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<div type="image" title="The RBI has cracked the regulatory whip on NBFCs and banks, who&amp;#39;ve been pushing microfinance and unsecured loans aggressively to grow their loan books." agency="ANI" msid="114778648" hostid="261" caption="&amp;lt;p&amp;gt;The RBI has cracked the regulatory whip on NBFCs and banks, who&amp;#39;ve been pushing microfinance and unsecured loans aggressively to grow their loan books.&amp;lt;/p&amp;gt;"></div> Imagine this. You have a younger sibling you’re mighty envious of. And why not? Unlike you, they seem to enjoy all the freedom and money in the world. They party like there’s no tomorrow, and here you are, stuck in a boring, ultra-disciplined but responsible routine that feels completely devoid of any independence, and mostly, funds. But of late, things are changing. This sibling is in massive trouble and just cannot escape the parent’s wrath anymore. Long story short, the party is over, and it is time to go back home. The rising defaults on this sibling’s part have now begun pulling the entire house down, thereby attracting the regulator’s ire. <h2>The Wild West of <keyword id="113684" type="General" weightage="20" keywordseo="microfinance" source="Orion">microfinance</keyword> and unsecured loans</h2>It's hard to ignore the issues with microfinance and unsecured loans in India. Many saw them as a small gamble and ignored the rising defaults much like the younger siblings’ tantrums, and now they find themselves in hot waters. The skyrocketing instances of non-payments aren't a micro-issue anymore and are threatening the stability of the entire banking system. In the quarter ended September 30, 2024, 5 of India’s 8 largest private sector <keyword id="19934118" type="General" weightage="20" keywordseo="banks" source="keywords">banks</keyword> reported a steep rise in their bad loan book, mostly thanks to microfinance loans. Some banks, in a bid to strengthen their fortress against these <keyword id="142154" type="General" weightage="100" keywordseo="bad-loans" source="Orion">bad loans</keyword>, have significantly upped their provisions. For instance, IndusInd Bank set aside Rs 525 crore during July and September 2024 to battle the menace of defaults on microfinance loans, which make up about 9% of its total loan book. See, banks rely heavily on their interest income, which they earn from advancing loans. Any loan where the borrower has not paid interest to the bank or defaulted for 90 days or more becomes bad, i.e. an NPA, or non-performing asset for the bank. And who likes things going bad? Simply put, there has been a steep rise in three areas, much to the dislike of banks and MFIs (micro-finance institutions). But hey, it's mostly their doing! <ol><li>GNPA ratio (gross net performing assets): The quantum of non-performing assets a bank has in proportion to its total assets.</li><li>Provision: The amount banks set aside to take care of such NPAs.</li><li>Slippage ratio: The rate at which good girls go bad, or the speed at which good loans turn into NPAs</li></ol>But how are these plaguing the Indian banking sector? And what does the road ahead look like? We decode it for you. <h2> Microfinance: A not-so-micro-menace</h2>Microfinance loans were initially brought forth for low-income households and individuals i.e. for those who might not generally have access to traditional ways of credit, like bank loans and more. They don’t require collateral or an asset to be pledged in lieu of the loan, making it a tad bit easier for borrowers. As of June 2024, the amount of outstanding loans in the microfinance industry stood at a staggering Rs 4,20,256 crore. Of this, NBFC-MFIs accounted for 40% and banks made for 33% of these. In 2022, RBI, in a bid to inspire some competition in this space, did something radical-they did away with the ceiling on how much interest MFIs could charge their customers. Previously, MFIs could add up to 12% to their cost of acquiring funds to determine the final interest rate chargeable to the consumer. So, assuming that Bank A incurs a 5% cost to acquire funds for further loaning, A could charge up to 17% interest from the end consumer. So, interest rates were in the hands of MFIs, and boy, did they have a gala time with it. Instead of spurring some healthy competition, as RBI expected, MFIs and banks went rogue and all guns blazing, competing for the title of “Who will charge the highest interest?” Recently, RBI banned 4 microfinance institutions (MFIs), namely Asirvad Micro Finance Limited, Arohan Financial Services Limited, DMI Finance Private Limited, and <keyword id="20117932" type="General" weightage="20" keywordseo="navi-finserv" source="keywords">Navi Finserv</keyword> from disbursing loans effective October 21, 2024. Why? Because they were charging 14% extra interest over their original cost of funds. To maintain their loan books (and pockets), banks and NBFCs resorted to shady practices like netting off loans, which RBI has now advised MFIs against. Here, lenders allow borrowers to settle a previous outstanding loan by issuing them a new loan! As crazy as it sounds, it helped banks to report less of their total assets as NPAs, since