Parag Thakkar: Correct. And sir, we have opened around 2,200 branches in last two years. So when they start showing productivity, your OpEx to asset ratio will — should come down, right, logically? Because they will become more productive now in terms of gathering deposits as well as advances.
Srinivasan Vaidyanathan: Yes, sir. It will come over time. But as we keep adding more and more new branches, one weighs the other. But if you look at two years ago branches, very important that you touched upon, if you look at what we opened about two years ago and look at that cohort, and when we look at that cohort of branches about how they are performing, right, our model shows that it should breakeven in two years’ time and about 90%-plus, slightly above 90% of the branches have broken even in about 20 months, 21 months. We have another 10% of the branches to breakeven. And when that does, that’s the average of, call it, 22 months to 24 months breakeven. So, they are all following their scripted model in terms of how they deliver.
We are confident that all of them starts to payback sooner, but we continue to add branches, right. That’s why when you see, part of the cost is when there is a credit opportunity, credit costs, as you heard us talk, it’s about 49 basis points. And if you look back, what is the — how does it — where does it revert to mean, right? At what levels does it revert to mean at some point in time? Call it, 80 basis points, 90 basis points, or in the pre-mortgage book, we would have said that it is 90 basis points, 100 basis points is the mean where it can revert over a period of time whenever that normalizes — benign conditions normalize. Maybe with the mortgage in, it is more closer to the 80 basis points or something reversion to mean. But the point to mention to you is that for every 10 basis points of credit cost opportunity that we take from a timing point of view, right, within the return framework, ROA framework, we take this opportunity on a timing to invest, it’s about 1% to 2% of cost to income that gets invested there, and so that is what.
And here we are trying to say as we make those investments, it should start to pay back. So, we can now look at those ones which are more than two years old and those cohorts are performing well, and we now starting to look at the last 12 months cohorts and we will keep tracking them as we go.
Parag Thakkar: Sir, just last one last question because everybody is concerned, now that you have gathered deposits of more than INR1 lakh crores, I think that concern is gone. But till last quarter, everybody was concerned about how we will fund. And as Mr. Sashi rightly pointed out in the beginning that we are not concerned about the funding part now. But going ahead, so for example, we have Credila, we have stake in HDB Financial Services, this anyways I think we are mandated to list, right, by FY ’25. And that will also unlock some value and, of course, that will provide us some funding also. So, can you just throw some light on direction of monetizing the stakes in various entities which we have in order to fund our growth? Because that much pressure will be lesser on the deposit engine, right?
Srinivasan Vaidyanathan: Your points are well taken and appropriate timing those will be considered for either, but, of course, at the right kind of a value. Yes, your thought process are right. And, from a timing point of view and from a consideration point of view, it will all depend upon the appropriate valuation.
Operator: Thank you.
Parag Thakkar: Thanks.
Srinivasan Vaidyanathan: Thank you.
Operator: [Operator Instructions] Next question is from the line of Atul Mehra from Motilal Oswal. Please go ahead.
Atul Mehra: Yeah. Hi, good evening and thanks for the opportunity. Sir, I have just one simple question. In terms of the non-retail NPA for HDFC Limited, how much of this was unanticipated at the time of the merger and how much of it is in terms of already anticipated and built for in the swap ratio that we had? Maybe if you can throw some color on that. Thank you, sir.
Srinivasan Vaidyanathan: Okay. Yeah. See, if you look at that book and look at this book over a period of six quarters at least now, it has been on a decline, right, which is this book has been assessed from a bank risk assessment perspective and it has been — there has been a de-growth that has been happening. So, go back to the June ’22 quarter, it was flat and then from then on, there was a minus 4% or a 5%, then a minus 6%, then a minus 7% and so on, and the recent quarter is a minus 6%. So, the risk assessment — we want that book. Sashi mentioned it, we want to grow that book. But before you grow the book, you have to assess in terms of the exposure for kind of a facility and so on, so that you’re balancing the risk over a period of time.
And that’s what has happened. And we are at a stage where we feel comfortable with the quality of the book as we see now with the provisions of approximately what we described on provision coverage ratio at 74% or the contingent provisions we have 66 basis points, all in — and these are all post-merger, right, so not just pre-merger, encompassed well. And we are looking at a book that is strongly positioned.
Atul Mehra: Right. Got it, sir. Sir, just one clarification on the same point. Did any of in terms of the incremental stress come as a surprise to the internal management, like to the bank management or this was something that you had already anticipated while you had worked out the numbers at the time of the merger?
Srinivasan Vaidyanathan: See, the risk assessment is the dynamic risk assessment. That is why on every quarter basis you see certain thing slips and certain things recovers and upgrades and it is a continuous process. What is true at a point in time is not a true at every point in time. It keeps changing.
Atul Mehra: All right. Got it, sir. Thank you, and all the best. Thanks.
Srinivasan Vaidyanathan: Thank you.
Operator: Thank you. Next question is from the line of Suresh Ganapathy from Macquarie. Please go ahead.
