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HDFC Bank Ltd.  (NYSE:HDB)
Q2 2021 Earnings Call
Oct. 17, 2020, 7:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, good evening, and welcome to the HDFC Bank Limited Q2 FY '21 Earnings Conference Call on the Financial Results presented by the management of HDFC Bank. [Operator Instructions]

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

Okay. Thank you, Lizanne. Appreciate the participants calling in today.

We have a few comments on the -- top line comments on the strength of the franchise, how we're continuing to position to gain strong market share and then from there on we will get on to some more details.

At the high level, we carried on the strategy to build on the deposit and on bringing in new customer relationships, thereby maintaining strong liquidity position. The Bank's average LCR for the quarter was 153%. That's about under INR110,000 crore of surplus or approximately $15 billion, considering 110% [Phonetic] LCR as a flow.

Next, I want to cover the capital adequacy ratio; at 19.1% total capital adequacy ratio. We have 8 percentage points more capital than the regulatory minimum of 11.075%. Our CET1 at 17% is 9.4 percentage points more than the regulatory minimum of 7.575%. The floating and contingent provisions totaling INR7,755 crores built over a period of time helps in derisking the balance sheet. We've also taken several steps to further tighten the credit. We have remained prudent in our approach to moratoriums and as of now are diligently handling the restructuring requests. The provision coverage ratio has been further augmented to make the balance sheet even more resilient for any shocks. Provision coverage ratio, including all categories of reserves, stand at 195%. We will cover more on credit later in the call.

Now we'll get to the results for the quarter.

COVID had certain impact in the financials which we will call out individually as we go along. We'll start with net revenues. Net revenues grew to INR21,869 crores, driven by an advances growth of 15.8% and deposit growth of 20.3%. Net interest income for the quarter was at INR15,776 crores, up 16.7% over previous year and grew by 0.7% over previous quarter. For the quarter, core net interest margin was at 4.1%. Prior year was at 4.2% and prior quarter was at 4.3%. As mentioned earlier, the Bank's average liquidity coverage ratio increased to 153% in this quarter from 140% in Q1, in line with the strategy to build on deposits, thereby strengthening the liquidity position further. While the excess liquidity position the Bank -- positions the Bank to cater to potential loan demand in the future, it impacts current NIM by around 15 basis points. This drag was offset by monetizing some of the investments in the form of trading gains.

Moving on to the details of other income. Total other income at INR6,092 crore was up 9% versus prior year and 49.5% versus prior quarter. Fees and commission income, constituting 65% of other income, was at INR3,940 crore, lower by 2.8% compared to prior year, but higher by 76.6% compared to prior quarter. Retail constitutes approximately 91% and wholesale constitutes 9% of the fees and commission income.

The fees and commission income has been impacted by around INR700 crore due to COVID pandemic. This impact was largely caused by lower loan originations, distribution of third-party products, payment product activities and so on; moratorium relief that's available to customers according to RBI notification; waiving of certain fees for customers was also implemented in accordance with the mandate. FX and derivatives income at INR560 crore was higher by 1.6% compared to prior year of INR550 crore. Sequentially, the activity volumes picked up significantly, reflecting in a 28.4% growth versus prior quarter, which was INR437 crore. Trading income was INR1,016 crore for the quarter. This represents the ALCO strategy of monetizing some portion of the gains from excess liquidity investments that was meant to be offset on the net interest margin, as I alluded to earlier.

Other miscellaneous income of INR576 crore includes recoveries. The collections were impacted due to graded lifting of lockdown during the quarter. This had an impact of approximately INR100 crore on recoveries. The net recoveries in the quarter was about 22 basis points on advances.

Operating expenses for the quarter were INR8,055 crore, an increase of 8.8% over previous year. Year-on-year, we added 297 branches and 104 branches during the quarter. During the first half of this year, we have opened 176 branches. Approximately another 100 branches are in various stages of readiness to be opened in a short period of time. Further, we are in the process of identifying another 100 branches by the end of this financial year. Since last year, we added 1,340 ATMs, cash deposit and withdrawal machines, and 296 during the quarter.

Since previous year, we added 11,931 business correspondents, managed by common service centers, including 5,589 opened during the quarter. During the first half of this year, we have added 6,591 business correspondents through CSCs. The staff count increased by 5,874 during the last 12 months and about 1,000 during this quarter. We positioned our staff without letting go anybody, looking forward to the economic growth that is on the anvil, to tap into that, so we don't need to restock [Phonetic] anything and we are readily positioned to go after this.

Cost to income ratio was at 37% versus 38%, 39% in the recent past time periods. We would expect the spend levels to increase in course of time with increased sales and promotional and discretionary expense. Thus, the cost to income ratio will be reverting to the recent historical trends in the short run, while our goal remains to bring this down again in the medium to longer time period.

On to the PPOP. The pre-provision operating profit grew by 18.1% to INR13,814 crore from INR11,698 crore in the prior year.

Now coming on to the asset quality. During the quarter ended September 30, 2020, the Supreme Court passed an interim order dated September 3 stating that those accounts that had not been declared NPA till August 31, 2020 should not be declared as NPA until further orders. The Bank has complied with the said directive and has not classified any account which was not NPA as of August 31, 2020, as per the RBI IRAC norms. In light of this interim order, we have not been and will not be classifying as NPA till such time the Supreme Court rules finally on the matter.

However, at the same time, the Bank has, as a matter of prudence, used its analytical models to estimate potential NPA, including accelerated recognition in an expedient manner on a pro forma basis and has provided for corresponding contingent provisions toward the same. The Bank holds provisions as of September 30 against potential COVID impact based on information available at this point in time, and the same are in excess of the RBI prescribed norms. For the credit update that we will provide in the next few minutes, we will mention the reported number and it will be followed by the pro forma number which is analytically arrived.

Annualized reported slippage ratio is at 0.8% in the current quarter. If you consider the potential NPAs, as I just mentioned, using analytical model, the pro forma annualized slippage ratio for the current quarter is at 1.98% as against 2.2% in the prior year and 1.2% in prior quarter. GNPA ratio reported was at 1.08% of gross advances. The impact to the NPA ratio by use of analytical model in determining the NPA, as I mentioned earlier, is about 29 basis point. Therefore, the pro forma GNPA ratio for the quarter was at 1.37% as compared to 1.36% in the prior quarter and 1.38% in prior year.

GNPA ratio reported excluding NPAs in the agricultural segment was at 0.9%. GNPA ratio for the quarter on a pro forma basis excluding NPAs in the agricultural segment was at 1.2% as compared to the 1.2% in prior year and in prior quarter. Net NPA ratio reported was at 0.1% of net advances. Net NPA ratio for the quarter on a pro forma basis was at 0.35% as compared to 0.33% in the preceding quarter and 0.42% in prior year.

Now coming on to provisions. Specific loan loss provisions reported were INR1,241 crore. If we were to follow a regular recognition process without any constraints of court directives, including accelerated recognition using analytical models, the specific loan loss provision would have been higher by INR1,130 crore, resulting in a specific loan loss provision on a pro forma basis of INR2,371 crore for the quarter as against INR2,041 crore for the prior year and INR2,740 crore during the prior quarter. The total reported provisions were INR3,704 crore as against INR3,892 crore during the prior quarter and INR2,701 crore for the prior year.

The total provisions in the current quarter included contingent provision of approximately INR2,310 crore. This contingent provision has got two components. The first component is the incremental specific loan loss provision of INR1,130 crore, which is reflected here. This amount we just added to the specific loan loss provision on a pro forma basis, and I just mentioned it moments ago. The second component of the contingent provision of INR1,173 crore represents provisions to strengthen the balance sheet to make it more resilient. The specific provision coverage ratio was at 84% as against 76% in the prior quarter and 70% in the prior year. There are no technical write-offs. All write-offs in our Bank books are fully integrated.

Beginning of the quarter, we had contingent provisions of INR4,002 crore, with a build of approximately INR2,310 crore. At the end of the current quarter, contingent provisions toward [Technical Issues] provisions remained at INR1,451 crores as of end September, and general provisions were INR4,734 crore. As on September quarter-end, total provisions comprising specific, floating, contingent, general provisions were 195% of reported gross non-performing loans or 154% of gross non-performing loans -- versus the prior quarter on a pro forma basis -- pro forma -- 154% of pro forma gross nonperforming loans versus prior quarter ratio of 149%. This is in addition to the security held as collateral in several of the cases.

