ICICI Bank - Contrarian pick

ICICI Bank Ltd

Highlights Of Q2 FY19 and H1 FY19 Results

Key Highlights

  • Operating Profit grew by 10 % YOY to 52.85 billion rupees in the quarter
  • Core operating Profit excluding dividend income from subsidiary increase by 17 % YOY to 51.18 Bn in the quarter
  • Domestic loan book grew by 15 % YOY led by retail growth of 20.5 % YOY.
  • Proportion of loan portfolio rated A and above increase by 63.3 % at june 30th 2018 to 65.5 % at September 30th 2018.
  • Outstanding CASA deposit increase by 14.9 % YOY from 2.47 trillion rupees to 2.84 trillion rupees. Average CASA ratio was maintained above 45 % during Q2 of 2019.
  • Team is working on product offerings by focusing on sharp micro markets. Company is also focused on the SME portfolio.
  • NPA during the quarter has further moderated to 31.17 billion rupees of which 13.04 billion rupees reflects the impact of currency depreciation. Corporate expect the NPA to significantly lower in next financial year.
  • GNPA was 544.89 Billion rupees as of Sep 30th 2018.
  • The provision coverage ratio excluding protection coverage ratio increase by 480 bps sequentially to 58.9 % as of Sep 30th 2018 including technical potential write off the provision coverage ratio was 69.4 %.
  • The BB grade SME and corporate portfolio decrease from 246.69 Billion rupees to 217.88 Billion rupees QOQ same year.
  • Company total loan outstanding to NBFC and HFC were 367.34 billion rupees at the quarter. Loans to NBFC and HFC were about 5.4 % of outstanding loan in the quarter.
  • Company expect the provision in 2019 to remain elevated and closely monitoring the asset quality.
  • Domestic loan growth was 15.7 % YOY driven by 20.5 % growth in the retail business. Within the retail loan portfolio the mortgage portfolio grow by 16 % , auto mobiles loans by 10 % , business banking by 45 % and rural lending by 19 % YOY. Commercial vehicle and equipment loans grew by 20 % YOY. Unsecured Credit Card and Personal loan portfolio grew by 43 % YOY of relatively small base to 353.65 billion rupees and was about 6.5 % overall loan book as of now and it drive by cross selling to customers.
  • Growth in the SME portfolio was 20.4 % YOY for the quarter. SME constituted 4.6 % of the total loan book for the quarter.
  • Company saw continuous growth in domestic corporate loan portfolio as well excluding the Net NPA , Restructured Loans and loans internally rated below investment in key sectors. Growth in Domestic corporate portfolio was 15 % YOY.
  • Net advances for the overseas branches increase by 3.8 % in rupee terms and 13.3 % YOY in US dollar terms. The international loan portfolio was about 12.7 % of overall loan book for the quarter.
  • Overall loan portfolio grew by 12.8 % YOY for the quarter.
  • On funding side total deposit grew by 12 % to 5.6 trillion rupees for the quarter. CASA deposits grew by 14.9 % to 2.8 trillion rupee for the quarter. Outstanding CASA ratio was 50.87 % compare to 49.5 % for the quarter.

