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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

<keyword id="19895995" type="General" weightage="20" keywordseo="HDFC-Bank" source="keywords" meta.keywordsubtype="org" meta.entityname="HDFC Bank" meta.hostid="261" meta.entityid="HDFC Bank">HDFC Bank</keyword> on Saturday posted a marginal 5 per cent increase in its standalone profit at Rs 16,821 crore in the second quarter ended September 2024. The country's biggest private sector lender had earned a <keyword id="19942166" type="General" weightage="20" keywordseo="net-profit" source="keywords">net profit</keyword> of Rs 15,976 crore in the same quarter a year ago. Total income increased to Rs 85,500 crore during the quarter under review against Rs 78,406 crore in the same period last year, HDFC Bank said in a regulatory filing. The bank reported <keyword id="20202322" type="General" weightage="20" keywordseo="interest-income" source="keywords">interest income</keyword> of Rs 74,017 crore during the quarter compared to Rs 67,698 crore in the same period a year ago. Net Interest Income (NII) improved to Rs 30,110 crore, from Rs 27,390 crore in the second quarter of previous year, registering a 10 per cent growth. As regards asset quality, the bank witnessed slight deterioration with gross <keyword id="19927319" type="General" weightage="20" keywordseo="Non-Performing-Assets" source="keywords">Non-Performing Assets</keyword> (NPAs) rising to 1.36 per cent of the gross loans by the end of September 2024 from 1.34 per cent a year ago. Similarly, net NPAs or bad loans rose to 0.41 per cent from 0.35 per cent at the end of the second quarter of the previous fiscal. On a consolidated basis, the bank logged a growth of 6 per cent in net profit to Rs 17,826 crore as against Rs Rs 16,811 crore in Q2FY24. SEE ALSO:<a href="https://www.businessinsider.in/personal-finance/news/best-credit-cards-for-online-shopping-in-india/articleshow/114354358.cms" target="_blank"></a> <a href="https://www.businessinsider.in/personal-finance/news/best-credit-cards-for-online-shopping-in-india/articleshow/114354358.cms" target="_blank">Best credit cards for online shopping this festive season</a><a href="https://www.businessinsider.in/tech/mobile/webstories/best-smartphones-under-25000-in-india-in-october-2024/slidelist/114339207.cms" target="_blank"></a> <a href="https://www.businessinsider.in/tech/mobile/webstories/best-smartphones-under-25000-in-india-in-october-2024/slidelist/114339207.cms" target="_blank">Best smartphones under ₹25,000 in India in October 2024</a><a href="https://www.businessinsider.in/stock-market/webstories/waaree-energies-ipo-price-band-to-risk-factors-all-you-need-to-know/slidelist/114350114.cms" target="_blank"></a> <a href="https://www.businessinsider.in/stock-market/webstories/waaree-energies-ipo-price-band-to-risk-factors-all-you-need-to-know/slidelist/114350114.cms" target="_blank">Waaree Energies IPO – Price band to risk factors, all you need to know</a>

