Top five private banks stare at NPAs doubling to 5 per cent in FY21: Report
| Date :11-Jul-2020 |
Business Bureau :
Top five private sector banks may see their slippages double to 5 per cent this fiscal due to the poor loan offtake and the moratorium-driven contraction in net interest margins, warns a report. These five banks--HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank, IndusInd Bank and Yes Bank--collectively control a quarter of the system and three-fourths of the private banking space, according to a report by India Ratings on Friday.
“We forecast FY21 slippages to nearly double to around 5 per cent for these banks from 2.3 per cent in FY19 and 2.7 per cent in FY20, even though net slippages would be lower if refinancing remains a challenge, resulting in a 4 per cent contraction in their net interest margin,” says the report. As loan demand remains tepid, banks are parking their excess liquidity in low yielding alternatives such as Government bonds and top-rated corporate securities due to their higher credit risk perception and widening duration spreads, even as deposit inflows have been robust.
On the other hand, growth in deposits for these top five private banks in FY20 was 18.8 per cent which was 18.5 per cent in FY19, while loan growth declined to 15 per cent from 19.1 per cent during this period. Additionally, the Reserve Bank has injected Rs 1.7 lakh crore of liquidity into the system over the last six months through open market operations and secondary market purchases. Without quantifying, the report expects a significant spike in delinquent assets due to the deep troubles the economy.