Now coming to the credit cost ratios. The reported core credit cost ratio, i.e., specific loan loss ratio was at 47 basis points of advances. If we were to follow regular recognition process without any constraints of court of directives, including certain accelerated recognition of losses, the specific loan loss ratio would have been higher by 43 basis points, resulting in a specific loan loss ratio on a pro forma basis of 91 basis points for the quarter as against 90 basis points for the prior year and 108 basis points for the prior quarter.

As you are aware, recoveries are recorded as miscellaneous income. Therefore, the core reported credit cost ratio net of recoveries was at 26 basis points. As mentioned earlier, on a pro forma basis, the core credit cost ratio net of recoveries was at 70 basis points as compared to 68 basis points in prior year and 99 in prior quarter. After factoring in, the accelerated contingent commission, as I previously mentioned, which has an impact of 43 basis points and the remaining contingent provision to make the balance sheet more resilient, which has an impact of 45 basis points, the total credit cost for the current quarter at 141 basis points as against 154 basis points in prior quarter and 119 basis points in prior year.

The reported profit before tax at INR10,110 crore, which is approximately INR110 crores per day during the quarter. Net profit for the quarter grew by 18.4% to INR7,513 crore. Net profit for the half year ended September 30 was at INR14,172 crore, up by 19% over the corresponding half year of prior year.

Some balance sheet items. The Bank's balance sheet size as of September 30 was at INR1,609,428 crore, an increase of 21.5% over the prior year's September level. Total deposits amounted to INR1,229,310 crore, an increase of 20.3% over prior year and up 3.4% over prior quarter, which is an addition of approximately INR40,000 crores in the quarter and INR208,000 crore since prior year. Retail constituted about 80% of total deposits, and incremental contribution -- incremental contribution during the quarter was also on similar lines.

As a result, our focus on -- as a result of our focus on granular deposits, CASA deposits grew by 27.5%, ending the quarter at INR511,451 crore, with savings deposits at INR348,432 crore and current account deposits at INR163,019 crore. Sequentially, CASA deposits had a strong momentum with a growth rate of 7.1%. Time deposits, at INR717,859 crore, grew by 15.7% over previous year and 0.8% over previous quarter. CASA deposits comprised 41.6% of total deposits as of end September.

Credit deposit ratio was at 84% for the current quarter as against 88% in prior year. Total advances were INR1,038,335 crore, an increase of 15.8% over prior year and 3.5% over prior quarter, which is an addition of approximately INR35,000 crores in the quarter and INR141,000 crore since prior year. Retail advances on a Basel basis grew by 5.3% year-on-year and sequentially grew by 2%, and wholesale advances on a Basel basis grew by 26.6% year-on-year and 4.6% sequentially.

Moving on to capex. With regard to capital adequacy, the total capital adequacy -- adequacy as per Basel III guidelines stood at 19.1% against a regulatory requirement which I just mentioned, 11.075%. And this is a -- this is an increase compared to prior quarter of 18.9%, and prior year was 17.5%.

During the quarter, the net capital generated is about 22 basis points, which is reflected in the increase in the total capital from 18.86% to 19.08%. In the half year ended September 30, the Bank generated net capital of 56 basis points. To provide further context, during the financial year '19-'20, the net capital generation was 140 basis points to the total capital ratio. Based on our current assessment, our internal generation of capital is adequate to sustain and support our business growth in the short term.

Now, in summary, our people across various verticals zealously manage customer relationship in executing our strategy by delivering products and services. These results that I just described reflects deposit growth of 20%, advances growth of 16%, operating profit growth of 18%, profit after tax increase by 18%, delivering a return on assets of 1.9%.

With that, may I request Sashi or Rahul to come?

Sashidhar Jagdishan -- Managing Director & Chief Executive Officer Designate

Yeah. Thank you, Srini. Thank you very much.

I think quarter two was reasonably more positive than what we had experienced in the first quarter of this fiscal year. We have seen lot more micro level indicators that capture the intensity of activity, whether it is the mobility indicators, the PMI for manufacturing, all that rose to an eight-year high in September. Rural economy continued to be reasonably buoyant in -- even during the second quarter. We have seen stepped-up sales in two-wheelers, tractors, gold loan sales.

I believe some anecdotal evidence of FMCG sales have also been reported during this particular quarter, especially in the rural and semi-urban economy. Whilst the CMI has reported some amount of job losses, it appears to be heavily concentrated in sectors like hospitality, entertainment, education and the informal SME segment. However, when we look at our internal numbers, because we are one of the largest corporate salary bank, large companies either in manufacturing or services have not reported any substantive reduction in payrolls.

When you do -- as we have always mentioned, customer acquisition is one of the most important figure for our business. Even during the height of lockdown, we managed -- the branch channel and other channels managed to mobilize 1.2 million customer acquisitions in the quarter ended June thanks to a step-up in the digitization efforts. This quarter, I think the channel has managed to open 1.8 million new liability relationships. It is a quite commendable job where there is still a large portion of people working from home as well. So this is thanks to the kind of digitization efforts that have -- that have been implemented over the last six months.

We are seeing a step-up in the cards businesses. Both the merchant acquiring as well as the insurance businesses have shown recovery, more or less both of them hitting about 97% of last year's September numbers. I think we should see the third quarter to be far more better than what we saw in the last -- last -- similar corresponding quarter of last year.

We have launched the Festive Treats 2.0. This is a 45 day long program where we have aggregated far more and better offers from more than 1,000 brands as compared to 100 last year, and this -- the reach of this particular festive treats is far higher than what we did last year as well. So we hope to sort of lift the mood and the sentiments during the third quarter. So this is something that we are very keenly watching. The early trends seem to be reasonably positive.

The retail assets is something that got hit during the first quarter of this year. I think as we see the recent trends, they have started to show first signs of recovery. Disbursals in Q2 have -- are reaching about 80% to 85% of the prior year levels and more than 2.5 times of June quarter. More of this color as to what's happening at the ground level, we will have Arvind Kapil who will give some color to that, but that's a little later. The key driver once again during the quarter was from the wholesale banking segment. Corporate banking did a stellar growth of 40% year-on-year and a sequential growth, 3% to 4%, though of course they were -- we did have some impact of couple of obligors prepaying some of the loans. Else, the growth would have been even much stronger.

But let me pause out here and let give the -- hand over to Rahul Shukla as to where he saw the growth coming in from and what's the ground level feedback that he is seeing for -- at the ground level for in the coming months. Rahul, over to you.

Rahul Shukla -- Group Head-Corporate Banking & Business Banking

Thank you, Sashi.

Today happens to be the first day of Navaratri. So wishing all of you on the call and in the room joy and happiness.

Each of our businesses -- there are several businesses in wholesale banking but corporate bank, business banking, our wholesale SME as well as healthcare finance businesses are tracking better than originally anticipated before COVID. This was a quarter that not only saw strong quarter-on-quarter pickup, but an extremely strong growth in averages in both customer assets and CASA in the range of 35% to 40%.

First, we begin with a commentary on the environment. Based on sequential improvement in high frequency data such as power demand, e-way bills, auto sales, cement and steel production, exports growth in September, we remain optimistic about a cyclical recovery, while services PMI, despite sequential improvements, remain subdued. Manufacturing PMI is at its highest in the last eight years. With total COVID cases continuing to -- the total active COVID cases continuing to fall off 25% from its peak and if this trend continues, the recovery will be lifted further during this quarter because of the festival season spending. Government's recent announcement on second fiscal support package worth INR73,000 crore to support consumption and capex spending will help frontload consumer discretionary spending.

As a very large transaction bank, here is what we saw on corporate collections in the second quarter that passed through our cash management system, which is an indication of how the economy overall -- at least a proxy of how we see it is doing. The Q2 collections were higher 0.5% Y-o-Y. It was higher than what we had done last -- seen last year in quarter two, and it was also higher 41% quarter-on-quarter. Of course, April was subdued, so the quarter-on-quarter number basically looks very high, but month-on-month, we continued to see that activity was gaining strength. September collections this year, for example, were higher 14.5% compared to September last year. That is how strong strength that we saw. We also saw strength in the wholesale SME overdraft book in September ahead of orders -- for restocking channel inventory ahead of the festival season.

Normalization was also reflected in new to bank additions and disbursements in our wholesale SME business. The Bank added about 1,550 new customers, which is 3 times of quarter one. Disbursements in value were 1.65 times quarter one, with September showing an all-time high disbursement that we've ever done in wholesale SME which was greater than INR5,000 crore.