Credit Quality

  • GNPA addition was 37.17 billion rupees. The retail portfolio has GNPA addition of 6.7 billion rupees and recovery and upgrade of 5.92 billion rupees. Of the Corporate and SME the GNPA addition was 23.57 billion rupees.
  • About 13 billion rupees representing the impact of rupee depreciation on existing foreign currency NPA. The Balance slippage of 10.5 billion rupees was largely from BB and below portfolio which company has disclosed during the previous conference call. It included slippage of about 0.54 billion rupees from restructured loans evolvement of non-fund base exposure of 1.32 billion rupee and slippage of 8.28 billion rupees from other loans rated BB and below in nature.
  • As the corporate loan is lumpy in nature tradition for Gross NPA may fluctuate on quarterly basis. GNPA written off aggregate of about 3.89 billion rupees and bank sold NPA aggregate sold to 6.98 billion during the quarter, the sale was for 100 % cash consideration. s NPA addition in 2019 are expected to be significantly lower compare to 2018.
  • Bank Net NPA decrease from 4.19 % to 3.65 % YOY . Provision coverage ratio on NPA excluding cumulative prudential technical write off increase by 480 bps sequentially to 58.9 % compare to 54.8 % preceding quarter including the write off the provision coverage ratio on Nonperforming loan increase to 69.4 % for the quarter from 66.1 % preceding quarter.
  • As on date company have outstanding loans worth 31.81 billion rupees and 1.47 billion rupees respectively to the accounts refer to NCLT in the list-1.
  • The provision coverage ratio on these loans was 87.9 % for the quarter. Banks has outstanding loans and funding facilities amounting to 93.6 billion rupees and 17.82 billion rupees respectively to accounts refer to NCLT in the list-2 . The provision on these loans was 62.1 % for the quarter.
  • Total Non Fund based outstanding book to borrowers classified as non-performing was 30.47 billion rupees for the quarter. Net Standard restructured loans was 14.13 billion rupees for the quarter. Non fund base outstanding to company in the restructured portfolio was 1.27 billion rupees for the quarter.
  • Standard loans under the remaining RBI schemes mainly 525 and S4A excluding overlap which has been tilt out was 18.98 billion rupees for the quarter. In addition Non-fund base outstanding to borrowers under S4A other than standard restructure cases aggregates to 15.07 billion rupees for the quarter.
  • The aggregate fund base and non-fund base outstanding to company that were internally rated below investment grade and promoter entities decrease from 44.01 billion to 38.2 billion for the quarter. There was net decrease of 0.66 billion rupees and net rating upgrade of 0.52 billion rupees during the quarter. The drill down list has decrease from 440.65 billion at march 31 2016 to 32.83 billion for the quarter. Going forward company will merge the drill down list with other categories in the corporate and SME double B and below portfolio. As of 31st Sep 2018 the fund base and non-fund base outstanding to standard borrowers rated BB and below 217.88 Bn rupees this included the gross standard structured loans , the drill down list , fund base and non-fund base outstanding for the borrowers under fully implemented in the RBI scheme and Non-fund base outstanding to Non performing and structuring accounts excluding over laps of 113.05 billion rupees for the quarter compare to 124 .91 billion rupees to June 2018. The balance 108.3 billion of fund raise and Non-fund base outstanding in to borrowers rated BB and below included 45.5 billion rupees cases to cases with an outstanding greater than One B and 59.33 billion rupee for cases outstanding of less than 1 billion rupees.
  • There were rating upgrades to the investment base category and net decrease in outstanding of 41.03 billion rupees. There were rating downgrades of 22.76 billion rupees from the investment grade category during the quarter. This includes downgrades in the drill down list of about 8.21 billion rupees. Fund and Non fund outstanding to a group entity based in infrastructure, Infrastructure financing and EPC business. There was reduction of 10.04 billion rupees due to classification of certain borrowers as non performing during the quarter. Exposure to power sector
  • Total exposure was about 481.5 billion rupees for the quarter. Of the total power sector exposure about 30 % was either non-performing structure or a part of a drill down list under RBI regulation schemes. In Balance 70 % of the exposure 53 % was to private sector and 47 % was to public sector companies. In exposure to public sector companies about 16.14 billion rupees to the State electricity board.
  • Loans Base to NBFC was 241.9 billion rupees compare to 219.15 billion rupees as on 31st Sep 2017.
  • Loans investments to Non-fund base to HFC was 25.44 billion rupees for the quarter compare to 117.14 billion last year same quarter. Loans to NBFC and HFC were about 5.4 % of total outstanding loans as on 31st Sep-2018.
  • The builder portfolio including construction finance , lease rental discounting , term loans and working capital loans was about 184 billion rupees for the quarter.


