Indian lenders are seeing an asset quality decline spawned by a protracted heatwave that crimped the ability of on-the-ground representatives to speed up collections. Polls through the summer also affected asset quality at mainstream lenders.
HDFC Bank and Kotak Mahindra Bank posted increases in fresh slippages for the June quarter.
HDFC Bank saw fresh slippages increase by 1.5% or nearly Rs 7,900 crore. Kotak Mahindra Bank said its slippages rose by Rs 1,360 crore or 4% sequentially. On a merged basis, asset quality deteriorated slightly with gross non-performing assets (NPAs) at 1.33% from 1.24% in the March quarter due to higher agriculture NPAs.
For Kotak, its special mention accounts (SMA-2) or loans overdue more than 60 days rose to ₹232 crore at the end of June 30. It was Rs 199 crore at the end of March.
HDFC Bank’s non-bank arm HDB Financial Services saw credit costs shooting up 70 basis points sequentially. It rose to 1.8% in the June quarter from 1.1% in the March quarter. The management attributed higher credit to seasonal factors such as reduced repayment ability.
“Though NPA numbers have been flat, the issue is Stage 2 assets have picked up,” said Suresh Ganapathy, head of financial services research at Macquarie Capital. “So what has happened is elections and heatwave have affected collections and overdue assets have gone up. How much will become NPA, and how much will recover is anybody’s guess. The MFI as well as NBFC target clientele will be more affected.”
Private lender RBL Bank saw fresh slippages rise to nearly Rs 720 crore. The deterioration in asset quality was due to stress in microfinance and card segments. Its gross NPAs increased sequentially by 4 basis points to 2.69%. Net slippages from the credit card portfolio stood at Rs 400 crore.
The bank’s MD R Subramaniakumar said over Rs 60 crore of it came from a transition in the management of the portfolio to within the bank from a co-brand partner, and added that the bank expects a part of it to reverse to become well-performing in a couple of quarters.
Public sector lender Union Bank of India made standard provisions of Rs 1,296 crore for select accounts where it expects to witness stress in the coming quarters. The bank also saw its SMA book increase to Rs 6,730 crore.