In light of this, here is our performance of -- brief on business volumes. On customer assets, advances and investments put together, corporate banking saw a low single-digit quarter-on-quarter growth. This has to be looked at in the context of a very strong growth in last quarter where our quarter-on-quarter growth was higher than year-on-year growth of the system and despite a very large repayment by a single obligor group. The year-on-year growth remained at a healthy greater than 40%. Almost all of the year-on-year and quarter-on-quarter accretion in the book came from top half of the 10 point internal rating scale which has served the Bank well over the years. Approximately 70 plus percent of the quarter-on-quarter as well as Y-o-Y growth disbursements including rollovers were assets with less than one year tenure maturities. So there has been no change in how we have approached the business in this quarter as any other quarter.

Business banking saw a high single-digit percentage growth in its asset book, which is very strong. This is quarter-on-quarter. Healthcare finance book comprising equipment health infra and working capital in the sector, that again grew in very high in high single-digit quarter-on-quarter. CASA growth for the businesses showed strong growth. The growth is a result of, one, of course, secular market share shift that we see in the sector. But for us, we do slightly better because of our adherence to our institutionalized sales process drilled into our heads by Mr. Puri that balances growth from penetration, new acquisitions, geographic expansion, collaboration with branch digitization, wallet sizing, full suite of superior products, in the backdrop of a very strong focus on credit compliance and controls architecture. Apologies; there is no other way that I can explain this.

The next question is whether growth has led to NIM dilution in these businesses. Just to give you an example of corporate banking, so both yield management and cost of funds declines that has been allocated to us in our internal management reporting systems, our asset NIMs for our large corporate banking business saw improvement both Y-o-Y and Q-o-Q, and so these were meaningful improvements. While growth in NIM performance has given a strong earnings momentum, has it led to deterioration in book? That would be the next question. Given the quality of the book that we support, we have seen several more instances of prepayments from top rated corporate. Obviously, we have to work around that and we have to continue on our growth trajectory. The restructuring book is non-material and non-meaningful to comment about in these businesses.

Lastly, India has a healthcare sector with annual flows of approximately INR800,000 crore to INR1,000,000 crore. HDFC Bank is a dominant player in this fragmented space encompassing hospitals and laboratories, doctors, stockists and chemists, pharma companies and, most importantly, patients. The Bank is working on building a digital healthcare ecosystem, the first step of which was announced in our partnership with Apollo Hospitals Group to provide our customers access to quality healthcare with instant financing delivered digitally. The launch was last Wednesday. In the last about nine days, we have seen signup of 121,000 customers to the HealthyLife platform. So I request all of you to also avail this service.

Thank you very much.

Sashidhar Jagdishan -- Managing Director & Chief Executive Officer Designate

Thank you, Rahul. Thank you very much for that.

Probably, Arvind, can you sort of come in and talk about what is the local and the ground level flavors on the retail asset business?

Arvind Kapil -- Country Head-Retail Assets

Yeah. Thanks, Sashi.

I think let me also take this opportunity to wish all of you a joyous Navratri. And like Sashi said, bringing the colors, I think I see the color is coming in in the retail assets. A quick sense of the retail assets umbrella comprises of 11 businesses ranging from secured loans of four-wheelers, two-wheelers, retail working capital loans to mortgages, the home loan franchise, gold loans, loans against securities, micro finance as well as the unsecured loan franchise, so salaried, self-employed and professional segment.

On an overall basis, for retail assets we are seeing a double-digit sequential monthly growth from July to September 2020. We are almost at around 90% monthly pre-COVID levels and see ourselves with robust growth here on every quarter on quarter. While the country is recovering from difficult times post COVID lockdown, we as a bank see five trends driving the economy and business at the ground level. These are infrastructure, rural and semi-urban, digital transformation in particular, supply chain and healthcare.

Our observation [Technical Issues] and across products in the self-employed entrepreneurs segment reveal that there is a clear distinction emerging between entrepreneurs and those who are able to jump ahead to improvisation and value-added services and create an edge for themselves. Take for example, even a simple kirana store that managers to invest in a fridge and has a home delivery option is delivering an output of almost 2x of the average business among its peers. This, we believe, is happening across various levels of self-employed businesses.

As a bank, we believe our ability to go micro, coupled with our ability to insightfully decipher data and use it in our underwriting engine, coupled with the liabilities physical distribution pan-India, along with our sense of personalization and customer digital platform creates a winning proposition and the robust growth that we are confident of. If one looks at the recent bureau trends to get a sense of how the inquiries and generating, the lead indicators, if I were to pick auto loans and home loan businesses, are clearly showing inquiries level that's quickly scaling back to pre COVID levels and at times even exceeding in some of the business segments beyond the pre COVID level even in the month of September, as observed.

Added to this, we are witnessing a double-digit incremental growth as a contribution from the government segment and the rural and semi-urban, especially for our unsecured business as well as secured business. On our unsecured business, we also see rapidly growing and we believe it should be pre COVID levels by the month of October. That's this month. We've already seen a surge of gold loans through a robust growth of almost 60% [Technical Issues].

Operator

Hello? Hello? Members of the management team, are you able to hear me? Hello?

Arvind Kapil -- Country Head-Retail Assets

Can you hear us?

Sashidhar Jagdishan -- Managing Director & Chief Executive Officer Designate

Can you hear us?

Operator

Yes, sir. Yeah, we are able to hear you now. Thank you.

Arvind Kapil -- Country Head-Retail Assets

Both our loans against property and retail working capital loans, we are already at pre COVID levels to give you guys a sense of where we're really moving from here on. Yes, we've been cautious and prudent on the micro finance business and expect a full scale recovery within the next 90 days in this particular business segment. It's worth noting that our observation at the ground level of the rural demand also shows that there is a massive increase in the two-wheeler sales by almost 34% at an industry level. This we believe is backed by an increase in the rural demand compared to our historical compounded rate of growth of 13% over the last five years.

Our two-wheeler business has also seen robust recovery in similar lines. Tractor sales are also at an all-time high, and it's due to the two years -- consecutive years of good normal monsoons, leading to water storage levels at its best in the last 13 years in our country. Also noteworthy is that the kharif crop planting is at a record high on a year-on-year basis. I think this aggregate gives us strength to our rural and semi-urban distribution.

Simultaneously, if we were to dwell for a moment in the self-employed sector based on our sales team's interaction with businesses at the ground level pan-India, I'd like to share with you that we're observing a positive uptick in demand and capacity increase by the SMEs and the self-employed, whether it is the farming sector, whether it's industrial chemicals in AP, Telangana, Omkareshwar in Gujarat or is it the rice and flour mills' increased capacity utilization in Punjab or Madhya Pradesh or even Chhattisgarh, for that matter, whether it's the food processing and packaging industry responding during COVID time with an uptick and with their basis predominantly in Puna, Rajkot or Bangalore or it's the fastener and bicycle manufacturing in Ludhiana that the demand is clearly showing an upward trend. And these are all, I'm giving you a ground level feel of our sales guys directly talking to businesses.

At this junction, while fully acknowledging that India is growing substantially in terms of the Internet users, almost a 24% increase in the number of active users monthly over on a year-on-year basis, let me take this opportunity to share with all of you the plans on digital transformation. One of the key -- key game changers on the retail lending side. Our next digital offering as a bank on the retail assets platform will be the auto first which we believe will transform the automotive financing landscape in India. Both for the four-wheeler loans as well as for the two-wheeler loans, it will be a dedicated platform to transform the vehicle lending and ownership experience from completely predominantly physical to digital. This offering, which we'll unveil in the next 90 days, will be available not only for our existing bank customers, but also to strengthen our open market customers onboarding.

At the HDFC Bank, we see significant opportunity to transform the automotive landscape over the next three to five years. We believe presently that 90% of the car purchase journeys in the industry are actually initiated online, which is why we believe the shift from physical to digital purchase and strengthening these platforms and creating an ownership journey will be delivering a distinctive loan experience. The customer journey from search to probably test-drive, maybe exchange, and couple of sales initiatives will be integrated seamlessly of this platform. This platform, we believe, will be the first of its kind for a bank our size in India and possibly the world.

Even for our unsecured personal loan business, we are gearing up and getting ready over the next three to five months horizon to substantially digitize the open market acquisition. We've had a successful stint on the 10 second loans over the last five years and we believe this could be another game-changer for the distribution. Thus, the new normal capitalized on our micro management strategy, the way I shared with you, coupled with our digital strength of customer journeys and our depth of data deciphering and underwriting engines, we strongly believe that we will come out as winner and create robust growth from here on quarter-on-quarter.