HDFC Bank Q2 profit soars 5% to ₹16,821 crore

The <keyword id="20086142" type="General" weightage="20" keywordseo="Indian-Renewable-Energy-Development-Agency" source="keywords">Indian Renewable Energy Development Agency</keyword> (IREDA) declared its Q1 FY25 results. For the April-June quarter, the company's <keyword id="20066400" type="General" weightage="20" keywordseo="revenue-from-operations" source="keywords">revenue from operations</keyword> stood at Rs 1,510.71 crore, up from Rs 1,391.64 crore as of March 31, 2024. The company's net <keyword id="20298212" type="General" weightage="20" keywordseo="profit-after-tax" source="keywords">profit after tax</keyword> also inched up from Rs 337.38 crore in the previous quarter to Rs 383.69 crore as of June 30th, 2024. The company's <keyword id="19985211" type="General" weightage="20" keywordseo="net-worth" source="keywords">net worth</keyword> also saw a significant jump from Rs 8,599.43 crore as of March 31st, 2024, to Rs 9,110.49 crore as of June 2024. For the quarter ended June 2023, IREDA's net worth was Rs 6,290.40 crore. On a year-on-year basis, the company also managed to bring down its <keyword id="21183774" type="General" weightage="20" keywordseo="debt-equity-ratio" source="keywords">debt-equity ratio</keyword> from 6.35 as of June 2023 to 5.83 as of June 2024. Notably, a lower debt-equity ratio indicates that the company does not have high debts commensurate with its equities and is relatively debt-free. On a year-to-year basis, the company also succeeded in bringing down its net <keyword id="21671151" type="General" weightage="20" keywordseo="non-performing-asset-ratio" source="keywords">non-performing asset ratio</keyword> from 1.61% during the same period last year to 0.95% during April–June 2024. At a little over 25%, the company largely kept its net profit margins steady. At the close of day's trade today, IREDA was trading at Rs 284.00, up by 0.11%.The stock has had an impressive year so far, generating a YTD (yield-to-date) of about 171%. However, the last quarter saw IREDA's operating margins shrink slightly on a YoY basis, from 38.42% as of June, 23 to 31.47% as of June 2024. The company's EPS (earning per share) also inched up from 1.29 in June 2023 to 1.43 as of June 30th, 2024. Recently, the company raised Rs 2,500 crore via private placement in June 2024, for general corporate purposes and funding renewable energy projects.

IREDA Q1 results: Profit after tax jumps to Rs 38,369.34 lakh

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

Private sector <keyword id="19945702" type="General" weightage="100" keywordseo="rbl-bank" source="keywords">RBL Bank</keyword> on Friday reported an 11% increase in its profit to Rs 233 crore in the third quarter ended in December 2023. The bank had earned a net profit of Rs 209 crore in the same quarter a year ago. Total income increased to Rs 3,969 crore during the quarter under review against Rs 3,116 crore in the same period last year, RBL Bank said in a regulatory filing. Interest income of the bank also improved to Rs 3,191 crore during the quarter compared to Rs 2,498 crore in the same period a year ago. The bank's gross <keyword id="19927319" type="General" weightage="20" keywordseo="non-performing-assets" source="keywords">Non-Performing Assets</keyword> (NPAs) declined to 3.12% of the total loans at the end of December 2023 from 3.61% a year ago. Net NPAs or bad loans also came down to 0.80% from 1.18% at the end of the third quarter of the previous fiscal.

RBL Bank Q3 profit rises 11% to Rs 233 crore

<keyword id="6358007" type="General" weightage="50" keywordseo="bank-of-baroda" source="Orion">Bank of Baroda</keyword> (<keyword id="92547" type="General" weightage="100" keywordseo="bob" source="Orion">BoB</keyword>) on Friday reported 75 per cent surge in standalone net profit at Rs 3,853 crore for the third quarter ended December 31, 2022 as bad loans declined. The state-owned bank had earned a net profit of Rs 2,197 crore in the year-ago period. Total income during October-December 2022 increased to Rs 27,092 crore as against Rs 20,482 crore in the year-ago period, BoB said in a regulatory filing. During the quarter, interest income increased to Rs 23,540 crore as against Rs 17,963 crore in the same period a year ago. On the asset quality front, the bank recorded an improvement with gross <keyword id="127693" type="General" weightage="20" keywordseo="NPAs" source="Orion">NPAs</keyword> (<keyword id="6401657" type="General" weightage="20" keywordseo="non-performing-assets" source="Orion">Non-Performing Assets</keyword>) declining to 4.53 per cent as compared to 7.25 per cent at the end of the third quarter of 2021-22. At the same time, net NPAs eased to 0.99 per cent as against 2.25 per cent in the same period a year ago. As a result, provisions (other than tax) and contingencies declined to Rs 2,404 crore during the quarter from Rs 2,507 crore a year ago. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/corporates/news/adani-enterprises-to-be-dropped-from-dow-jones-sustainability-indices/articleshow/97577747.cms">Adani Enterprises to be dropped from Dow Jones sustainability indices</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/tech/news/tech-layoffs-to-continue-for-sometime-thanks-to-a-slowdown-in-demand-and-an-uncertain-economic-environment/articleshow/97575092.cms">Tech layoffs to continue for sometime thanks to a slowdown in demand and an uncertain economic environment</a>