  • PBT and tax excluding grew by 10.3 % to 52.85 Bn Rupees in the quarter from 47.93 Bn rupees last year same quarter
  • Net Interest margin for the quarter was 3.33 % compare to 3.19 % in Q1 FY19 and 3.27 % in Q2 FY18.
  • Domestic margin was at 3.71 % compare to 3.54 % in Q1 FY19 and 3.57 % in Q2 FY18
  • International margin decrease to 0.05 % in Q2 FY19 compare to 0.3 % in Q1 FY19 due to lower interest collection from non-performing loans.
  • There has been increase in the incremental cost of term deposit from banking system from September while bank is passing it on by hiking MCLR and the incremental lending rate the impact of that in margins may come with a ag due to lower recent frequency of loans into MCLR .
  • Total Non-Interest Income was 31.56 Bn in Q2 compare to 56.82 bn in Q2 last year. Fee income grew by 16.5 % YOY to 29.95 Bn rupee given by the retail income growth of 20.6 % which now constituent of 72 % overall fees in the current quarter.
  • Dividend income from the subsidiaries was 1.67 Bn rupee in current quarter compare to 4.11 Bn rupees in Q2 FY18 it also include the final dividend of ICICI life for FY17. The final dividend for ICICI Life was received in Q1 FY19.
  • Other income excluding dividend income from subsidiaries was 0.3 Bn rupees in Q2 FY19 compare to 0.12 Bn rupees in Q2 FY18.
  • Bank Operating expenses increase by 10.6 % YOY . Cost to income ratio was 45.2 % compare to 44 % in Q2 FY18 which excluding the stake sale in subsidiary.
  • Bank has 83,927 employee as on Q2 FY19.
  • There was a treasury loss of 0.35 Billion rupees in Q2 FY19 compare to profit of 21.93 Bn rupees in Q2 FY18 it include gain of 20.12 bn from sale of stake in ICICI general insurance company.
  • Provisions were 39.94 Bn rupees in Q2 FY19 compare to 59.71 Bn rupees in Q1 FY19 and 45.03 bn rupees in Q2 FY18. As a result of this bank had profit of 9.09 bn rupees in Q2 FY19 compare to 20.93 bn rupees in Q2 FY18
  • Consolidated PAT was 12.05 Bn rupees in Q2 FY19 compare to 0.05 bn rupees in Q1 of FY19 and 20.71 Bn rupees in Q2 FY18.
  • Bank on standalone Tier-1 capital adequacy ratio of 15.38 % and total is 17.84 %.