Thank you.

Sashidhar Jagdishan -- Managing Director & Chief Executive Officer Designate

Thank you, Arvind.

Jimmy Tata, a lot of people will be looking at you with a lot of eagerness. So there are a lot of questions, I'm sure they would be having. First is with the moratorium getting over in August and September being the first month post which you would have presented all the dues, they would like to know if you can give a very -- a synopsis on how your demand resolution has been.

Jimmy Tata -- Head, Credit and Market Risk

Thanks, Sashi. Definitely.

Hi, everyone. Good evening. And allow me to join all my colleagues in wishing you compliments of the season. I usually say thank you for joining us on a previous Saturday evening, but Saturday evenings aren't really all that precious anymore. But thank you for coming. Really appreciate it.

Yes, Sashi, and to take it forward for everyone, I'll just put in a flavor of the -- I think Rahul and Arvind have both given you a good flavor of where the business is headed. So I'll just, without trying to repeat anything that they're doing, put in the flavor of where the risk profile and the dimension for the Bank exists in our various segments.

So if we start with the wholesale businesses. That's where most of the growth has been, as you know in the last six months or so. We have achieved this growth and continue to achieve this growth with no dilution of the credit standards. The best way to define that for all of you is our internal rating scale. I have described it last time, but for those who are new on the call this time, we have an internal rating scale of 1 to 10, 1 being the safest, 10 being the riskiest. We usually have a mapping process and we rely on this scale much more than we look at external rating. Plus, there are of course a good number of companies and transactions and customers who are unrated. So this is a more universal method of adoption for us, but of course, to those who are not insiders to HDFC Bank, it does need some elaboration.

So the historical steady state average borrower grading on the scale of 1 to 10 of the wholesale portfolio has been around 4.4 for the last several quarters. Happy to report that the incremental portfolio put on in the last quarter has also come in at a 4.4 average and therefore there has been no dilution. A 4.4 essentially from public perception corresponds to a AA rating. That's the best way that I can put it. There has been a marginal, in fact, improvement, if you look at the basis points over the last few quarters, but let's just suffice it to say that it's pretty steady in that sense. Keep reporting this figure quarter-on-quarter to you. I must put out over here as well that this is an extremely safe average borrower grading to have based on our internal scales.

It is asset profile that we do manage to achieve because we have the advantage of the cost of funds to associate with the best profiles in the country. There could actually be a slightly higher risk profile. If it were to be adopted at any point of time, that would still be to our minds well above the average risk profile of the banking system as a whole. That said, we stay where we are and continue that way. Around 75% of the externally rated portfolio -- so this I think is something people relate to more. But from those who are externally rated, 75% are either AAA or AA. 93%, if you want to add the A-rated companies get into that kind of a bracket.

I'm often asked about the unsecured exposures, and here again, it's been kept at a very steady rate. The -- I did mention 4.4 as being the portfolio average. The unsecured is weighted at a much safer level and comes in at an average of 3.5 which means that these secured portfolio is around 4.57, 4.58 kind of a range. The difference between these two grades effectively is a 55% lower probability of default. That's about the best flavor that I can give you based on what we have right now. So the unsecured portfolio remains in a much lower risk category than the overall portfolio and obviously the secured portfolio as well.

Fresh NPAs I'm not going to get into because Srini has covered them and we have -- we have some constraints on. As everyone know, fresh accounts in the quarter that were referred to the NCLT from what we have.

Sashidhar Jagdishan -- Managing Director & Chief Executive Officer Designate

Okay. Thanks, Jimmy. Thanks to you -- on that corporate side. You have anything more on the corporate side?

Jimmy Tata -- Head, Credit and Market Risk

No. On the SME...

Sashidhar Jagdishan -- Managing Director & Chief Executive Officer Designate

SME, yeah, that's the question that I have for you is, if you recall, in the July '18, in the quarter one earnings call and also at the -- sorry, the quarter four earnings call, you did mention that you all have done a simulation exercise assimilating the drop in sales in the SME portfolio and you arrived at that 9% of your SME book is high-stress. Can you give color as to where we stand on that?

Jimmy Tata -- Head, Credit and Market Risk

Yeah, sure.

So on the SME book in the Bank, yes, Sashi is right. We had quite early on, maybe toward the end of February and early parts of March, we had done a stress test in 3 degrees of stress and we had reported out to you that if you looked at the mid-level of 3 degrees, there could be approximately 9% of the portfolio that could face stress. We now have the benefit of hindsight on this particular situation. It was clearly an extremely conservative estimate that we had put out to you. It has not panned out that way at all.

If we look back now from a position of early October, we have 30 DPD counter that we are looking at. We also have identified stress accounts now because we do have relationships with all these entities. They are not mere loans. So we are able to absorb their bank accounts. We are able to observe their business flows. We are able to observe their expenses and their revenues that come in as well as capital account transactions. So we are in a position to identify those who are in stress.

If we now identify those who are in stress and if we look at people who are even short-term delinquent, I think this number could be brought down somewhere into the 3.x percentage range, it's not in the 9% range. So there is -- there is some good news to report on that segment. The 3% as well -- now, if we want to analyze that a little further, we have looked at -- see, these are obviously all relationship accounts, so we look at them individually. There is a very good probability of recovery in several of these.

We are seeing -- I think Rahul alluded to it as well, that cash flows are definitely improving, the order books in our portfolio are improving. In addition to that, the promoter savings have gone up, and I'm going to come to that a little later as well. We are always well collateralized. Another part of this portfolio will probably want to avail the FITL that has been allowed to them for a few months more, and that could probably give them the relief that they wish.

Needless to say, the ECLGS has been of benefit to this segment in large measure. And whatever is left would probably need some form of restructuring, which has been positive. And a very small part of that, let us also say that if it does not fall within the specified norms and if we did believe that they do need some help and assistance, we would be willing to restructure that part even without it falling into the standard restructured bracket. But let us take that as it comes to it. As of now, the signs are good, flows are improving, flows are increasing, order books are doing well. The utilization of our limits, which had fallen during the pandemic is also now creeping back up, and again, through account observation; it is not creeping up lump sum to take care of problem. It is a utilization operation based in the larger part of things.

Our utilization has actually remained fairly steady throughout this entire time. It's been in the low 70% of sanctioned limits, and has not really either fallen dramatically or gone up dramatically, both of which you'll understand for different reasons is a fairly good sign.

The SME portfolio diversification continues to remain highly diversified, the large concentration being in agri and agri processing oriented. This is only because it is directed lending. Otherwise, the concentration is created through that. Everything else is less than a 5% concentration. And if you move to around industry number six or seven, it could go well below that as well.

To give you a small feel further on the portfolio performance after the moratorium is over, we are seeing now a mean reversion. So if you look at the very early DPD buckets, seven, 15 types, we had a particular level pre COVID. Obviously, during COVID and during the first three and the second three months, we had certain levels. We are normalizing those levels in our internal calculation so that we do not artificially take any benefit of moratoria. And there is clearly an improving trend down to a mean reversion. And you would probably see that reversion back to the original level in a few months or so. So this is one more positive trend that I can provide to you.

Another thing to point out, I think in the very first quarter of the pandemic when we did report we had mentioned while we had fought the stress test at that time to bear costs [Phonetic] of somebody which I explained a little earlier the hindsight details upon. We had referred to the self-funding that we have always carried out in terms of our SME promoters and their families and their personal wealth. Once again, to repeat, this is not security. This is merely liquidity. The -- we were watching that. It has not only held up, it has actually increased as a percentage of the outstanding. Then, as I mentioned to you, we have not seen any great hit -- demise in both outstanding. So the savings have actually kicked into the time limits for these segments as well. The collateralization of this portfolio beyond the inventories and current assets continues to be extremely high. There is an 85% portfolio level collateral for the same.

And with that, I think it's a flavor that I can give you on the risk profile of our SME business.

Sashidhar Jagdishan -- Managing Director & Chief Executive Officer Designate

Thanks, Jimmy.

I think the last one, which everyone will be waiting for is when you presented for the retail portion in the month of September and the early trends in October, they would like to know what's your resolution coming about.

Jimmy Tata -- Head, Credit and Market Risk

Yeah. So, thanks.

