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Mumbai, Dec 27 () The gross non-performing asset ratio of banks may increase to 9.9 per cent by September 2020 from 9.3 per cent in September 2019, according to an RBI report.
 The gross NPA ratio of banks stood at 9.3 per cent in March 2019.
 "The stress tests indicate that under the baseline scenario, the GNPA ratios of banks may increase to 9.9 per cent by September 2020, due to change in macroeconomic scenario, marginal increase in slippages and the denominator effect of declining credit growth," RBI said in its Financial Stability Report (FSR).
 The report said state-run banks' GNPA ratios may increase to 13.2 per cent by September 2020 from 12.7 per cent in September 2019, whereas for private banks it may climb to 4.2 per cent from 3.9 per cent, under the stress scenario.
 The foreign banks' gross bad loans may increase to 3.1 per cent from 2.9 per cent in September 2019.
 The report said banks net non-performing assets (NNPA) ratio declined in September 2019 to 3.7 per cent, reflecting increased provisioning.
 The aggregate provision coverage ratio (PCR) of all banks rose to 61.5 per cent in September 2019 from 60.5 per cent in March 2019.
 PCRs of both state-run banks and private banks increased in September 2019.
 "Following the recapitalisation of state-run by the government, banks capital to risk-weighted assets ratio (CRAR) improved to 15.1 per cent in September 2019 from 14.3 per cent in March 2019," the report said.
 The state-run banks' CRAR improved to 13.5 per cent from 12.2 per cent during the same period.
 Bank-wise distribution of asset quality showed that while 24 banks had GNPA ratios of under 5 per cent, four banks had GNPA ratios higher than 20 per cent in September 2019.
 The asset quality of agriculture and services sectors, as measured by their GNPA ratios, deteriorated to 10.1 per cent in September 2019 as compared to around 8 per cent in March 2019.
 For the industry sector, the slippages during the period declined to 3.79 per cent from around 5 per cent in March 2019.
 The report showed that the share of large borrowers in banks' total loan portfolios and their share in GNPAs was at 51.8 per cent and 79.3 per cent, respectively, in September 2019, lower compared to the 53 per cent and 82.2 per cent, respectively in March 2019.
 The top 100 large borrowers accounted for 16.4 per cent of banks' gross advances and 16.3 per cent of GNPAs. HV ABM
ABM

