“While the stress is much lower than what we had envisaged, these numbers will be higher than what we saw last year. It is getting better for us but since there was stock we will see stress in Q3 and Q4,” Sumit Bali, head of retail lending and payments at Axis Bank, said.
Mumbai: Axis BankNSE -0.12 %, India’s third largest private lender, said it could see an increase in retail non-performing loans in the third and fourth quarters of this financial year before the situation normalises in 2021-22. However, non-performing loans were much lower than what was feared at the start of the Covid-19 pandemic, it said.
“Bouncing was higher in the month of September so that flows forward, and that is what you will see in terms of gross bad loans in Q3 and Q4,” Sumit Bali, head of retail lending and payments at Axis Bank, said on Thursday. “While the stress is much lower than what we had envisaged, these numbers will be higher than what we saw last year. It is getting better for us but since there was stock we will see stress in Q3 and Q4.”
He said job losses and salary cuts were hurting the retail book but the situation would improve by 2021-22.
“Our sense is once we are over Q3 and Q4 of this financial year, the retail asset quality will be back to pre-Covid levels from next financial year,” said Bali. “Given the fact that a lot of people lost their jobs, some had to take salary cuts and some industries were badly affected, that will have some impact on delinquency and portfolio collections.”
The bank has been reporting collection efficiencies of more than 95 per cent after the six-month moratorium period ended in August. Retail advances grew 12 per cent at the end of September and contributed more than half to the lender’s total portfolio. The bank had reported gross non-performing assets of 0.7 per cent on its retail book at the end of September.
The National Automated Clearing House (NACH), a clearing service for interbank transactions run by the National Payments Corporation of India, shows that bounce rates by volume have gone up to 40.5 per cent while by value is up 31.1 per cent. These were 31 per cent and 25 per cent respectively in February.
NACH is indicative of only a quarter of the total retail payments segment and does not reflect intrabank transactions or those made through cash or cheque. Banks, however, have been carrying large provisions as high as 1.5 percentage points in several cases and generally the collection rate for such customers has been high.
Bali also said that the number of restructuring requests for the retail portfolio was in low triple digits.
“The number of restructuring requests continue to be low. We will have a better visibility by the end of this month,” said Bali. “These numbers are fairly well within what we had guided. We are assessing whether a business is facing cash flow issues and if restructuring will help it emerge out of stress. If it won’t benefit, then it is not advisable to push it down the road.”
The bank also continues to be conservative on its unsecured loan portfolio, which is still at 60-70 per cent of pre-Covid levels, while the secured book has crossed pre-pandemic levels.