BoB Q3 profit jumps 75% to ₹3,853 crore

It looks like <keyword id="15561167" type="General" weightage="20" keywordseo="sunshine-days-for-the-Indian-banking-sector" source="Orion">sunshine days for the Indian banking sector</keyword> after having struggled with a seemingly <keyword id="15561168" type="General" weightage="20" keywordseo="never-ending-gloom-of-rising-non-performing-assets" source="Orion">never-ending gloom of rising non-performing assets</keyword> (NPAs) and the Covid-19 pandemic, which hit their profits hard. The September quarter results of <keyword id="6355548" type="General" weightage="20" keywordseo="public-sector-banks" source="Orion">public sector banks</keyword> (PSBs) seem to have brought cheer for the Indian banking sector with all the major 12 PSBs recording net profits worth Rs 25,685 crore during the period under review. On September 7, Finance Minister Nirmala Sitharaman had lauded all the 12 PSBs for their outstanding fiscal performance. In a series of tweets, she said that "the continuous efforts of our government for reducing the NPAs and further strengthening the health of PSBs are now showing tangible results. All 12 PSBs declared net profit of Rs 25,685 cr in Q2FY23". She said that the combined net profits of public sector banks recorded a year-on-year growth of 50 per cent. Similarly, in the first half of the current fiscal, the 12 state-owned banks recorded total profits of Rs 40,991 crore, which were 31.6 per cent higher year-on-year. Country's largest lender State Bank of India (SBI) reported a 74 per cent jump in profit to Rs 13,265 crore, while Canara Bank reported an 89 per cent jump in profit to Rs 2,525 crore. UCO Bank reported a huge 145 per cent jump in profit to Rs 504 crore, while the Bank of Baroda reported 58.70 per cent profit of Rs 3,312.42 crore in the September quarter of 2022-23. Experts have said that the financial performance of PSBs is expected to improve in the current fiscal of 2022-23 over the previous financial year, as NPAs are coming down and leverage of corporates too has been cut. They informed that NPAs of banks were brought out especially after the asset quality review measure was introduced by the government in 2015. While rising NPAs seem to be under control as of now, the Indian banking system had faced a serious threat from these in 2011, when they started rising and had reached a climax in 2017-18, when they reached 11.18 per cent. Though now the NPAs have come down, experts say that it is a cyclical thing as they keep rising and falling. To help PSBs tide over the NPA problem, the government had infused Rs 3 lakh crore in these banks, which went a long way in stabilising them financially. On the basis of this stability, state-owned banks are now able to issue bonds and raise funds from outside, which is gradually making them more financially independent, industry experts said. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/stock-market/news/psb-stocks-on-52-week-high-riding-on-record-profits-double-digit-loan-growth/articleshow/95621602.cms" style="">PSB stocks on 52-week high riding on record profits, double-digit loan growth</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/finance/news/rupee-slips-6-paise-to-close-at-81-70-against-us-dollar/articleshow/95604868.cms" style="">Rupee slips 6 paise to close at 81.70 against US dollar</a>