Banks' gross NPA ratios may rise to 9.9 pc by Sept 2020: RBI

The bad assets or gross <keyword id="19964545" type="General" weightage="20" keywordseo="NPAs" source="keywords">NPAs</keyword> of commercial <keyword id="19934118" type="General" weightage="20" keywordseo="banks" source="keywords">banks</keyword> fell to a 12-year low of 2.8% in March 2024 and may go down further to 2.5% by the end of the current fiscal, said the <keyword id="19899808" type="General" weightage="100" keywordseo="RBI" source="keywords" meta.keywordsubtype="org" meta.entityname="RBI" meta.hostid="269" meta.entityid="RBI">RBI</keyword>'s <keyword id="678734" type="General" weightage="20" keywordseo="Financial-Stability-Report" source="Orion">Financial Stability Report</keyword> (FSR) released on Thursday. <keyword id="19982351" type="General" weightage="20" keywordseo="Scheduled-Commercial-Banks" source="keywords" meta.keywordsubtype="org" meta.entityname="Scheduled Commercial Banks" meta.hostid="269" meta.entityid="Scheduled Commercial Banks">Scheduled Commercial Banks</keyword>' (SCBs) gross <keyword id="6401657" type="General" weightage="20" keywordseo="non-performing-assets" source="Orion">non-performing assets</keyword> (<keyword id="19982350" type="General" weightage="20" keywordseo="GNPA" source="keywords">GNPA</keyword>) ratio fell to 2.8%, and the net non-performing assets (NNPA) ratio to 0.6% at the end of March 2024. "The asset quality of SCBs recorded sustained improvement, and their GNPA ratio moderated to a 12-year low in March 2024. Their NNPA ratio too improved to a record low," said the June FSR. Among bank groups, public sector banks (<keyword id="20012926" type="General" weightage="20" keywordseo="PSBs" source="keywords">PSBs</keyword>) recorded a substantial reduction (76 bps) in their GNPA ratio during H2 2023-24. While the GNPA stock decreased across all bank groups, active and deep provisioning by PSBs and foreign banks (FBs) resulted in an improved provisioning coverage ratio (PCR) in March 2024, the report said. The half-yearly slippage ratio (viz, new NPA accretions as a share of standard advances) decreased across bank groups. Though the amount of write-offs declined during the year, the write-off ratio remained almost at the same level a year ago due to a reduction in GNPA stock, the FSR said. Overall, it added the sustained reduction in the GNPA ratio since March 2020 has been primarily due to a persistent fall in new NPA accretions and increased write-offs. The RBI said macro stress tests are performed to assess the resilience of SCBs' balance sheets to unforeseen shocks emanating from the macroeconomic environment. These tests attempt to assess capital ratios over a one-year horizon under a baseline and two adverse (medium and severe) scenarios. "The GNPA ratio of all SCBs may improve to 2.5% by March 2025 under the baseline scenario," the report said. However, if the macroeconomic environment worsens to a severe stress scenario, the ratio may rise to 3.4%. Under the severe stress scenario, the GNPA ratios of PSBs may increase from 3.7% in March 2024 to 4.1% in March 2025, whereas it may go up from 1.8% to 2.8% for private sector banks and from 1.2% to 1.3% for FBs. The <keyword id="20089808" type="General" weightage="20" keywordseo="financial-stability" source="keywords">Financial Stability</keyword> Report reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on the resilience of the Indian financial system and risks to financial stability. The report further said deposit mobilisation by SCBs gathered pace during 2023-24, with a large portion of new accretions in the form of term deposits. "Interest rates became more attractive as banks stepped up efforts to mobilise funds to match the rapid rise in credit demand. Growth in current account and savings account (CASA) accelerated across all bank groups," the RBI said. According to the report, bank credit accelerated during H2 2023-24 among public sector banks (PSBs) and foreign banks (FBs), whereas it moderated in respect of private sector banks (PVBs). The share of credit to the services sector and personal loans in the aggregate loan portfolio increased. Personal loans accounted for over half of PVBs' <keyword id="19998083" type="General" weightage="20" keywordseo="credit-growth" source="keywords">credit growth</keyword>. The expansion in personal loans was broad-based, led by housing loans and followed by other personal loans.