the new credit would cover pending instalments of the borrower’s previous loan. Then there was the issue of borrowers overleveraging, i.e. taking multiple loans using different IDs from various lenders and then failing to honour any of them. The consequence? Banks and NBFCs end up with massive NPAs. Data from credit bureaus suggests that over the last quarter, there was a 17.2% rise in the number of borrowers who had 5 or more active loans at the same time. <h2>Growth &gt; Caution</h2>It's an age-old tale unfolding yet again in India’s banking sector- Icarus flew too close to the sun and eventually, fell to its death. Between April and June 2024, NBFCs microfinance portfolio jumped by 2.7%. If you see this in terms of loan sources, microfinance loans issued by banks grew by 11.2% in Q1FY25. But the same portfolio in NBFCs swelled by almost double-23.9%. While most of these loans had an average ticket size between Rs 30,000-50,000, there was a sharp spike in the number of loans that had a ticket size of Rs 80,000 or more. Data suggests that as of March 2024, more than 12% of all microfinance borrowers had over 4 or more active loans. In dating parlance, this is a classic case of borrowers going polyamorous, minus the honesty and transparency. Not the best of situations, you'd agree! <h2>Will banks and NBFCs stand up to this stress?</h2>If their results for Q2FY25 are to be believed, NBFCs are not handling the pressure all that well. Or even slightly well. Only a few banks like Bank of Baroda (BoB), ICICI, and Indian Bank were up for the battle, even witnessing a decline in their loan delinquencies. Some others, like IndusInd Bank, saw their stock dip by a massive 16.2% over the last 5 days. Its slippages in the previous quarter burgeoned from Rs 15.3 billion in Q1FY25 to Rs 17.9 billion in Q2. As a result, the bank pushed a staggeringly high amount of money to create an NPA cushion for itself. While its management has highlighted its preference for secured lending, that was hardly reflected in its actions during the quarter, where growth in unsecured personal loans remained exceptionally high at over 7% on a QoQ basis. Turns out, only 44% of customers in IndusInd Banks’ microfinance loan portfolio were exclusive to it. The rest 47% were, you guessed it right-polyamorous! 27% had borrowed from another lender as well, apart from IndusInd Bank, while 20% were those who had outstanding loans with two other lenders, apart from IndusInd Bank. IndusInd Bank’s credit card segment did not miss the NPA bus and accounted for 7-8% of its GNPAs. Canara Bank’s total slippages during the previous quarter jumped to Rs 11.1 billion, up by 24.7% QoQ, and making up for 3.6% of its total loans. As for Bandhan Bank, its gross NPA for Q2FY25 inched up on a QoQ basis, up from 4.23% in Q1, to 4.68% in the second quarter. IDFC Bank’s heavy provisioning for its NPAs marred its profits significantly, causing its PAT (profit after tax) to dip by 73% on a YoY basis. Data from ICRA Analytics suggest that the AUM (asset under management) growth in microfinance loans and unsecured (personal and business) loans by the NBFCs will moderate to 10-12% and 19-21%, respectively, in FY2025 compared to 30% and 38%, in FY2024. Says A M Karthik, Senior Vice President &amp; Co-Group Head, Financial Sector Ratings, ICRA, “As bank funds constitute a larger share in the overall funding of NBFCs, a slower credit flow from banks to the NBFCs will compress their AUM growth. The NBFCs in unsecured and digital lending businesses shall face a higher squeeze in funding compared to others, and the unsecured lending space will continue to be a source of stress in the near term.” There has been uninhibited growth in <keyword id="6051027" type="General" weightage="20" keywordseo="Unsecured-loan" source="Orion">unsecured loan</keyword>s, apart from just the microfinance segment. For instance, Axis Bank’s gross slippages jumped by Rs 4,443 crore, largely thanks to its unsecured business. The same is the case with Yes Bank, which saw 35–40% of its retail slippages emerging from the unsecured loan portfolio. <keyword id="6376194" type="General" weightage="20" keywordseo="kotak-mahindra" source="Orion">Kotak Mahindra</keyword> Bank was also quick to follow Yes Bank’s suit, with around 35%-40% of its slippages coming from credit cards. <h2>How is the road ahead?</h2>While RBI has just cracked its whip and served a warning at the moment, experts at Morgan Stanley believe that more changes (read regulatory lashes) are underway. Moreover, with both festive and wedding seasons underway in our country, unsecured lending might pick up momentum, much to the disdain of the calibrated approach banks have been taking towards it so far. But if the situation doesn't improve, RBI will not waste any time in becoming the typical tyrannical <keyword id="19897820" type="General" weightage="20" keywordseo="bollywood" source="keywords">Bollywood</keyword> headmaster who runs his dominion with an iron fist. However, that's a story for another day. Do you have a topic in mind you'd want a simpler explanation for, or insights or personal experience to share on personal finance and more? Contact us at businessinsider@timesinternet.in.

