“With regard to any kind of movement of stress in the retail and MSME sector we are very closely monitoring, yes there is a visibility of little bit stress from the past data but it is not alarming,” Jain said in the post monetary policy conference while interacting with reporters. “We are constantly engaged with the regulated entities, particularly the outlier banks and NBFCs.”
Jain said that they have asked banks and NBFCs to raise capital as well as provisions.
“We also conduct stress tests, in the past we had advised all regulated entities post Covid to improve their provisions, to which they have responded,” Jain said. If you see the results of all banks, pre and post Covid there is overall improvement in all parameters with regards to capital adequacy ratio, there is reduction in gross NPA, net NPA, as well as slippage ratio, there is improvement in provision coverage ratio and there is also improvement in profitability. The sector is better positioned today than what it was before the onset of Covid.”
India’s largest lender
has seen rising stress levels in its home loan and MSME book with nearly 75% of the incremental slippages coming from these two segments in the June quarter. Fresh slippages came in at Rs 15,666 crore, while Rs 5268 crore from the retail book another Rs 6416 crore from the SME segment. The lender has already pulled back Rs 4700 crore from its fresh slippages in July.
“We have slippages coming from MSMEs and home loan space, which is about 1.39% of the book, but we have seen a decent pullback on both home loans and personal loans,” Dinesh Khara, chairman, SBI had said last week. “The MSME sector is stickier; many of the SME borrowers also would be the ones to avail home loans. The stress seen in this book is on account of disruption in cash flows for the SMEs.”
Lenders say that the second wave of Covid not only impacted the capacity of borrowers to repay loans but also forced banks to halt collection efforts in the June quarter.
Private lender Axis Bank reported fresh slippages of Rs 6,518 crore, up 23% from Rs 5285 crore in the March quarter. 84% of the net slippages were from the retail book.
too saw a disproportionately higher share on NPAs from the retail segment as Covid affected repayment ability of borrowers.
ICICI Bank which has seen it’s retail non-performing loans at closer to 3.8% – a 7 year high, has said that it will exercise increased caution on retail book asset quality going ahead.
HDFC Bank too saw it’s bad loans inch up in the June quarter, a bulk of it contributed by smaller ticket loans. Restructured assets stood at 80 basis points of total advances, a bulk of its led by the retail portfolio. Also, two-third of the retail restructured loans came in form the unsecured assets category.
Even though India’s biggest lenders have seen asset quality worsen and recast cases rise, they are hopeful that with collections picking up from June-July, repayments from overdue buckets will normalise soon.
