Despite improving economic conditions, private sector lender Axis Bank sees bad debt rising and said it will continue to be conservative.
“Collection efficiency has been around 95-97%. We saw payments rebound in September (when the EMI moratorium ended) but since then we have seen month-over-month improvement,” said Sumit Bali, President, Retail Loans and Payments, Axis Bank.
“Although stress is lower than projections, it would be higher than what we saw last year due to the pandemic. But it’s going better for us. However, Q3 and Q4 will see some slippages (in the sales book retail).” He said the bank had surpassed pre-Covid levels for secured lending. “The unsecured part of the activity continues at 60-70% of the pre-pandemic level. We are conservative on the insecure part and would like to see more rounds of data points before we start going back to the pre-pandemic level,” he added.
The lender’s asset quality improved both sequentially and year-over-year in the second quarter. It had a gross NPA of 4.18% in the second quarter, compared to 4.72% in the first quarter. Net NPAs had fallen 25 basis points to 0.98% in the benchmark quarter. Total provisions and contingencies made by the lender increased by more than 3% sequentially to Rs 4,581 crore.
The bank has made additional provisions of Rs 1,279 crore for loans under moratorium and Rs 1,864 crore for probable restructuring, totaling Rs 3,143 crore.
Axis Bank has also seen growth in disbursements since July and had reached pre-Covid levels in the second quarter. In October and November, outflows were at or above pre-Covid levels in some asset classes.
“We are already seeing some upside, but sustainability will depend on vaccine availability,” management said. The bank recalled that the number of restructuring requests remained low.
Going forward, the bank will strive to increase its market share in rural and semi-urban markets through an asset-driven liability strategy. The focus would be on farmer finance, gold loans, small business loans, home loans and two-wheeler loans.