Retail non-performing assets (NPAs) will be higher in the third and fourth quarter of FY21 and will go back to the pre-COVID levels only in the new fiscal year, Axis Bank said on Thursday.
The third largest private sector lender, however, said that the asset quality situation is much better than what was feared initially and stressed that it has adequate provisions to take care of the reverses.
It can be noted that the damage to the economy because of the pandemic resulted in job losses or salary cuts, in turn impacting the loan repayment abilities in the otherwise resilient retail segment.
“Given the fact that lot of people lost their jobs, some had to take salary cuts, some industries were badly affected that will have some impact on delinquency and portfolio collections. But these numbers are much lower than what we had anticipated,” its head of retail lending Sumit Bali told reporters.
He said loan repayments are improving every month, and the stock of sour debt from the past will lead to a higher NPAs in the December and March quarters, before the situation improves to go back to the pre-COVID levels in the new fiscal starting April 2021.
In September, when the six-month moratorium on loan repayments ended, the bank had been experiencing higher bouncing on electronic fund collection mandates but the same is much lower than the industry’s averages, officials explained.
On the restructuring, which got introduced to take care of loan stress after the end of the moratorium, the bank has seen very few applications running into “low triple digits”, Bali said, adding that the exact picture will be known only after the window closes on December 31.
“The number of restructuring requests continues to be low, we will have a better visibility by the end of this month. These numbers are fairly well within what we had guided,” he said.
The bank has been focusing largely on the secured assets front when it comes to new loans and the business has gone back to pre-COVID levels, while the riskier unsecured loans like the ones are credit cards is at 60-70 per cent of the pre-COVID levels.
It is focusing on the bank’s existing questions for the unsecured lending segment, he said, adding that from a loan repayments perspective the worst is behind for the salaried segment.
It is being conservative on the loan to values on the home loans and loans-against-property segment, and cautious while taking lending calls on people associated with deeply impacted sectors like aviation, hospitality and entertainment, Bali said.
The lender’s head of branch banking and retail liabilities Ravi Narayanan said the bank has set aside an excess Rs 12,540 crore in provisions for the reverses and also raised Rs 10,000 crore of fresh capital to take the overall adequacy to over 19 per cent with a view to position the bank for growth opportunities.
The bank has invested considerably on the digital banking front, including allocating 800 dedicated people to take care of all the requirements, its head of digital banking Sameer Shetty said.
Within days of the lockdown implementation, it bought 12,000 laptops to ensure that work goes on seamlessly from homes, he said.
Given the recent service outages experienced by rivals SBI and HDFC Bank, Shetty explained that such an eventuality can happen to any player and added that the bank has carried out of turn audits to check its networks.
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