ICICI, Axis, SBI and PNB report sharp increase in bad debt collections

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ICICI Bank, Axis Bank and Punjab National Bank () all reported a sharp increase in bad debt collections in the second quarter, largely due to improved retail collections which had fallen sharply in the first quarter through the second. wave of Covid 19.

Bankers and analysts said improving recoveries is another indicator of improving consumer confidence and is a start of better asset quality for banks in the immediate future.

“Two things have happened in the last quarter – one is that bad debt collections from large companies are catching up as we have seen with the completion of the DHFL resolution,” said Rajiv Anand, director Deputy General of Axis Bank.

“Two, the retail payments that were hit due to the second wave of Covid caught up as economic activity picked up and customers started making payments. ”

Anand was referring to the recovery of 37,400 crore recorded by lenders led by the State Bank of India (SBI) in the last week of September in the Dewan Housing Finance (DHFL) resolution.

SBI-led financial creditors admitted claims of 87,000 crore. Of that, SBI alone had an exposure of 7,267 crore to the distressed house financier. Some of that and other retail recoveries resulted in SBI’s full recovery, with upgrades increasing 83% to 7,407 crore in September from 4,038 crore a year ago.

The story is similar for the private sector peer of SBI

, which saw a two-and-a-half-fold increase in recoveries and upgrades to 5,482 crore in September 2021 from 1,945 crore a year earlier.

ICICI’s total recovery and upgrades are less than 1,000 crore of what the bank recovered in full year 2021 at 6,463 crore.

Axis Bank also more than doubled its recoveries and upgrades in the second quarter ended September 2021 to 4,757 crore from 2,026 crore a year earlier. The Punjab National Bank (PNB) also reported an almost tripling in recovery and upgrades to 9,126 crore from 3,252 crore in the same quarter last year. Analysts said the trend is clearly in favor of fewer new slips and more recoveries for the remainder of the year.

“The portfolio affected by Covid, particularly in the personal and small business loan segments and which were the main causes of slippages in the first quarter, is showing signs of a strong recovery,” said Asutosh Mishra, head of research at Ashika Stock Broking. “Going forward, asset quality trends in the BFSI sector look better as we don’t expect slippages to increase like they did last year.”

Mishra said the decline in slippages is also a good sign for improving the quality of bank assets.

SBI slippages fell to just 4,176 crore in September 2021, from ₹ 15,666 crore in the quarter ended June 2021, as retail loan collection efficiency improved to 95% after termination mobility restrictions. The net NPA ratio fell to 1.52%, from 1.59% a year ago.

ICICI also reported a drop in its net NPA ratio which fell from 1.16% at the end of the June quarter to 0.99% at the end of the September quarter – the lowest since December 31, 2014.


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