So on the retail portfolio, now, as we all know for everyone, not just for retail, the moratorium is over. So for the last two months, it has been all about what the demand has been and what the resolution on this demand has been. Once again, pleased to report that in the month of September, we had a demand resolution of around 95-odd percent and -- by October and we're pretty close to the end of October. Now, so we can -- with fair level of confidence, say that we should expect that we'll improve further to around 97-odd percent. You want to juxtapose this with what it was pre COVID. Pre COVID, we had 99-odd percent. So we have 2 percentage points to go. We expect that to be covered in a few months.

Our non-moratorium portfolio already has demand resolution of 99%, so you can see that that is clearly on par. And the rest of it will again show us increasing -- and there are encouraging trends month-on-month in all these businesses. So we do feel a little pleased about that.

Arvind mentioned a good amount on where the businesses are going. So I'm not going to get [Technical Issues] degree of buoyancy. Demand for credit, in fact, I must say has been available for virtually all retail products. The extent to which we are onboarding it through the various departments that are [Indecipherable] has been the extent to which we have chosen to the -- revert to the original policies which had been considerably tightened during the pandemic. So I would say in auto and two-wheelers, we have reverted in very large measure to the pre COVID policies. There are a few geographies and a few segments where it might yet be constrained.

The personal loans in the unsecured, the other large product, we were always very well placed in these because of the customer selection. And there, we continue to have now much better sight because once again, the salary accounts of these individuals stay with us. So we know that we are dealing and we are in -- talking with employees of companies who have not indulged in job cuts, who have not indulged in salary cuts. So the income stream remain steady and we expect that to go well. The lower end of the personal loan segment has not yet been opened up and we would do so as we find it appropriate to do so.

I would say the same thing for cards, and if you look at the self-employed segments for the business loans as well as the commercial transportation, again, over there the policies remain relatively tight for the time being and would be opened up only when we found it to be appropriate.

The agricultural portfolio which we usually do segregate even when we are reporting our NPAs, has actually been a segment of the industry that has done rather well. We had a bumper rabi crop. There were a few logistical lockdown related issues at that point in time for transporting the produce, but most of these are not ultra perishable and therefore there has been good realization. The kharif season also looks to be doing well. And we have actually had a rather good period with this particular line of business, and therefore that works well.

The SLI portfolio, which we have, it's not our largest portfolio, but as you would understand, the sustainable livelihood has been impacted quite significantly through this pandemic. The analogy I can draw perhaps is a similar impact that they face during the demonetization sales. It took approximately six months that time for things to get back to normal. Arvind does believe and I probably do share his belief that it may not take that long this time round. But on this book, I must say that these are -- these are people who are very good in terms of their culture. They are genuinely suffering. We do intend to be sympathetic toward this portfolio. So we are not trying to accelerate any kind of recoveries there. In fact, I must say one of the last things that Aditya mentioned to me recently was, be kind to these people, be kind to the MSME, they have genuinely suffered, don't try to push it on them. So they do keep that in mind. They do understand that this has been no fault of a lot of the people and therefore we will be very understanding in how we interact with them.

The last thing I would want to mention is in terms of recoveries. This has actually been a pleasant surprise. Recoveries across the board, across products, are actually higher than the pre COVID state. So I do see a benefit in terms of the credit profile from or better recovery flow going forward as well.

Sashi, honestly, that's all.

Sashidhar Jagdishan -- Managing Director & Chief Executive Officer Designate

Yeah. Thank you, Jimmy. Thank you so much for that very elaborative and comprehensive commentary on the -- on the credit and the collections part of the business. I will request the operator to throw open the forum for questions now.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Mahrukh Adajania from Elara Securities. Please go ahead.

Mahrukh Adajania -- Elara Securities -- Analyst

Yeah, hello. Congratulations. My first question is on collection. So you said that the non -- the moratorium collection efficiency would be 97% by end of October. Would that be true of the whole book as well or just the retail book?

Jimmy Tata -- Head, Credit and Market Risk

This is the retail book -- Mahrukh, hi.

Mahrukh Adajania -- Elara Securities -- Analyst

Hi.

Jimmy Tata -- Head, Credit and Market Risk

This is the retail book. But you won't see any significant variation on the whole book as well. It would pretty much be around the same.

Mahrukh Adajania -- Elara Securities -- Analyst

And the denominator for collection efficiency would be the total demand, not the collection buckets or any such thing, right, you mean the total demand?

Jimmy Tata -- Head, Credit and Market Risk

This is the demand resolution. It means what was the demand during the month and what was collected of that demand during the month.

Mahrukh Adajania -- Elara Securities -- Analyst

Got it, got it. And my -- my other question was that, Rahul did explain how NIMs in the corporate book were good. So how do you explain the pressure on NIM? So NIM got declined, but the corporate book has expanded. It's just the liquidity? Or...

Jimmy Tata -- Head, Credit and Market Risk

Yeah, yeah.

Srinivasan Vaidyanathan -- Chief Financial Officer

Mahrukh, that is what -- this is Srini here. That's what I alluded to that we did increase -- we did see the increase in the liquidity coverage from 140% to 153%. That's part of -- about 15 basis points or so is what we estimate as the drag due to additional liquidity where we have the cost of funds but with very little choices for investments.

Mahrukh Adajania -- Elara Securities -- Analyst

Got it. And just one last question. What is the percentage of customers who have not paid a single installment?

Jimmy Tata -- Head, Credit and Market Risk

I didn't follow that, Mahrukh, sorry. What do you mean by that?

Mahrukh Adajania -- Elara Securities -- Analyst

What was the -- so -- I mean, in the -- so there was a morat book and there would be customers who were not paying any installments. At the end of August -- at the end of June, you had given a figure of around 8.5% of customers who have not paid a single installment. So at the end of August, in the morat book, what is the percentage of customers who had not paid a single installment?

Jimmy Tata -- Head, Credit and Market Risk

Mahrukh, see that the moratorium is frankly over and behind us. So whoever took a moratorium, their transactions have been adjusted and extended accordingly. I think what we have to look at now -- and they haven't really contributed to delinquency, as you'll know because the transactions continue. The real thing for us to look at now is what is due and what is collected from what is due, which is why I think the demand resolution is really the measure. So I honestly don't have the answer to that question.

Mahrukh Adajania -- Elara Securities -- Analyst

Okay. Thank you so much.

Operator

Thank you. The next question is from the line of Suresh Ganapathy from Macquarie. Please go ahead.

Suresh Ganapathy -- Macquarie -- Analyst

Yeah. Hi. Jimmy, I mean, of course you clarified this, but I just wanted to double-check on couple of things. So say on June end, your total loan book under moratorium was 9%. Is it possible to share the August 31 number? I know moratorium is over, but you guys would know what was the monitoring as of August 31, right?

Jimmy Tata -- Head, Credit and Market Risk

Hi, Suresh.

Suresh Ganapathy -- Macquarie -- Analyst

Yeah.

Jimmy Tata -- Head, Credit and Market Risk

Suresh, the moratorium is over and behind us.

Suresh Ganapathy -- Macquarie -- Analyst

Okay.

Jimmy Tata -- Head, Credit and Market Risk

And just not -- I think every single person has their own way of defining this, and it's probably going to mislead to try and put these numbers out right now. I think the real thing we should put out is what we are collecting from what is due and where our portfolio stands and where it's going to be. And I think that's what we've tried to put out as clearly as fairly as we can.

Suresh Ganapathy -- Macquarie -- Analyst

Sure. Okay, so let's hypothetically assume the number is say X percent as of August 31. What you are arguing here is that 97% would have paid, that is the collections in October -- expected to be collected by the end of October, right? 97% of X percent.

Jimmy Tata -- Head, Credit and Market Risk

Suresh, the phrase I used and the term I used was the demand resolution, and this is defined as the amount that could be demanded of customers during a month and how much of that was actually collected during the month.

Suresh Ganapathy -- Macquarie -- Analyst

Okay.

Jimmy Tata -- Head, Credit and Market Risk

That's the exact definition of what I'm talking.

Suresh Ganapathy -- Macquarie -- Analyst

Cool. Okay. That's clear. Okay. And last two question is, is there any estimation of total cumulative restructured book that you can give to us? I mean, you think 0.5% could get restructured, 2% could get restructured? Any indicative number?