  • What has led to sharp upgrade in BB segment ?
    • One large account is of steel got upgraded during the quarter and these all are based on the internal ratings of the banks which are done by the risk team of the bank Other upgrades are spread across countries included one case that there was one change in management which happened few quarters back.
  • Does the downgrade in the BB segment is scattered across sector or real because company has mention it as a concern from last quarter ?
    • The drill down was of 8.2 Bn rupees that was done in specific sectors and then company have one Infrastructure company and some other accounts were there . On the builder finance portfolio company is monitoring that portfolio closely and as of now company is comfortable with the portfolio.
  • What has led the interest margin to go up ?
    • The lending rate was similar during the quarter and company had also deployed the surplus liquidity on the lending side has also see on the margin and there has been an increased in funding cost from September onwards going forward that will result in the funding cost going up and company will be in focus to pass that on to the lending side also .
  • When do the overseas margin will stabilise ?
    • It is volatile because it is driven by the interest collection from the non-performing loan . Given the very high level of NPA there the Core margin is extremely low . So volatility will be there in the financial year. In next financial year there will be some stability.
  • Did the NIM has been bottom out ?
    • Liquidity in the system has been extremely tight and RBI also reown the liquidity. So in second half the funding cost will go up for all the banks and company will be focusing on passing the funding cost on the lending side. But company have to see that how that will play out .
  • In terms of 821 Cr for a group engage in infrastructure for which downgrade happen so this is only with respect to downgrade or company have any exposure to the project and how does company read the whole group ?
    • There were rating downgrade of 22.06 Bn rupees from the investment grade category during the quarter. 8.21 Bn rupees included downgrade from the drill down list which is the power steel and ricks sector that is 28.21 Bn rupees than there was down grade toward the group engage in infrastructure so there is no specific number to specific account.
  • What has led to the Tier-1 capital ?
    • It is inline in the growth that company have seen in the balance sheet for the quarter excluding the profits risk weighted assets as per bank. Overseas book also increase sequentially in rupee term because of the depreciation.
  • What is the trend of deposits seen by the company and how does it affect the cost of deposit overall ?
    • Company have seen good attraction in retail term deposits during the last 2-3 quarters. The reason is overall term deposit growth for the bank is on lower side because company kept away from some of the higher wholesale term deposits because company had other opportunity of refinancing and the borrowings had gone up. In second half the liquidity will get more tighter and banks will need to rely on the wholesale term deposit as well .
  • What are the absolute numbers for CA and SA separately ?
    • 2.07 bn deposits from SA and 760 Bn rupees deposits from SA.
  • What level will company maintain for the unsecured loans in total portfolio in coming years ?
    • It will depend on the opportunities company see and as of now company is seeing lot of opportunities . In this area there is still lot of work that company can do by De-conjusting some of the processes and making it easier for customers to access these products. So as long as company will find growth company will grow the portfolio. Company will not go beyond the risk parameters that company has set up.
  • What is the reason that company has become so conservative on the provisioning side ?
    • On Coverage company have to be at 70 % by March 2019. Coverage will increase with better pace. In the period there will be some amount of aging provision that will come in as the non-performing loans move into the deeper buckets of the doubtful and loss category. So that is the reason that for second half also the provisions will be elevated. Compare to any credit loss it will be higher number .
  • In risk calibrated growth what kind of risk company will see in retail and non-retail going ahead ? Domestic CD ratio has been inching up from last one year so any steps taken by company for deposits growth versus the advances growth ? Does company have any retail loan mix ?
    • In normalised scenario the number for credit cost will be around 100 basis points compare to 300-400 basis points where company have been currently running. Beyond that company have internal numbers for each segment but do no disclose it separately on the credit cost.
    • On Credit deposit ratio the numbers have increase for the company and almost all banks and may be this is not just purely from a fixed deposit ratio. Company also look at the liquidity coverage ratio that company maintain higher than the minimum requirement of RBI which is close to 90 % and company is closer to 110 % on that. Company also look at some of the stable long term borrowing opportunities because compare to wholesale deposits they are much more stable and at points of time could even be at similar cost or lower cost. So company look at the overall liquidity by taking into consideration the credit deposit ratio , the level of borrowings that company have and the liquidity that company maintain. So company is comfortable with the balance sheet and company want to grow its retail deposit at faster pace and that is what company is focusing on.
    • On retail loan mix company don’t have any specific figure it all depend on the opportunities in the market and company own appetite because it will also be the growth in the other segment where also there are attractive opportunities on the corporate and the SME side.
  • Does the 100 basis point credit cost can be achieved in next 2 years ?
    • Company will get on normalised credit cost in that period if migration to IND-AS happen than the number can achieve earlier also.
  • What about ROE targets for the year ?
    • 15 % is the initial targets and going forward company will re-assist it. Company focus is to increase the core operating profit within the risk parameters.
  • Did company is looking for any increase in the FCNR deposits going forward ?
    • It depend upon the opportunity and market rate.
  • Did company is increasing the deposit rate in domestic market ?
    • All banks have increased and company have increase it for retailers and MCLR also for couple of times in last quarter so these rates are calibrated for what is the liquidity is in the market. It could increase in second half of this year.
  • In Deposit what proportion is of retail and wholesale ? In wholesale what rates can go up by ?
    • In wholesale deposit rate if one look at CD rates they are a good relection generally for where the fix deposit rates are , it gone up above 8 % and then it depend on every day and every week where the rate is there for the banks.
    • Larger deposits will be from retail deposits.
  • In overseas margin how will the reversal come in margins ?
    • There could be transfer of capital which happen . More importantly there are non-performing loan indeed hoping to collect on some of them , timing is very important to see there and in the interim because the interest collection on NPA . In this quarter company have interest collection book in the quarter and after that the margin is 5 basis points without that interest expense may get higher than the interest income. Because they have not grown the book in the last two or three years that kind of compounds it more from a margin perspective. In next financial year there will be more stability on margin.
  • On liquidity crisis does bank is getting enough opportunities to lending to NBFC on buyout portfolio opportunity and what are the internal caps in terms of NBFC lending ?
    • There will be opportunities for lending to NBFC and HFC and also buying portfolio from NBFC and HFC for priority sector purpose. Company is looking at such opportunity and all of these has to be within company risk appetite. Company is open to lending to NBFC and HFC and even buying retail portfolios from them.
  • Does company approach of lending will change going further ?
    • Company approach will be more granular and focusing on high rated loans only.
  • What is the extent of provisioning right back in NCLT-1 and by when company will see some of the NCLT provisioning coming back ?
    • On NCLT once case is going on do as and when that kind of conclude and banks recover on that it will be positive for the banks. There will be further provision that comes in because of aging of some of loans based on RBI guidelines.
  • Kindly brief on the UK loss subsidiary ? In terms of asset quality what are the NPL level in that at the movement ?
    • The loss is because of some of provisions that may have taken on the Non-performing loans which company have in the UK subsidiary . Bit of that loans are India link loans and have faced similar kind of face that company had talk about on the domestic and overseas branches hook. That is where company is in terms of UK portfolio. For the current year company have to watch how it plays out in terms of aggregate NPL at the UK subsidiary about 119 mn dollar.
  • What are the risk parameters and risk frame works that bank is using to help company retail engine grow ?
    • If retail lending is break up into two parts one is secured and other is unsecured . On the unsecured part essentially company credit scoring model has input which is more than the cibil and the credit beurau . Credit beaurau is a lag indicator not a lead indicator. Two-third of all lending is done to company current customers and liability under current behaviour is very good for the credit scoring that company do. Company is very strong on the Calvi side . Company have a very very high frequency looking into the liability side.
    • On the Secured part , company use to do income estimation there company have to very careful on the collateral debt that company get. The big estimates that company do is
      • What is the quality of the collateral by valuation
      • What is the saleability of the collateral
      • When it is sell what is realizable value.
    • Company also look on concentration area.
    • On the valuation side company have large internal team which do valuation So company don’t rely on external valour. Delta that one get on secured and unsecured is quite large and so the collateral value and realisable value has to be very critical.
    • On routinely credit cost company do two things
      • Routinely watch Benchmark with Credit cost
      • The files which don’t get pass through company own parameters and within next 6 month or 1 year if they get loan from outside than company able to figure out whether the rejection was proper or improper. Proper is if the credit cost is higher on portfolio which company left out and internally company is quite satisfied
  • What is the business banking sub vertical retail consist of ?
    • They are loans which are of typical size of 1 and 1.5 Cr so it is small ticket business loans and they are mostly collateralised.
    • There will be two collateral
      • Own Cash Flow
      • LAP or Commercial
    • Most of them are on sole banker relationships on 1 Cr to 1.5 Cr there is no multiple banker.
  • How soon does company will get to 100 % on NCLT from aging provisioning because bulk of company NPA are aiding in the doubtful one or D1 category or beyond ?
    • It will be spread across quarters so depending upon time bound and years get completed to move to 100 %. That will be distributed in several next quarters the portfolio moving from 40 % provision requirement bucket to 100 % provision requirement. So lot of that indeed will come in next financial year if company continues according to the RBI guidelines.
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Any insights on ICICI Bank at these levels