Simply Put: Is the lending party over? The dangerous tango of Indian banks with microfinance and unsecured loans

Imagine this. You have a younger sibling you’re mighty envious of. And why not? Unlike you, they seem to enjoy all the freedom and money in the world. They party like there’s no tomorrow, and here you are, stuck in a boring, ultra-disciplined but responsible routine that feels completely devoid of any independence, and mostly, funds. But of late, things are changing. This sibling is in massive trouble and just cannot escape the parent’s wrath anymore. Long story short, the party is over, and it is time to go back home. The rising defaults on this sibling’s part have now begun pulling the entire house down, thereby attracting the regulator’s ire. <h2>The Wild West of microfinance and unsecured loans</h2>It's hard to ignore the issues with microfinance and unsecured loans in India. Many saw them as a small gamble and ignored the rising defaults much like the younger siblings’ tantrums, and now they find themselves in hot waters. The skyrocketing instances of non-payments aren't a micro-issue anymore and are threatening the stability of the entire banking system. In the quarter ended September 30, 2024, 5 of India’s 8 largest private sector <keyword id="19934118" type="General" weightage="20" keywordseo="banks" source="keywords">banks</keyword> reported a steep rise in their bad loan book, mostly thanks to microfinance loans. Some banks, in a bid to strengthen their fortress against these <keyword id="142154" type="General" weightage="100" keywordseo="bad-loans" source="Orion">bad loans</keyword>, have significantly upped their provisions. For instance, <keyword id="46717" type="General" weightage="20" keywordseo="IndusInd-bank" source="Orion">IndusInd Bank</keyword> set aside Rs 525 crore during July and September 2024 to battle the menace of defaults on microfinance loans, which make up about 9% of its total loan book. See, banks rely heavily on their interest income, which they earn from advancing loans. Any loan where the borrower has not paid interest to the bank or defaulted for 90 days or more becomes bad, i.e., an <keyword id="79363" type="General" weightage="20" keywordseo="npa" source="Orion">NPA</keyword>, or non-performing asset for the bank. And who likes things going bad? Simply put, there has been a steep rise in three areas, much to the dislike of banks and MFIs (micro-finance institutions). But hey, it's mostly their doing! <ol><li>GNPA ratio (gross net performing assets): The quantum of non-performing assets a bank has in proportion to its total assets.</li><li>Provision: The amount banks set aside to take care of such NPAs.</li><li>Slippage ratio: The rate at which good girls go bad, or the speed at which good loans turn into NPAs</li></ol>But how are these plaguing the Indian banking sector? And what does the road ahead look like? We decode it for you. <h2> Microfinance: A not-so-micro-menace</h2>Microfinance loans were initially brought forth for low-income households and individuals, i.e. for those who might not generally have access to traditional ways of credit, like bank loans and more. They don’t require collateral or an asset to be pledged in lieu of the loan, making it a tad bit easier for borrowers. As of June 2024, the amount of outstanding loans in the microfinance industry stood at a staggering Rs 4,20,256 crore. Of this, NBFC-MFIs accounted for 40% and banks made for 33% of these. In 2022, <keyword id="30067" type="General" weightage="20" keywordseo="RBI" source="Orion">RBI</keyword>, in a bid to inspire some competition in this space, did something radical-they did away with the ceiling on how much interest MFIs could charge their customers. Previously, MFIs could add up to 12% to their cost of acquiring funds to determine the final interest rate chargeable to the consumer. So, assuming that Bank A incurs a 5% cost to acquire funds for further loaning, A could charge up to 17% interest from the end consumer. So, interest rates were in the hands of MFIs, and boy, did they have a gala time with it. Instead of spurring some healthy competition, as RBI expected, MFIs and banks went rogue and all guns blazing, competing for the title of “Who will charge the highest interest?” Recently, RBI