Banks' gross NPAs at 12-yr low, may fall further to 2.5%: RBI report

<ul><li><keyword id="6355975" type="COMPANY" weightage="20" keywordseo="axis-bank">Axis Bank</keyword>’s share price is up by over 6% in early morning trade.</li><li>The jump in stock value comes after the bank revealed that its moratorium book was only 9.7% of the total portfolio in terms of value. </li><li>Axis Bank has also built up buffers to the tune of $900 million to address stressed assets and COVID-19 contingency.</li></ul>Axis Bank’s share price rallied over 6% in early morning trade, reacting to its Q1 earnings posted last evening. The primary concern over asset quality was assuaged when the bank disclosed that only 9.7% total portfolio consisted of loans that had opted for the Reserve Bank of India’s (RBI) moratorium. <div type="image" title="axis bank stock price (1)" msid="77100086" hostid="261" caption="&amp;lt;p&amp;gt;Axis Bank stock price surges by over 6%&amp;lt;/p&amp;gt;"></div> Analysts are now positive about Axis Bank’s growth and have increased their earnings estimates based on the bank’s strong net interest income (NII) growth and sequential decline in provisions. <table style="border-width: initial; border-style: none; width: 468pt; table-layout: fixed;"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Brokerage </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Target Price </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Motilal Oswal Securities </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹ 600 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">IDBI Capital </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹ 530 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">HDFC Securities </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹ 565 </td></tr></tbody></table> 90% of the customers who opted for the second moratorium are the same as the ones who opted for the first moratorium. Nonetheless, management said that Axis Bank remains cautious which is why it has a provision buffer of nearly $900 million and is building up a solid war chest. <div type="Article" hostid="261" msid="77086850" title="Axis Bank has set aside over $900 million fearing COVID-19 may sour loans" mstype="2" mssubtype="0"></div> In June, 80% of corporate clients and 70% of customers in retail who had opted for the moratorium successfully paid the interest on their loans. The bank’s Gross Non-Performing Assets (GNPA) ratio and Net Non-Performing Assets (NNPA) ratio has also improved over last quarter. <div type="image" title="Axis bank GNPA NNPA" msid="77100109" hostid="261" caption="&amp;lt;p&amp;gt;Axis Bank&amp;#39;s GNPA and NNPA ratios over the last five quarters&amp;lt;/p&amp;gt;"></div> This has helped boost the provisions coverage ratio (PCR) to 75%, an increase of 576 basis points (bps) over the last quarters. A hundred bps make up 1%. “Post near term stress taking shape, we expect the book to normalize and improve thereon,” said IDBI Capital’s review. SEE ALSO: <a href="https://www.businessinsider.in/finance/banks/news/axis-bank-has-set-aside-over-900-million-fearing-covid-19-may-sour-loans/articleshow/77086850.cms">Axis Bank has set aside over $900 million fearing COVID-19 may sour loans</a> <a href="https://www.businessinsider.in/stock-market/news/hdfc-bank-share-price-rises-on-bond-issue-and-increase-in-provision/articleshow/77061426.cms">HDFC Bank is beefing up capital and provision to cushion a spike in bad loans post moratorium — and that’s helping its share price</a>

Axis Bank share price surges over 6% after earnings reveal that only 9.7% of its loans are exposed to the moratorium