Jimmy Tata -- Head, Credit and Market Risk

Honestly, Suresh, no. And why I'm saying no is because whatever estimates we made, the demand for restructuring is not measuring up, so I wouldn't like to give a figure right now. It's not turning out to be at this point of time a very large or meaningful number. That said, I want to caveat it. Everyone has till the December 31 to apply. But at this point of time, any estimate that we had made within the Bank has proven to be so ultra-conservative that I should not be mentioning it right now.

Suresh Ganapathy -- Macquarie -- Analyst

Okay. Okay. And last question is to Sashi. I mean, where is the disconnect -- disconnect here, Sashi? Because you guys are painting a completely different outlook of the market compared to what the reality is. It looks like you guys are in a completely different world. In a positive way I'm looking at it, because the commentary across whether it's Arvind Kapil, Jimmy Tata, the corporate guys, everybody is saying that there is no problem with you guys. How do you reconcile with the 25% drop in GDP in a single quarter?

Sashidhar Jagdishan -- Managing Director & Chief Executive Officer Designate

See, you are asking a very tough question because we all work hard and we have -- we have sort of produced these results. But jokes apart, I think this may be a cliche, but if you really look at it, we have assiduously built this platform in terms of what is the target customer segment, what needs to be in terms of the profile of customers that we would like to cater to whether it is in the wholesale, whether it's in SME, whether it's in retail.

I mean, you heard the commentary [Indecipherable] culture. It is very clear that even though that there is a bit of a pain, which has arisen because of the lockdown, I think the segment that we are catering to, whether it's in the top-end corporate, whether it's in the top end of the SMEs, whether it's in the more top-end salaried customers, has been much better. Even in the self-employed and even in the micro enterprises, I think, since we have been patronizing more in the -- in the top end of each of the sectors, we have been able to manage or navigate through this adversity. It's not that we don't -- we have not taken risk, it's not that we don't have pains, but it's much, much more manageable well within what we have -- what we had expected.

Fortunately, I must also say that especially the worst segment, which is the SME segment, we have got a huge amount of relief from the -- the government guarantee scheme. That has been one of the prime movers in getting the 9% high risk asset to the 3% than Jimmy mentioned. So we need to thank the government for that. Of course, we would have wanted more to adopt for that, but the quantum were so small that the customers who were -- who were probably the smaller segments, they did not opt for or elect for that. So, on an overall basis, we -- even though we have the appetite, we probably are covering around the 60% or 55% to 60% of the total eligibility and of the government guarantee scheme.

So it's all about the distribution platform, it's about the customer segment -- target customer segmentation, it's all about the kind of processes, whether it's the sales process or the credit processes that we have adopted and not to mention the collection process as well. So each one of them have really worked hard during this entire period, and that is -- that's all. We have tried to nibble away where there is -- where we see an opportunity. So it's not that there is no problems in the economy. It's just that we've been -- we have been positioned ourselves reasonably well to nibble away that -- that opportunity, and we believe that when -- when good times are going to be there, we will be even more well-positioned to nibble away at that.

Suresh Ganapathy -- Macquarie -- Analyst

Thanks, Sashi.

Operator

Thank you. The next question is from the line of Abhishek Murarka from IIFL. Please go ahead.

Abhishek Murarka -- IIFL -- Analyst

Hi. Good evening. Thank you. Congratulations for the quarter. So three questions. One on the check bounce rates. What was it for you versus pre COVID levels? And how does that compare with the high collection efficiency numbers that you've disclosed on your retail book and on the overall portfolio? The second question is on the NIM outlook. Now, this quarter, your ED [Phonetic] accretion Q-o-Q has also slowed down and it's actually much lower than your CASA accretion on a Q-o-Q basis. So just will this support NIM, and this, coupled with your healthy NIMs in the corporate bank, should that help your NIM stabilize? And the third question is on Festive Treats. Now you've mentioned that your tie-ups are much -- much, much wider as compared to last year, probably 10x more, and the reach is also wider. So in terms of the scale of volume and value of credit or value of revenues that you put last year under Festive Treats, what kind of scale-up do you expect this year? Thanks. Those were my questions.

Srinivasan Vaidyanathan -- Chief Financial Officer

Probably I'll take the NIM first before Jimmy can come on the check bounce. On the NIM, the way to look at it is, how we deal -- think about how we deal with it in the ALCO, right. And before that, even if you get back to our historical approach to managing net interest margin over a period of time, one year or three years or five years or whatever time period you choose to select and monitor that, we operate between to 4 to 4.5, right. That's the kind of range at which we have operated. And that's how the products are priced in our ALCO bi-weekly that when we meet and price the product, that's how we handle that price. So we are at that kind of a lower end type of a range at 4.1. While we don't give a particular outlook where it will be, we believe that is the range that you should think about it is 4.1, 4.4. That's the kind of a range, and we've been smacked in the middle at 4.2, 4.3 for a long time. If you look at last four quarters to six quarters, we were being -- we have been in that kind of a range. There is nothing more that we do other than to manage the pricing on both sides, the deposit side and on the asset side to be within that kind of a range.

Abhishek Murarka -- IIFL -- Analyst

So basically it should sort of flatten out or at least the decline should get arrested at these levels since you at the lower end of the line.

Srinivasan Vaidyanathan -- Chief Financial Officer

We believe -- that is how we manage it to be within this range -- short range.

Abhishek Murarka -- IIFL -- Analyst

Sure.

Jimmy Tata -- Head, Credit and Market Risk

To answer your question on the check bounce, yes, you are right, you would not have a good demand resolution if it did not start with the very low level of check bounce. It cannot be that you chase 90% of the people and succeeded within a month. So there has been a very good and better than expected response on the deposits and not as much as was earlier anticipated has bounced. That said, not putting numbers out here right now for various reasons. We'll be -- look at what has happened across the country. There are still logistical issues, there are a few habitual issues in the very first months or first six months of not paying; a check could have bounced, but gets paid very quickly after that only because of some carelessness. There have been logistical issues in terms of the DH [Phonetic] and other such things. So let's just leave it that the bounce trend is encouraging, and it's definitely contributing to the good levels of demand resolution.

Srinivasan Vaidyanathan -- Chief Financial Officer

I'll get to the third -- third point that you raised about the Festive Treats. Festive Treats has been -- it's about two weeks or so that Festive Treats has been running and it's been -- the early results have been phenomenal in terms of the customer engagement with us across the board, let it be on the spend through the programs that we have with Amazon or with the other partners or in terms of the branch activity that we have in terms of what Arvind Kapil had alluded to in terms of that operates predominantly through the branch and into the non-branch channels too, but in terms of the customer engagement on that front. While we don't put a particular forecast number of where the Festive Treats to go. All I'll say is that the buoyancy is pretty good, which is what you heard from Arvind in terms of what we see on the ground in terms of the customer stickiness [Phonetic] to this kind of a program that is running.

Abhishek Murarka -- IIFL -- Analyst

Sure. So just to jump back to Jimmy on this check bounce, could you -- is it possible for you to give an idea of where it is for you versus pre COVID? At least, that will give us an idea of how fast the improvement has been over September and following up into October.

Jimmy Tata -- Head, Credit and Market Risk

We are getting there and there is a mean reversion, and it should happen in a while. But as I said, it's an apple and orange if you're trying to compare it to pre COVID.

Abhishek Murarka -- IIFL -- Analyst

Sure. And if I can just squeeze in one last quick question. So if I look at your auto and two-wheeler book, now, the commentary has been that there is a very strong momentum and mean reversion and all of that, and also the volumes are great. We've seen the volumes for September and even expectations for October. But your own book has shrunk on the Q-o-Q basis. Why is that? I would imagine that you would have actually grown that book quite a bit sequentially.

Jimmy Tata -- Head, Credit and Market Risk

So, see, the auto book had shrunk even before COVID. There was a slowdown in the sector. We had concerns. And in fact it was one of the products where we had decided that we wanted to constrain policy and go slow even before COVID. It actually was very fortuitous because we entered COVID for that reason with a very good auto book because it was extremely tight credit parameters on which it had been built. So we've said this always. Continue to say it. We will never dilute policy.

And in fact I alluded to it a few minutes ago as well, that there is demand across the board, across products, and what we onboard is where the policy can in the view of the Bank be liberalized to the extent that something can be onboarded. Auto has been one of the products where we have found due to the security in the product, due to our assessment methods to our much larger than -- or larger share in the very high bureau scored customers as well as our internal P27 scored customers. So we -- we have the ability to judge it well and it's one of the products where we have opened up little more than other products.

Abhishek Murarka -- IIFL -- Analyst

Sure.