banned 4 microfinance institutions (MFIs), namely Asirvad Micro Finance Limited, Arohan Financial Services Limited, DMI Finance Private Limited, and Navi Finserv, from disbursing loans effective October 21, 2024. Why? Because they were charging 14% extra interest over their original cost of funds. To maintain their loan books (and pockets), banks and NBFCs resorted to shady practices like netting off loans, which RBI has now advised MFIs against. Here, lenders allow borrowers to settle a previous outstanding loan by issuing them a new loan! As crazy as it sounds, it helped banks to report less of their total assets as NPAs, since the new credit would cover pending installments of the borrower’s previous loan. Then there was the issue of borrowers overleveraging, i.e. taking multiple loans using different IDs from various lenders and then failing to honor any of them. The consequence? Banks and NBFCs end up with massive NPAs. Data from credit bureaus suggests that over the last quarter, there was a 17.2% rise in the number of borrowers who had 5 or more active loans at the same time. <h2>Growth &gt; Caution</h2>It's an age-old tale unfolding yet again in India’s banking sector- Icarus flew too close to the sun and eventually, fell to its death. Between April and June 2024, NBFCs microfinance portfolio jumped by 2.7%. If you see this in terms of loan sources, microfinance loans issued by banks grew by 11.2% in Q1FY25. But the same portfolio in NBFCs swelled by almost double-23.9%. While most of these loans had an average ticket size between Rs 30,000-50,000, there was a sharp spike in the number of loans that had a ticket size of Rs 80,000 or more. Data suggests that as of March 2024, more than 12% of all microfinance borrowers had over 4 or more active loans. In dating parlance, this is a classic case of borrowers going polyamorous, minus the honesty and transparency. Not the best of situations, you'd agree! <h2>Will banks and NBFCs stand up to this stress?</h2>If their results for Q2FY25 are to be believed, NBFCs are not handling the pressure all that well. Or even slightly well. Only a few banks like Bank of Baroda (BoB), ICICI, and Indian Bank were up for the battle, even witnessing a decline in their loan delinquencies. Some others, like IndusInd Bank, saw their stock dip by a massive 16.2% over the last 5 days. Its slippages in the previous quarter burgeoned from Rs 15.3 billion in Q1FY25 to Rs 17.9 billion in Q2. As a result, the bank pushed a staggeringly high amount of money to create an NPA cushion for itself. While its management has highlighted its preference for secured lending, that was hardly reflected in its actions during the quarter, where growth in unsecured personal loans remained exceptionally high at over 7% on a QoQ basis. Turns out, only 44% of customers in IndusInd Banks’ microfinance loan portfolio were exclusive to it. The rest 47% were, you guessed it right-polyamorous! 27% had borrowed from another lender as well, apart from IndusInd Bank, while 20% were those who had outstanding loans with two other lenders, apart from IndusInd Bank. IndusInd Bank’s credit card segment did not miss the NPA bus and accounted for 7-8% of its GNPAs. Canara Bank’s total slippages during the previous quarter jumped to Rs 11.1 billion, up by 24.7% QoQ, and making up for 3.6% of its total loans. As for Bandhan Bank, its <keyword id="763994" type="General" weightage="20" keywordseo="Gross-NPA" source="Orion">gross NPA</keyword> for Q2FY25 inched up on a QoQ basis, up from 4.23% in Q1, to 4.68% in the second quarter. <keyword id="62152" type="General" weightage="20" keywordseo="IDFC-bank" source="Orion">IDFC Bank</keyword>’s heavy provisioning for its NPAs marred its profits significantly, causing its PAT (profit after tax) to dip by 73% on a YoY basis. Data from ICRA Analytics suggest that the AUM (asset under management) growth in microfinance loans and unsecured (personal and business) loans by the NBFCs will moderate to 10-12% and 19-21%, respectively, in FY2025 compared to 30% and 38%, in FY2024. Says A M Karthik, Senior Vice President &amp; Co-Group Head, Financial Sector Ratings, ICRA, “As bank funds constitute a larger share in the overall funding of NBFCs, a slower credit flow from banks to the NBFCs will