No, we don't do that. It's not limited to mortgage alone.

Even in the other product where DSAs are involved, while we're keeping the relationship going, we're trying to lessen the skew towards the DSAs. Got it.

Got it. On the co-lending, we have seen a very strong growth in co-lending.

Is it largely led by gold loans? Why expecting some regulatory hurdles in co-lending model?

What is the expectation now?

We were 16.22% of the book in co-lending in Q2. We have come down to 16.

I've publicly said that we'll our co-lending book as of March 31st will be 15% or lesser as 15% or lesser of the total asset book. We're comfortable with 15%.

There are multiple originators we work with. Of course, you're aware that from January 1 onwards, we have had this new CLM 1, new rules of co-lending coming into play.

We see that this will continue from a from a growth perspective. Our co-lending book will grow from '26-'27 onwards at the same rate as our total book.

While we grew 108% last year, currently we are at about 60%, 65%. Next year onwards, if the bank is growing by an 18%, we'll grow by 18% on the co-lending.

If we grow by 20%, we'll be growing co-lending also by 20%. That's the way we foresee this.

To the question whether largely gold loan, yes, it's it's largely gold loan. Multiple players, but but largely gold loan-based.

Got it. Got it.

Yeah. Thanks.

Thanks for the opportunity and congrats for a good set of numbers. You have been focusing on improving the efficiency of the people we have.

If we see in last this 9 months, we have opened five branches. Going forward, do you see that this kind of 18%, 19% growth will require new branch or still there is a lot of scope for improving the efficiency?

I think it's both. I don't know whether we'll ever stop improving the efficiency.

That's a continuous thing. No way.

There's no finish line there. For us, improving efficiency, going digital, war on paper, these are not epithets or slogans.

It's a real thing. These are we live and die by it.

It will continue. There's no two ways about it.

Having said that, if you see Q2 to Q3, there's been a slight increase in the number of people. While we're still lesser than the number of people we had a year back or in March, a slight improvement has happened.

We will increase it. There will be more investment in people coming in.

We will be increasing our branches. Next year, we should be touching the 500 branches mark.

That most likely will happen. Increasingly, it is not one or the other.

It is both. A large proportion of our benefits will come from efficiency improvement, from increased digitization, but that doesn't mean that we will not increase the number of people.

We're still people dependent in terms of our growth, specifically assets. There will be more branches put in and more people put in.

The game changer could be if something like a Unified Lending Interface happens, where digitization of the land records happen across India, and then you could see a different kind of game coming into play. We are involved in it.

Let's see how that emerges. If ULI is anything like UPI, we have a very interesting time ahead.

Okay. That's it from my side.

I think pre-COVID, we have doubled our branches, and even before getting the benefit of that, we were hit by the COVID. I think now the real benefit is visible in the numbers.

Congratulations for that, and all the best for the future.

Thank you, Dikshit.

Thank you very much for your patience, and hope to kind of interact with you at the end of March or after the March results are declared. In the meantime, let's go back to the grind and ensure that we continue to be predictable and consistent and boring.

Thank you very much.