Jimmy Tata -- Head, Credit and Market Risk

You want to add something, Arvind?

Arvind Kapil -- Country Head-Retail Assets

Yeah. Just to add on to what Jimmy is saying -- Arvind here. I think even from a level of readiness, like I shared with you guys, we're launching an order first, which is nothing but a complete digitized version of the entire experience for auto loans. The whole idea being not just to get more of the new to bank customers. Imagine, the cross-sell opportunities, imagine all my feet on street in the rural sector can probably far easier close the digital auto loans, and including all the other businesses. So it becomes a far more easier proposition to kind of expand and build on your internal customer plus external investors.

Abhishek Murarka -- IIFL -- Analyst

Sure. Sure. [Speech Overlap] yeah, thanks.

Sashidhar Jagdishan -- Managing Director & Chief Executive Officer Designate

[Speech Overlap] is that I would like to just take this opportunity to sort of talk to the investors. I would like to take this opportunity to thank Mr. Puri who has steered this company with a near blemish-less track record for 26 glorious years. It's a poignant moment for the 117,000 plus strong workforce to see their iconic leader move on to a new innings of his life. We shall miss this magnetic persona which has guided us all these years. But such is the selflessness that he has transferred his energy and passion to many of us. He has laid actually all the platform with clear strategies for the future so that HDFC Bank team 2.0 can carry this wonderful legacy forward. Suresh, you asked a lot of questions about why is it that you are different from the market, and I think a lot of us owe this to this man who has created this kind of a platform.

A lot of you have written and even sent some wonderful sound bites affectionately on Mr. Puri. It was indeed heartwarming for -- to read and hear the same and it's surely moved Mr. Puri. I thank you for all the patronage you have provided to this institution all these years, and I'm sure we can count on you for your support even into the future in our next journey. On behalf of all our stakeholders, be it the customers, the investors, the regulators [Technical Issues]

Abhishek Murarka -- IIFL -- Analyst

Hello? Hello?

Operator

Ladies and gents -- sir, we have lost the lines for the management. I'll just reconnect them. Ladies and gentlemen, we have lost the audio for the management. Please stay connected while we try to regain the line to the management.

Abhishek Murarka -- IIFL -- Analyst

I can hear you.

Operator

Yes, sir. Sir, you are connected. We have lost the line for the management.

Abhishek Murarka -- IIFL -- Analyst

Okay.

Operator

Ladies and gentlemen, thank you for patiently holding. We now have the line for the management reconnected. Over to you, sir.

Srinivasan Vaidyanathan -- Chief Financial Officer

Two minutes -- last two minutes.

Sashidhar Jagdishan -- Managing Director & Chief Executive Officer Designate

Right. I was just mentioning that on behalf of all our stakeholders, be the customers, the investors, regulators, the Board and the HDFC Bank family, we thank Mr. Puri from the bottom of our heart for creating such a world-class institution. Thank you, Mr. Puri. There will not be anyone like you. You are one in a billion. We will miss you. Thank you. Lizanne, is Mr. Puri there? If you can connect him, he may want to -- he wanted to have a...

Aditya Puri -- Managing Director

Yeah, yeah, yeah. Sashi, I'm here.

Sashidhar Jagdishan -- Managing Director & Chief Executive Officer Designate

All right, Mr. Puri. I think a few words from you too at last to investors...

Aditya Puri -- Managing Director

Sure, sure, sure. So firstly, thanks a lot, all of you. It's been a pleasure dealing with you. We've had our ups and downs. We have had our differences of opinion, but it's been fun. I am absolutely thrilled in handing over to Sashi and so is the team below him and more importantly so is each and every employee. Now there is a gang in the Bank called the Karamchand gang which Sashi heads. What they've done is they have got together to give me the most poignant, emotional farewell that I could see. But what it's done, it's brought the HDFC Bank family together. Well done, Sashi.

The second part, I must tell you, is really good. Not only has it brought the HDFC Bank family together, but all of them have promised to carry on the legacy and deliver what Sashi and me have jointly had every single reviewed. So Sashi, very cleverly, over the last one month has been having two reviews a day with me reading them basically so that everybody is on the same wavelength, which is very well done. By the way, even my wife is a part of this Karamchand gang, so it's been a beautiful experience that we can see all 120,000 of us coming together, recognizing the change.

I'm happy with the recognition of the footsteps I've left behind, but I'm even more happy that the whole Bank is behind Sashi, me and the legacy and the strategy that we have set up. I also found that in part of the farewell, I had everybody -- anybody right from Mukesh Ambani to the government secretary, and Sashi had rung them up asking for two words. So he has -- almost he has introduced himself to everybody, which is just phenomenal. And I promised him that once COVID goes, whoever he wants to be further have a one-on-one meeting, I will accompany him.

So what we have got, and I don't want to go into so much detail thereafter other than to say the team is there, Sashi is there, the technology is there, the market is there, your support is there. But please recognize two things. There is no point saying year-on-year. Yes, we had two good quarters because we even didn't take the -- we had the energy, not even to let the COVID hit us for two quarters. But the fact of the matter is comparing with the previous years doesn't work because six months, there was actually supposed to be no business while we sat down and we said HDFC Bank will not lose and we even didn't lose those through six months. We didn't let go a single person. Everybody got his increment, everybody got his bonus, everybody got his promotions, and both Sashi and me have promised them that if they achieve what they have set out to achieve, they will have the same thing.

So there is a wave of optimism out there. And our strategy is very clear. The market is there. We dominate semi-urban and rural India. Please log on on the 28th to CNBC. There is Shantanu Narayen -- Shantanu Narayen and me there basically to tell you where -- how our digital story is going to unfold, some of what all these guys have been doing, and we have all worked on it together. Then to give you a further illustration it takes guts for a fellow taking over to do it, this guy and Srini come to me and say, you know, boss, this NPA will fluctuate like hell and then people will say Mr. Puri went away and the NPA is -- so I say what is your solution, tell me. Boss, do you mind we'll we create a pro forma NPA and we'll create provisioning because --because we had the robustness.

So they created pro forma NPA because we don't violate anything of the RBI. That also tells you Mr. Puri is not bloody selling shares just because NPA going up. Mr. Puri is here to give the long-term legacy, not short-term. So -- so they provided a pro forma and -- what they really wanted provisioning underneath. So we are at some -- even if we take the -- if we don't have pro forma provisioning 190 [Phonetic] if we have pro forma provisioning 150 [Phonetic]. So I'm delighted. I want to thank all of you. I want to wish -- wish Sashi and his team the best, and I'll take any questions you have.

Operator

Thank you. We'll move on to the next question. That is from the line of Utkarsh Katkoria from PGIM India Asset Management. Please go ahead.

Utkarsh Katkoria -- PGIM India -- Analyst

Yes. Good evening to the management and thank you for taking my question. This is actually on HDB Financial. If the management can throw some light on what's happening there in terms of profitability, which is down sharply and also the asset quality. And what are the challenges we are seeing there going forward, and if there is any change in strategy? Thank you.

Srinivasan Vaidyanathan -- Chief Financial Officer

From an HDB point of view, like everything else, the advances growth that did slowed off. There is a caution and it did slow down to about 2% growth. That's what you are seeing. Lot of the sales force have also been directed toward collection so that we bring effectiveness in the collections area. If you look at the pre-provision profit, the pre-provision profit is quite robust. It did take about INR300-odd crores of additional provisions in the quarter. Adjusted for that, you will see that the profit before tax would be about 10% or so up. That's the kind of numbers that we have.

Aditya Puri -- Managing Director

And Srini -- Srini?

Srinivasan Vaidyanathan -- Chief Financial Officer

Yes.

Aditya Puri -- Managing Director

Also, I'd like to add here. RBI had told us and we are now going back to RBI, and saying that we are analyzing that the rest of the industry to change. We will also revert back to the way the rest of the NBFCs account for their NPAs. So if we go by industry standards, the NPA and the profit figures would have been very different. They asked us to follow what the banks do, and they advised us that they will make sure the rest of the industry follows. They haven't. Both the boards have asked Sashi, G. Ramesh and Srini to go back to RBI and advise them that we are reverting to what is the industry standard.

We have a lot of new products. We again have not laid off there. So the prospects are bright. They've gone into gold loans, they've gone into micro finance, they've gone into two-wheeler loans, they've gone into secondhand car loans and they are looking at a few new -- new products. And so I think growth will come back there as well because we've kept the people on. And as now the sales develop, this is what I was saying, that if we look at it, the key is have we reached pre COVID level running rate everywhere -- run rate everywhere, and the answer is yes.