I read somewhere that ICICI is currently the second most tracked stock globally.
I have no positions so far, but been a long time customer who never had any trouble (in contrast my experience with HDFC has been sub-par).
At a price of 344 this does look interesting poised.
(I have not looked at the latest results though)


People’s bank of China buys in to ICICI bank…


They will get the stick from the RBI governor in private. As far as I know investment bankers have been asked not to market their domestic bank issues in greater China region. Looks like a stealth kind of ops here.

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Conference call highlights

„ Bank’s Ultra high frequency on economy suggests 94% collections across segments for
the banking system. Toll collection (sign of mobility and business activity) is around pre-
Covid levels with more than 100% on commercial side and around mid-80% in passenger
movement. Bank expects NPA addition in second half to be higher for the entire banking

„ As pick up in collections and demand emerges, bank expects to drawdown excess

„ Bank does not foresee any major rate cuts in deposits unless RBI initiates rate cut.

„ Bank continues to maintain excess liquidity which further boosted LCR to 150%

„ Treasury gains (INR5.4bn) also include sale of investments in ICICI Securities to the tune
of INR3bn undertaken to comply with shareholding norms.

„ Tax rate was lower because of tax breaks on account of dividend received from subsidiaries
„ Bank has disbursed INR106bn so far under ECLGS scheme, which also helped post
growth in SME/business banking segment.

„ Bank has builder portfolio amounting to 3.5% of loans, which is fairly granular and to
large established builders. Around 12% of portfolio was either under BB or below or
NPA. Outstanding to NBFC/HFC is around 5% of loans, of which only 1% is classified
either BB and below or NPA.

