Bad loans tend to rise in bad times,says HDFC Bank

Country's second largest private sector lender HDFC Bank has played down fears of rising bad loans,saying it is not unrealistic for some uptick in non-performing assets given the economic gloom.

Country’s second largest private sector lender HDFC Bank has played down fears of rising bad loans,saying it is not unrealistic for some uptick in non-performing assets given the economic gloom.

“To some extent,some increase in non-performing assets (NPAs) is something we don’t regard as unrealistic,” said executive director Paresh Sukthankar.

High interest rates,tight liquidity and currency volatility,all take a toll when the growth is sluggish, he said,adding the quality of the bank’s over R2.50 lakh crore loan book is “reasonably stable and healthy”.

The economy has lost 4 percentage points on the growth front in recent times,he said. Sukthankar also said movement in NPAs is within a narrow range which is the reality of doing business during a slowdown in overall growth.

Investors expressed concern following the release of the city-headquartered bank’s quarterly numbers for the April-June period on Wednesday,which showed a marginal increase in NPAs.

The stock lost up to 3.5% intra-day after the result announcement,though it recouped the losses Thursday.

“If you look at the incremental NPAs,a little over half of them came from regular retail NPAs and the remaining 45% were wholesale in nature but were from a handful of accounts…But I don’t think,there is any trend in that,” he said. In the first quarter,while gross NPAs remained flat at 1%,net NPAs rose marginally to 0.3% from 0.2% a year earlier.

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Sukthankar said one has to keep in mind the expansion in the asset book while looking at gross NPA levels. “Our NPAs at 1% or 1.1%,which have been there in the past 12 to 18 months,is lower than our historical average,” Sukthankar said.