Srinivasan Vaidyanathan -- Chief Financial Officer

We kept the powder dry in the sense that we have a big amount of liquidity built up. 214% is the liquidity coverage ratio in HDB. So kept ready for the growth to foresee that and get that in. And another important element of the capital ratio is in excess of 19%. So we positioned well in order to get back and get that growing.

Utkarsh Katkoria -- PGIM India -- Analyst

Sure. Okay. Thank you.

Operator

Thank you. The next question is from the line of Ashish Gupta from Credit Suisse. Please go ahead.

Ashish Gupta -- Credit Suisse -- Analyst

Hi, everyone, and congratulation, Mr. Puri. So I think we are finally in safe hands. But this question was for Jimmy.

Operator

Sorry to interrupt, Mr. Gupta. Sir, we are not able to hear you clearly.

Ashish Gupta -- Credit Suisse -- Analyst

Okay. Yeah. Is this better?

Operator

Sir, a little better.

Ashish Gupta -- Credit Suisse -- Analyst

Okay. Yes, the question was for Jimmy. Jimmy, I wanted to check. You mentioned the collection numbers for September. So if I was to translate it in another term, would it be fair to say that in the retail book, all SMA categories put together will be less than 5% of the retail book, SMA 0, 1, 2?

Jimmy Tata -- Head, Credit and Market Risk

Hi, Ashish. SMA in the retail book is negligible, but I must say in large measure because we don't have higher than INR5 crore exposures in the retail book in any significant measure. So I didn't fully follow...

Ashish Gupta -- Credit Suisse -- Analyst

No, no. In the sense that the days overdue. So if you look at 30 day, 60 day overdue numbers, so both put together those buckets will be [Speech Overlap] 5% of the retail book.

Jimmy Tata -- Head, Credit and Market Risk

Yeah. The 30 plus varies product from product, and there will be some products where, as I did mention earlier, we would be rather sympathetic to the plight of those segments. Those segments might well have a 30-plus [Indecipherable] or so or more. But by and large, yes, you would be that.

Aditya Puri -- Managing Director

It would -- it would vary from 5% plus or minus 1.5%.

Ashish Gupta -- Credit Suisse -- Analyst

Okay. Okay. Thank you so much.

Operator

Thank you. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead.

Kunal Shah -- ICICI Securities -- Analyst

Yeah. Congratulations for a great set of numbers, and congratulations, Mr. Puri, for building up such a robust organization [Phonetic] and all the best going forward. So three questions. Now firstly in terms of the growth. I think we are getting back to more -- more or less pre COVID levels or we are expecting us to be there within one or two months, and we have all the distribution expense, digitization. So finally, where should we see in terms of the growth momentum and gaining of the market share within the industry? So that was the first.

Second was with respect to the current account discipline guidelines, which have been there now more than two months. So what is the kind of benefit that we are seeing with respect to say those norms? And thirdly in terms of the provisioning. So I think overall collection efficiency or demand resolution settling at a much better level. So with respect to the contingency buffer which we have created, should we say like we are more or less done with that, maybe having created INR2,300 crores, and going forward, there would not be much need of a contingency buffer given this kind of developments which have been there for us in terms of collections? Yeah. Thank you.

Sashidhar Jagdishan -- Managing Director & Chief Executive Officer Designate

So, can I? Yeah, on the first question, Kunal, we normally don't give a guidance. But I think the kind of narrative that Rahul and Arvind both have spoken about, I think it's quite evident and clear that the trends are encouraging and it's on an increasing trend, both from a retail and SME perspective. Yes, you would have a bit of a tepidness in the [Technical Issues] of the year. So I think as Mr. Puri also mentioned briefly, you need to now look at how we are tracking the growth sequentially from now on and largely from the retail and the SME stack. That is a very key indicator. We are very -- quite optimistic -- cautiously optimistic that the GDP is going to be much, much better in the second half of the year, which is what we all believe from the kind of indicators that we are seeing at the ground level. And I think while on a year-on-year basis there could be a bit -- bit of a base effect for a couple of quarters, but on a sequential basis, the trends will tell you that we are reasonably robust and strong vis-a-vis what the industry is going to do.

As regards market share, naturally, we are going to be higher than the market or the industry. We will continue to be nibbling away that extra share. That's on the growth part of it.

As regards -- on the current accounts, I think as you know, the entire objective of the current account guidelines is more from a risk management perspective. Considering the fact that we are one of the largest working capital banks in the country in addition to the fact that we are a large cash management bank, I think there will be some areas where we will gain and some areas we may have to sort of give up some of the shares. I think the initial primary -- prima facie assessment of the same -- it appears that we will be more or less on a square-ish basis if not slightly positive.

So that's where we are, and we also have clear-cut micro level strategies between the corporate banking, the wholesale banking team, the SME team, to see how we can get a slight advantage in terms of gaining that extra share of the current accounts and hence also, which means that we will also get an extra share on the funding side as well. So suffice to say that I think it's not going to be a negative for the Bank. It probably will be on a square basis or we will be slightly positive in the -- in the future.

The third aspect of it is -- what was the third question?

Srinivasan Vaidyanathan -- Chief Financial Officer

Provisioning, provisioning.

Sashidhar Jagdishan -- Managing Director & Chief Executive Officer Designate

On the provisioning, yes, Kunal, I think the last three quarters, whether it's the March quarter or whether it is the June and the September quarter, and in addition to that, the kind -- the INR1,500 crores of floating provisions that we are carrying on the books, as Mr. Puri also mentioned, from a 195% of the total coverage all put together, even if I were to -- if the NPA -- if the Supreme Court ruling does come about and we are able to continue the way the IRAC norms of RBI is regularized, then it will come down to 154%, which is still a very healthy number. I think we see -- we believe that we are -- we have sufficient cushion to buffer any future contingencies that may arise in the future. But if there is an opportunity when things are looking good as we have done in the past, if we believe that we need to do more of countercyclical provisions, I think we'll be more than happy to do so.

Kunal Shah -- ICICI Securities -- Analyst

Okay. So I think that's probably [Phonetic] just on that. So in terms of the credit costs, [Indecipherable] 140 [Phonetic], 150 [Phonetic], maybe 40 bp [Phonetic] some contingency. So still would be look toward it maybe given a very, very strong profitability, which is coming in at the operating level or maybe we should see it back retracing [Phonetic] to somewhere around 100 basis points, 120-odd basis points?

Sashidhar Jagdishan -- Managing Director & Chief Executive Officer Designate

Kunal, if we have -- if the economy were to move up and if we have the ability and if you want to provide countercyclical floating provisions basis -- analytics basis, the expected loss on the standard book, even if it is in the region of 1.4% to 1.5%, we would not be apologetic about it. But on a core credit cost basis, excess of -- minus of the floating provisions of the countercyclical provisions, I think it will be much lesser.

Kunal Shah -- ICICI Securities -- Analyst

Okay. Yeah. Thanks a lot.

Operator

Thank you. Ladies and gentlemen, due to time constraint, that was our last question. I now hand the conference over to Mr. Srinivasan Vaidyanathan for his closing comments.

Srinivasan Vaidyanathan -- Chief Financial Officer

Okay. Okay. Thank you. So thank you, Mr. Puri, thank you, Sashi, for handling the call. We appreciate the participants dialing in today. If there are anything more that you need to know, Ajit and I would talk to you over a period of time. Obviously, if anything more [Indecipherable] the next week. Thank you very much. With that, we can sign off, ma'am.

Operator

[Operator Closing Remarks]

Duration: 100 minutes

Call participants:

Srinivasan Vaidyanathan -- Chief Financial Officer

Sashidhar Jagdishan -- Managing Director & Chief Executive Officer Designate

Rahul Shukla -- Group Head-Corporate Banking & Business Banking

Arvind Kapil -- Country Head-Retail Assets

Jimmy Tata -- Head, Credit and Market Risk

Mahrukh Adajania -- Elara Securities -- Analyst

Suresh Ganapathy -- Macquarie -- Analyst

Abhishek Murarka -- IIFL -- Analyst

Aditya Puri -- Managing Director

Utkarsh Katkoria -- PGIM India -- Analyst

Ashish Gupta -- Credit Suisse -- Analyst

Kunal Shah -- ICICI Securities -- Analyst

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