compress their AUM growth. The NBFCs in unsecured and digital lending businesses shall face a higher squeeze in funding compared to others, and the unsecured lending space will continue to be a source of stress in the near term.” There has been uninhibited growth in unsecured loans, apart from just the microfinance segment. For instance, Axis Bank’s gross slippages jumped by Rs 4,443 crore, largely thanks to its unsecured business. The same is the case with Yes Bank, which saw 35–40% of its retail slippages emerging from the unsecured loan portfolio. Kotak Mahindra Bank was also quick to follow Yes Bank’s suit, with around 35%-40% of its slippages coming from credit cards. <h2>How is the road ahead?</h2>While RBI has just cracked its whip and served a warning at the moment, experts at Morgan Stanley believe that more changes (read regulatory lashes) are underway. Moreover, with both festive and wedding seasons underway in our country, unsecured lending might pick up momentum, much to the disdain of the calibrated approach banks have been taking towards it so far. But if the situation doesn't improve, RBI will not waste any time in becoming the typical tyrannical Bollywood headmaster who runs his dominion with an iron fist and takes things (and ceiling rates) into their own hands. However, that's a story for another day.

Is the lending party over? The dangerous tango of Indian banks with microfinance and unsecured loans

<ul><li>ICICI Bank is scheduled to announce its fourth-quarter results on May 9.</li><li>It's share price inreased by over 2% today morning during early trade.</li><li>The private sector bank’s retail-focused lending puts it at higher risk of bad loans due to the effects of the coronavirus lockdown than its counterparts.</li><li>Last quarter, ICICI Bank managed to post a profit of 158% and its provisions were down by 58%.</li></ul>ICICI Bank is set to post its fourth-quarter results on May 9 and the outlook seems grim with the banking sector bearing the brunt of the coronavirus pandemic. “Banking is the first sector to get hit and the last one to recover. We’re already in a phase of credit issues,” Siddarth Purohit, a banking analyst with Angel Broking, told Business Insider. ICICI Bank is one of top ten stocks to buy, according to Maquarie, which set a target price of ₹438 (nearly 30% higher from Thursday’s closing) in the next one year. Ahead of its earnings announced, the bank's share price rose by over 2% in today during early morning trade. <div type="image" title="ICICI BANK SHARE PRICE (1)" msid="75616714" hostid="261" caption="&amp;lt;p&amp;gt;ICICI Bank stock movement over the past year&amp;lt;/p&amp;gt;"></div> However, the bank’s share price has lost over one-third of its value this year. During the lockdown, its movement is still largely volatile as investors remain uncertain of what the future may hold. A fresh cycle of bad loans? ICICI Bank was in good shape last quarter with its profits up by 158% and provisions cut down by half. However, The onset of the coronavirus pandemic and its effect on the economy is rapidly changing that narrative. Experts fear that the nationwide lockdown and rising unemployment will shrink people’s ability to pay off loans giving birth to a fresh cycle of bad loans. <div type="image" title="ICICI bank operating profit" msid="75615873" hostid="261" caption="&amp;lt;p&amp;gt;ICICI Bank&amp;#39;s operating profit over the last five quarters&amp;lt;/p&amp;gt;"></div> According to <a href="https://www.moodys.com/researchandratings/country/india/-/0420C9/0420C9/-/-1/0/-/0/-/-/-/-/-/-/-/en/global/pdf/-/rra">Moody</a>’s, ICICI Bank’s retail-focused lending puts it as higher risk as incomes of many borrowers is now at risk due to the lockdown even though it has strong capital to back it up. “There will have to be a signification deterioration in asset quality to erode these buffers,” it said. Ratings cut around the block The bane of the banking sector has always been the share of non-performing assets in its kitty. The cycle finally seemed to be turning around for good with analysts expecting the banking industry to soar in the coming financial year. The global rating agency <a href="https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/s-p-revises-outlooks-on-axis-bank-icici-bank-amid-rising-economic-risks-58076962">Standard &amp; Poor</a> cut its outlook from “stable” to “negative” expecting a drop in asset quality. “The negative outlook on ICICI Bank reflects our view that the bank is exposed to economic headwinds faced by India’s banking system,” said the report. But maintains that the private lender will maintain its strong market position. Fitch Ratings, on the other hand, affirms that the outlook for ICICI Bank remains stable even though its viability rating (VR) has taken a hit. “The downgrade of ICICI’s VR highlights heightened risks to its asset quality and earnings from the disruption in business and consumer acidity that we expect to continue well beyond the lockdown in India,” it <a href="https://www.fitchratings.com/research/banks/fitch-affirms-icici-bank-idr-at-bb-outlook-stable-downgrades-vr-to-bb-30-04-2020">said.</a> <div type="Article" hostid="261" msid="75570240" title="The downgrade of SBI, Bank of Baroda, and ICICI Bank is proof that the 'biggest nightmare' for India's financial sector is becoming real" mstype="2" mssubtype="0"></div> Earlier this week, ICICI and other large lenders came together to resurrect the idea of creating a ‘bad bank’ to help mitigate the effects of the economic slowdown intensified by the outbreak of COVID-19, which threatens to saddled with more sticky loans. According to PayTM founder <a href="https://www.youtube.com/watch?v=satElBUTBIQ&amp;feature=emb_logo">Vijay Shekhar Sharma</a>, this could be the “biggest nightmare of 2020” for the financial sector. <div type="javascript" title="Custom" contenttype="Video"><cdata><![CDATA[]]></cdata></div> As a private sector entity, ICICI Bank’s prospects are better than its public sector counterparts. Nonetheless, many have already downgraded their expectations. See also: <a href="https://www.businessinsider.in/finance/news/sbi-indusind-bank-bank-of-baroda-icici-bank-downgraded-as-paytms-paytms-vijay-shekhar-sharma-warned/articleshow/75570240.cms">The downgrade of SBI, Bank of Baroda, and ICICI Bank is proof that the 'biggest nightmare' for India's financial sector is becoming real</a> <a href="https://www.businessinsider.in/finance/news/yes-bank-share-price-net-loss-and-drop-in-deposits-post-q4-earnings/articleshow/75590798.cms">Yes Bank fears more deposits may disappear when COVID-19 moratorium ends and people start repaying loans</a> <a href="https://www.businessinsider.in/india/news/vizag-gas-leak-styrene-used-in-making-household-plastics-and-condoms-too-much-of-it-can-cause-cancer-or-coma/articleshow/75598829.cms"> Vizag gas leak: Styrene used in making household plastics and condoms — too much of it can cause cancer or coma</a>

ICICI Bank’s earnings on May 9 will reveal the level of economic damage caused by COVID-19 at the level of small borrowers

ICICI Bank on Saturday reported a 50 per cent jump in net profit to Rs 6,905 crore in the first quarter of the current fiscal aided by a decline in bad loans. The second biggest private sector bank had posted a net profit of Rs 4,616 crore in the same quarter of the previous financial year. Total income during the April-June quarter of 2022-23 improved to Rs 28,336.74 crore, from Rs 24,379.27 crore in the same quarter in FY22, ICICI Bank said in a regulatory filing. On a consolidated basis, ICICI Bank reported a 55 per cent jump in net profit to Rs 7,385 crore for the reporting quarter as against Rs 4,616 crore in the same quarter of the previous fiscal. Interest income of the bank during the quarter increased to Rs 23,671.54 crore from Rs 20,383.41 crore in the year-ago period. On the asset quality front, gross non-performing assets (NPAs) declined to 3.41 per cent of the gross advances as of June 30, 2022, from 5.15 per cent on June 30, 2021. Net NPAs or bad loans too slipped to 0.70 per cent from 1.16 per cent. As a result, provisions for bad loans and contingencies more than halved to Rs 1,143.82 crore in the quarter, as against Rs 2,851 .69 crore put earmarked in the year-ago quarter. During the quarter, there were net additions of Rs 382 crore to gross NPAs compared to net additions of Rs 3,604 crore in Q1-2022. Recoveries and upgrades of NPAs, excluding write-offs and sale, were Rs 5,443 crore in the first quarter. Provisioning coverage ratio on