Private lenders’ loan portfolios show stress easing in Q2

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The asset quality of major private sector banks improved slightly sequentially during the September quarter. This is due to efforts by banks to reduce further slippages, improved collections, better collections from written off accounts and regulatory support in the form of loan restructuring.

For example, gross non-performing assets (GNPA) of India’s largest private sector lender HDFC Bank fell to 16,346 crore yen in the July-September quarter from 17,099 crore yen in the first quarter of the fiscal year. In progress. The bank also made lower provisions and contingencies at 3,924.70 crore during the quarter, compared to ₹ 4,830.84 crore in the June quarter. GNPA, as a percentage of gross advances, also fell to 1.35 percent in September, from 1.47 percent in the June quarter. It was 1.08% in the same quarter a year ago.

On an annual basis (year-on-year), the bank’s GNPA was above the 11,305 crore recorded in the September quarter. However, the year-over-year figures are strictly not comparable since the Supreme Court of September 3, 2020 temporarily suspended banks from classifying loans that were standard as of August 31 as NPA (non-performing assets). Most banks reported their NPA figures on a proforma approach for the September 2020 and December 2020 quarters while maintaining cautious contingency provisions. On March 23, 2021, the Supreme Court lifted the provisional suspension of the banks.

ICICI Bank reported its highest quarterly profit ever on a stand-alone basis at 5,511 crore for the September quarter, helped by healthy loan growth and lower bad debts. The bank’s asset quality improved, with gross non-performing assets (RPAs) falling to 4.82 percent of gross advances as at September 30, from 5.15 percent in the June quarter. Net NPAs (bad debt) also fell to 0.99% from 1.16% sequentially in the September quarter.

Likewise, Axis Bank’s gross and net NPAs showed substantial improvement both on an annual basis and sequentially, while Kotak Mahindra Bank also showed an improvement in the quality of its assets in the last quarter. .

GNPAS on the rise

In a recent report, Crisil said banks’ GNPAs would drop to 8-9 percent this fiscal year limited by Covid-19 relief measures such as the restructuring waiver and the line of credit guarantee program. emergency (ECLGS). However, he also added that with more than 2% of bank credit expected to be restructured by the end of this fiscal year, stressed assets – including gross ANP and the loan portfolio under restructuring – are expected to hit 10-11%. .

“The retail and MSME segments, which together make up about 40% of bank lending, are expected to see an increase in APNs and stressed assets this time around. Stressed assets in these segments are expected to grow to 4-5% and 17-18%, respectively, by year-end. The numbers would have trended even higher without write-offs, mainly in the unsecured segment, ”Krishnan Sitaraman, senior director and deputy director of ratings, Crisil Ratings, said in the report.

Retail portfolio

The stress in the retail portfolio is already visible. For example, HDFC Bank restructured loans worth 7,829.48 crore under the Reserve Bank of India Framework 1.0 for Covid-19 stress. Of which, 22% or 1,687.02 crore slipped into the NPA category, with the personal loan slippage alone amounting to 1,283.06 crore. The bank also canceled loans worth 857 crore.

However, the stress in the MSME sector appears to be more pronounced for public sector banks than for its private peers. In its Financial Stability Report, the RBI said that despite the restructuring, stress in the MSME portfolio of PSBs remains high. While the PSBs actively resorted to restructuring under all programs, the participation of private banks was only significant in the Covid-19 restructuring program proposed in August 2020, ”the regulator said in July.


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