Top Indian banks with the biggest chunks of loans to individual borrowers⁠— and coronavirus has triggered a huge risk

The novel coronavirus, COVID-19, pandemic has thrown up yet another risk for top Indian banks. When the current lockdown is lifted, it is expected that thousands of jobs will be at risk as businesses realign themselves to a long period of slow economic activity. When people lose jobs or livelihood, their ability to repay loans⁠— including but not limited to personal loans, home loans, car loans, education loans, and credit card debt ⁠— will be tested and if some, or many of them, fail, the amount of bad loans will rise.

So far, the Indian banking system has total non-performing assets (NPA) worth ₹9.36 lakh crore ($124 billion), about 9.1% of all the loans advanced. However, most of the defaults have been from companies, big or small.

The retail borrower, i.e. individuals including those earning salaries, have continued to pay up their instalments. The gross NPA in retail loans is anywhere between 0.8% to 1.5% whereas in loans to industries, the same is over 11% (in the case of Axis Bank and State Bank of India) and as high as 17% for ICICI Bank.

The extent of the dent on the common man’s prospects will be unclear as the Reserve Bank of India has given a three-month leave from equated monthly instalments (EMI).

There will be added pressure on small businesses who will be cash strapped at the end of the lockdown and many of them may struggle to service their loans. “The lock down of the domestic and global economies due to the COVID-19 threat will have a meaningful impact on banks’ loan-book growth,” advisors at PhilipCapital said in a recent report estimating a rise in loan-loss provision and slashing earnings estimates for the top banks anywhere between 10% (in the Kotak Bank Mahindra Bank) and 35% (for IndusInd Bank).

So here’s a look at the top Indian banks with the most amount of loans to retail borrowers as well as micro, medium, and small enterprises— higher the proportion, greater the risk.

Bank	Retail loans	MSME loans
Axis Bank	45%	13%
DCB Bank	56%	11%
HDFC Bank	45%	15%
ICICI Bank	50%	7%
IndusInd Bank	36%	8%
Kotak Mahindra Bank	42%	15%
State Bank of India	31%	12%

Proportions are based on total loan book
Source: PhilipCapital

However, one has to remember that the strength of the bank to withstand such defaults, if they were to occur, will depend on a variety of factors. "Comparison of banks on key parameters such as deposit franchisee, loan book mix, asset quality, capital position and liquidity position indicate that banks such as HDFC Bank, ICICI Bank, and Kotak Mahindra Bank stand out in terms of relative strength. However, for IndusInd Bank, the relative strength is on
the lower side due to a weak deposit franchisee and higher concentration in the vulnerable corporate segment (like LRD, CRE, gems and jewellery) and commercial vehicles," the report added.

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