„ Overseas book stood at $5.5bn. Of this 66% is towards Indian corporate, 17% is towards
non-Indian companies with Indian linked operations, 7% is NRI owned and 10% is
towards non-Indian companies.
Collections/Asset Quality

„ Collections in retail EMI and credit cards came at 97% of raised demand resolutions,
assuming 99% collection efficiency in normal times. Retail EMI and credit card overdue
loans were 4% higher than pre-Covid levels, and overdue loans in rural portfolio were
1% higher than pre-Covid times. Overdue loans in SME/Business banking were same as
at pre-Covid levels. For Corporate book, Less than 3% of portfolio was overdue.

„ Bank has received restructuring applications for INR21bn for corporate/SME loans. Bank
expect less than 4% of corporate book to get restructured.

„ Bank further ramped its Covid provisions by INR5bn to INR88bn fully on account of
provisions made on unrecognized slippages (INR14bn) implying a coverage of ~33%,
bank also did not accrue interest on same. Overall bank holds INR147bn of non-accounted
provisions equivalent to 2.6% of loans.

„ Personal loan and credit card pool - 99% of customers continue to receive salary credits
in the month of Sept. SME and Business banking pool - average daily credit summations
have reached pre-Covid levels.

Q 4 results by icici bank

Last year during this time I had posted above on ICICI Bank. During the last 12 months as the market moved upwards, so has ICICI.
Today when I reflect on the bad press for HDFC and the positive experiences with ICICI as an NRI customer, I believe that ICICI is doing all the right things.
I also suppose the bad times of ICICI (Kochhar et al.) is history.

Surprised that the HDFC thread has so many recent posts but no one in VP is talking about this stock since April.

Stock is at 650 and still good value (to me). Taking a position.


The imobile app is miles ahead of hdfc bank mobile app. I have both icici and hdfc bank accounts and I prefer to do all my transactions through icici only because of its mobile app. I opened ppf, bough car insurance and term insurance from its mobile app. The same is the case with most of my friends. Hdfc is ahead because of icici bank was bogged down by some corporate loans and chanda kochar episode, but the new icici is back to its A game in retail banking. Its even offering insta loan on credit card and personal loan on mobile app only, the future looks bright. Sooner or later it should give tough competition to hdfc bank in terms of valuations.
Disclosure: invested


Agreed !!! As someone who also has both ICICI and HDFC, ICICI is miles better in terms of tech.


ICICI Bank’s co-branded credit card with e-commerce major Amazon has been one of the driving factors behind this gain as the bank on-boarded close to a million customers in the past nine months


yes, the card is being issued in 5 min if the customer has good credit history, i myself has the card and few of my friends applied and got approved on the spot and the best thing is the card got added on mobile app even before the delivery. trully world class experience. i request the board members to try the feature and experience your self how it is. hdfc bank pales in comparison in digital on boarding.
Disclosure: invested in icici bank from 480 levels.

Quarterly results from ICICI bank over the weekend

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Net npa is only 1.16% and provisions fell massively, narrative also shifting infavor of icici and axis banks. The npa in gold loan and kcc are not a big worry, but the stress levels in retail is to be seen in next few quarters. But as per my experience their retail loan sourcing is very good, in my case even I’m paying all the emi regularly before due date they are not increasing the credit limit like hdfc or some other banks. They are very very Conservative in this, hope its the same in majority of cases. Hope we are going to see icici catchup with hdfc in valuation.


Both HDFC and ICICI Bank trade at 25ish PE currently. What valuation catch up are analysts talking of? Book value is significant but if HDFCs book generates a higher return and the PE for both entities is same consequently then why should a re rating take place?

Not able to understand the logic for re rating. Can someone please help me get there.

Inv-HDFC Bank

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if you look at the current market scenario ICICI Bank is trading at its all time high and HDFC Bank is trading 15% below its all time high. pe and other metrics may show the rerating once it happens, but price is the best indicator to understand how a stock is being perceived in the market in the early stages.
disclosure: invested from lower levels

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Does anybody know if Icici bank had exposures to Future retail and Vodafone? since both these businesses may have to go to NCLT. It can impact the bank’s profitability… if there is a hair cut

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Future Retail - NO Exposure

Can be checked here. Scroll till the end.