non-performing assets was 79.6 per cent at June 30, 2022. Total capital adequacy ratio was 18.74 per cent and Tier-1 capital adequacy ratio was 17.95 per cent, on a standalone basis, at June 30, 2022. The net interest margin rose to 4.01 per cent as compared to 3.89 per cent in the same quarter a year ago. Total advances increased by 21 per cent year-on-year to Rs 8,95,625 crore while period-end term deposits increased by 11 per cent to Rs 5,58,235 crore at June 30. SEE ALSO <a href="https://www.businessinsider.in/retail/news/reliance-retail-reports-a-second-consecutive-quarter-of-declining-profits/articleshow/93059096.cms" data-type="tilCustomLink" style="">Reliance Retail reports a second consecutive quarter of declining profits</a> <a href="https://www.businessinsider.in/business/ecommerce/news/amazon-prime-day-best-offers-deals-discounts/articleshow/93024348.cms" style="">Amazon Prime Day 2022 – early deals, bank offers, Prime membership and everything else you need to know</a> <a href="https://www.businessinsider.in/business/news/reliance-industries-to-start-fy23-with-strong-earnings-thanks-to-refining-margins/articleshow/93041430.cms" style="">Reliance Industries to start FY23 with strong earnings, thanks to refining margins</a>

ICICI Bank Q1 profit zooms 50% to ₹6,905 crore

<ul><li>The stock of ICICI Bank jumped by 4% in early trade, due to strong quarterly earnings.</li><li>The bank not only posted strong growth in profits but also managed to reduce the amount of bad loans.</li><li>Global broking firm CLSA called the numbers as a sign of turnaround in the bank that has been hamstrung in recent years by rising bad loans and allegations of a financial scandal.</li></ul> The stock of ICICI Bank jumped by 4% in early trade, worth over ₹10,600 crore ($1.5 billion), on the first trading day, after it announced better-than-expected earnings. The bank not only posted strong growth in profits but also managed to reduce the amount of bad loans. Global broking firm CLSA called the numbers as a sign of turnaround in the bank that has been hamstrung in recent years by rising bad loans and allegations of a financial scandal. ICICI Bank posted a consolidated net profit of ₹2,513 crore for the quarter ending June 2019, which is a massive increase on the stressed quarter it experienced last year where it posted a mere ₹4.9 crore in profit. It is also fair improvement on the ₹1,170 crore profit posted three months ago. Signs of recovery But that is not the only thing which could be driving the stock which was trading at ₹432.8 at 11 am, on Monday (July 29). The country’s largest private bank is showing strong signs of recovery. This quarter its net interest income went up by 27% to 7,737 crore from last year. More importantly, the bank has made lower provisions which are made to cover for bad loans, at ₹3,496 crore as compared to ₹5,971 crore last year. “ICICI is exiting the corporate non-performing loans cycle, reflected in the 31% year on year fall in slippage and some upgrades below-rated loans to the steel industry). Moreover, its rise in better-rated clients and low exposure to new stressed corporates will insulate from risks,” said a report by CLSA. Improved loan book All of its top 20 loans are rated A- or better, according to the brokerage which gave the stock a ‘Buy’ rating, as it see 2019-20 as the year of turnaround. The brokerage predicts that its shareholders will be able to make as much as 15-16% returns from the stock, as the company chugs on its path to recovery. “As structural changes become more entrenched at the bank , ICICI Bank’s reported financials will improve and stabilise. Continuous stability and improvement in core parameters underpin our thesis of its trajectory towards normalized earnings,” said a report by HDFC Bank. ICICI has been emerging from last year’s revelation of bad loans weighing on its books year. Adding fuel to fire is a scandal involving its long-time CEO Chanda Kochhar , who allegedly gave loans to Videocon Group <a href="https://www.businessinsider.in/its-the-end-of-the-road-for-chanda-kochhar/articleshow/66082441.cms">in exchange for favours</a>. An Enforcement Directorate probe is still underway in the case. Kochhar was later ousted and asked to pay back all her hefty bonuses as well.

