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13 of 18 private lenders witnessed record growth in non-performing assets in Q3

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PW Bureau 

Banks’ aggregate asset quality improved as the gross NPAs dropped 11 basis points q-o-q to 4.21 percent

New Delhi: There has been a sequential rise in the gross non-performing assets (GNPAs) in 13 of the 18 private sector banks in India, which have reported results for the quarter ending December. However, their aggregate asset quality has improved as the gross NPAs dropped 11 basis points (bps) quarter-on-quarter (q-o-q) to 4.21 percent. The asset quality of banks, including Axis Bank, ICICI Bank, and Kotak Mahindra, improved, while gross NPAs reduced.

For 11 of the 18 banks, provisions and contingencies increased, partly because of the slippage of the IL&FS account. Concerns have been raised about the SME sector as some of them are in trouble following the introduction of the Goods and Services Tax (GST).

The IL&FS crisis could have pushed NPAs up

Yes Bank senior group president, Rajat Monga told analysts that the bank’s gross NPA ratio is now reported at 2.1 percent, representing a growth in the NPA book of about Rs 5,100 crore. “The bank is reporting net NPA ratio of 1.18%, or Rs 2,800 crore, of net NPAs. Both these ratios have factored in a Rs 1,900 crore slippage on account of IL&FS,” Monga said.

Analysts of Kotak Institutional Equities’ examined that Axis Bank’s slippages from the IL&FS group amounted to Rs 300 crore, seven percent of the bank’s total slippages. Further, 98 percent of overall corporate slippages were from the disclosed BB and below pool accounts, a statement from Axis said. 

A contingent provision of Rs 255 crore was made by IndusInd Bank on these “standard assets” (advances granted to various companies of IL&FS Group), on top of an amount of Rs 275 crore made in the second quarter of FY19. 

“Elevated slippages from accounts under IL&FS offset strong improvement in overall asset quality for most banks under coverage (80% of overall slippages for Yes Bank and 7% of slippages for Axis Bank were from accounts under IL&FS),” said the analysts at KIE.

Jefferies’ analysts say that HDFC Bank expects higher slippages in agriculture segment in the first quarter of FY20 citing “elections and the pre-monsoon indecision of farmers.”

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