<ul><li>The <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> has proposed 15% capital adequacy as a benchmark and LIC Housing Finance is short of that.</li><li>The new restrictions proposed by the regulator will also limit the amount of dividend paid by other non-banking finance companies.</li><li>Check out the latest news and updates on <a href="https://www.businessinsider.in/" data-type="tilCustomLink" target="_blank">Business Insider</a>. </li></ul>The Reserve Bank of India issued a draft circular that proposed restrictions on non-banking finance companies declaring dividends. And, according to analysis by Emkay, only two companies, LIC Housing Finance and M&amp;M Financial Services, in that space do not meet the conditions, under current circumstances, for paying dividends set by the central bank. However, M&amp;M Finance has clarified that it would be eligible. Not surprisingly, it took a toll on the two stocks. <table style="border-width: initial; border-style: none; width: 468pt; table-layout: fixed;"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Stock </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Losses on Dec 10 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">LIC Housing Finance </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">-3.11% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Mahindra and Mahindra Financial Services </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">-3.35% </td></tr></tbody></table> The RBI has proposed a capital to risk weighted assets ratio (CRAR) of 15%. Simply put, CRAR is a measure of how much capital the company has compared to the riskiness of its loans. If the borrower fails to repay, the capital would be the cushion to absorb the loss. And LIC Housing Finance fails to meet the RBI threshold on this count. The capital adequacy ratio has been 14.4%% for the company in the last two financial years and 14.5% for the first half of the current one, the report said. The way out of this is that the company can raise money from the market to boost this figure past the 15% mark, and then, shareholders can expect a dividend. M&amp;M Financial, on the other hand, doesn’t make the cut on RBI’s benchmark for paying dividend because the amount of bad loans on its books is a little more than what the regulator likes. The circular has set the threshold at 4% while M&amp;M Financial has a net NPA (non-performing assets) of 4.7%. However, if the firm is able to recover enough loans by March 2021 to bring the metric below 4%, dividend may be back on the table. In the year before COVID-struck, the one ending in March 2019, the company paid a handsome 25.7% dividend to shareholders. On the other hand, in a statement to Business Insider, M&amp;M Financial stated “As per the circular, RBI has proposed a twin matrix of CRAR and NNPA and accordingly specified 4 categories based on a combination of both. CRAR of MMFSL has been above 18% for the last 3 years. Hence, the company will fall in Category B as per the matrix. Secondly, MMFSL’s net NPA at the end of September 30 was 4.7%, based on which our permissible dividend payout ratio is ‘up to 20%’,” the company said. This is not the first time the spotlight has fallen on M&amp;M Finance’s chunk of bad loans. The pandemic has only increased the risk of defaults and therefore the company too has been aggressively setting aside money to cover the losses if they occur. “As we progress, the next six months, which is normally the good six months, we would not see a decline in the gross NPA, and we will maintain our stance on aggressive provisions… if we start seeing things are not improving as we think, then we may take higher provision, whichever is necessary,” Vice Chairman and Managing Director Ramesh Iyer told Business Insider <a href="https://www.businessinsider.in/stock-market/news/mahindra-and-mahindra-finance-managing-director-gets-candid-about-the-rights-issue/articleshow/77212386.cms" data-type="tilCustomLink" target="_blank">in an exclusive chat in July 2020</a>. Here’s an excerpt of that interview: <div type="Youtube" id="Qu9KvcNr1iM" title="M&amp;M Financial MD explains how the company is preparing for the worst and hoping for the best" thumbUrl="https://i.ytimg.com/vi/Qu9KvcNr1iM/mqdefault.jpg"></div> For other NBFCs that are eligible to pay dividend, there may be a cap on how much they can dole out based on the benchmarks set by the RBI. These are the likely limits on dividends given the current financial health of the following firms. <table style="border-width: initial; border-style: none; width: 468pt; table-layout: fixed;"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Company </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Dividend limit </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Bajaj Finance </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 45% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Cholamandalam Finance </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 30% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">HDFC </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 45% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">L&amp;T Finance Holdings </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 25 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Magma Fincorp </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 25% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Shriram City Union Finance </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 25% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Shriram Transport Finance </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 25% </td></tr></tbody></table>Source: Emkay SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/corporates/news/the-33-billion-itc-one-of-indias-most-trolled-stock-in-recent-weeks-seems-to-have-turned-a-corner/articleshow/79641456.cms">The $33 billion ITC, one of India’s most-trolled stock in recent weeks, seems to have turned a corner</a><a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/corporates/news/the-33-billion-itc-one-of-indias-most-trolled-stock-in-recent-weeks-seems-to-have-turned-a-corner/articleshow/79641456.cms"></a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/careers/news/icertis-helps-google-microsoft-and-apple-manage-their-contracts-is-hiring-for-techies-and-people-in-sales/articleshow/79640659.cms">EXCLUSIVE: This Indian unicorn helping Google, Microsoft and Apple manage their contracts is hiring⁠— it needs techies as well as people in sales</a><a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/careers/news/icertis-helps-google-microsoft-and-apple-manage-their-contracts-is-hiring-for-techies-and-people-in-sales/articleshow/79640659.cms"></a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/corporates/news/tata-group-company-voltas-is-telling-analysts-that-it-may-hike-ac-prices-by-3-4-to-cover-rising-input-costs/articleshow/79624340.cms">Voltas is telling analysts that it may hike AC prices by 3-4% to cover rising input costs</a>

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Banks' gross NPA ratios may rise to 9.9 pc by Sept 2020: RBI

PTI

Banks' gross NPAs at 12-yr low, may fall further to 2.5%: RBI report

PTI

Axis Bank share price surges over 6% after earnings reveal that only 9.7% of its loans are exposed to the moratorium

Prabhjote Gill

How RBI's proposed restrictions may affect your dividends

Sriram Iyer

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