ICICI Bank shares gain over a billion dollars in value after signs of turnaround

<ul><li>ICICI Bank's profits were in the green for its fourth quarter earnings. </li><li>Its non-performing assets ratio also declined to 1.41% from 1.49% last quarter. However, experts expect the full extent of bad loans to only be reflected once RBI's three-month moratorium on bad loans comes to an end.</li><li>The bank believes its strong deposit franchise and capitalisation will be enough to tide it through the coronavirus lockdown and impact on the Indian economy.</li></ul>ICICI Bank’s fourth-quarter core operating profits are in the green at ₹1,221.36 crore, a jump of 26% over the same quarter last year. For the entire year, the bank’s profit after tax grew by 136% to ₹7,931 crore. ICICI Bank’s share price ended in the end on Friday (May 8) trading 0.33% below the previous close. According to Macquarie, the private sector bank is one of the top ten stocks to buy with a target price of ₹438 over the next year. <div type="image" title="ICICI BANK SHARE PRICE (2)" msid="75646086" hostid="261" caption="&amp;lt;p&amp;gt;ICICI Bank&amp;#39;s share price so far this year&amp;lt;/p&amp;gt;"></div> Even though many expect the ratio of bad loans to increase in the near term once the Reserve Bank of India’s (RBI) moratorium on repayment of loans ends, ICICI Bank’s net non-performing assets (NPAs) decreased from 1.49% last quarter to 1.41% in Q4. On the other hand, the private sector lender has increased in provisions by 186% from ₹1,083 crore in the last quarter to ₹5,967 crore this quarter. "This additional provision made by the Bank is more than the requirement as per the RBI guideline dated April 17, 2020," the bank said in its fourth-quarter filings with the BSE. Around 32% of its customers have opted to delay repayments till after the lockdown, according to ICICI President Sandeep Batra during the earnings conference call. <div type="Article" hostid="261" msid="75570240" title="The downgrade of SBI, Bank of Baroda, and ICICI Bank is proof that the 'biggest nightmare' for India's financial sector is becoming real" mstype="2" mssubtype="0"></div> The global ratings agency <a href="https://www.moodys.com/researchandratings/country/india/-/0420C9/0420C9/-/-1/0/-/0/-/-/-/-/-/-/-/en/global/pdf/-/rra">Moody</a>’s believes that ICICI Bank’s retail-focused lending puts it as higher risk as incomes of many borrowers is now at risk due to the lockdown even though it has strong capital to back it up. “There will have to be a signification deterioration in asset quality to erode these buffers,” it said. ICICI Bank also showed a year-on-year increase in term deposits of 29%. While current account deposits increased by 15%, savings account deposits grew by 11%. “The bank is well-capitalised and has a strong deposit franchise. The digital and technology platforms are key strengths of the Bank and the present scenario provides an opportunity to re-engineer the delivery of banking,” it said. See also: <a href="https://www.businessinsider.in/tech/enterprise/news/cognizant-ransomware-attack-impact-to-get-worse-in-q2-and-coming-quarters/articleshow/75644164.cms">The Cognizant Maze ransomware saga will show its full impact for many months to come</a> <a href="https://www.businessinsider.in/science/health/news/coronavirus-vaccine-for-india-should-be-from-from-china-and-oxford-not-the-us/articleshow/75644278.cms">There are a lot of coronavirus vaccines in the works⁠— but these are the two that Indians should watch out for</a> <a href="https://www.businessinsider.in/india/news/indias-new-testing-guidelines-say-that-only-severe-covid-patients-will-be-tested-once-before-discharge-from-hospital/articleshow/75642880.cms">India’s new testing guidelines say that only ‘severe’ COVID patients will be tested once before discharge from hospital</a>

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