Crunching Numbers: 12 PSBs end Sept quarter notching up ₹25K+ cr net profit

<ul><li><keyword id="6357149" type="General" weightage="80" keywordseo="hdfc-bank" source="Orion">HDFC Bank</keyword> today reported a 19% growth in the first quarter to ₹9,169 crore.</li><li>Net interest income for the quarter grew by 14.5% to ₹19,481 crore.</li><li>The bank’s other income excluding trading and mark to market losses grew by 35%.</li></ul>HDFC Bank today reported a 19% growth in the first quarter of FY23 net profit to ₹9,169 crore, from ₹7,729 crore in the same quarter last year. Its total revenues grew by 13% to ₹41,560 crore as compared to ₹36,771 crore last year. Net interest income for the quarter grew by 14.5% to ₹19,481 crore from ₹17,009 crore last year. This was driven by a 22.5% growth in advances and 19.2% growth in its deposits, India’s largest private bank said in its press release. Its gross non-performing assets or NPAs grew by 11.7% to ₹18,033 crore as compared to the fourth quarter of the last financial year. Its net NPAs too went up by around 10.8% as compared to the last quarter. On a sequential basis, its net profits also fell by 8.5%. In an annual general meeting that was held on the same day as it declared results, the company chairman Atanu Chakraborthy, the bank chairman claimed that they had added 90 lakh customers during the year. While inflation reared its ugly head, the resultant monetary tightening has resulted in rate increases and currency depreciation, Chakraborthy said. In the last financial year ending March 2022, it paid a dividend of ₹15.5 per equity share, he said in his AGM speech. <cmsannotation type="cmsannotation" annotationid="Margins remain flat, while commission fees grows" comment="subhead" text="Margins remain flat, while commission fees grows">Margins remain flat, while commission fees grows</cmsannotation> India’s largest private bank reported a core net interest margin of around 4%. Its other income excluding trading and mark to market losses grew by 35%, the bank said. “The four components of other income for the quarter were fees and commissions, foreign exchange and derivatives revenue, loss on sale / revaluation of investments of ₹1311 crore, which gained by ₹601 crore in the corresponding quarter of the previous year and miscellaneous income, including recoveries and dividend,” the bank said in a press release. The bank’s fees and commissions for the quarter stood at ₹5,360 crore. Its operating expenses for the quarter came in at ₹10,502 crore, and increased by 28.7%. SEE ALSO <a href="https://www.businessinsider.in/business/telecom/news/full-list-of-airtel-xstream-fiber-broadband-plans-with-complete-details-and-benefits/articleshow/92901601.cms">Airtel Xstream Fiber Plans 2022: Full List of Airtel broadband plans with prices, benefits and validity</a> <a href="https://www.businessinsider.in/finance/news/rupee-at-80-heres-how-a-falling-rupee-could-impact-indias-current-account-deficit/articleshow/92897064.cms">Rupee at 80: Here’s how a falling Rupee could impact India's current account deficit</a>

HDFC’s net profit grows by 19% but its non performing assets swell sequentially

Even though the gross non-performing assets (<keyword id="710979" type="General" weightage="80" keywordseo="gnpa" source="Orion">GNPA</keyword>) of scheduled commercial banks in <keyword id="3658" type="General" weightage="20" keywordseo="india" source="Orion">India</keyword> has hit a six year low of 5.9 per cent in FY22, it can improve further, said <keyword id="6431877" type="General" weightage="100" keywordseo="care-ratings" source="Orion">CARE Ratings</keyword> in a report. According to the credit rating agency, the GNPA of Indian banks at the end of FY22 was at 5.9 per cent and the overall provision coverage ratio (PCR) went up to 70.9 per cent. "As the Indian economy has navigated the pandemic-induced shocks, the <keyword id="6355272" type="General" weightage="20" keywordseo="bank" source="Orion">bank</keyword> credit growth by scheduled commercial banks (SCBs) improved post-August 2021 to reach 13.1 per cent in early June 2022, a rate last recorded in March 2019," the report said. Apart from retail, the major driver of this growth has been the wholesale credit, which reported double digit growth after witnessing a significant slowdown last year. According to CARE Ratings, the <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword>'s (<keyword id="30067" type="General" weightage="50" keywordseo="rbi" source="Orion">RBI</keyword>) <keyword id="678734" type="General" weightage="50" keywordseo="financial-stability-report" source="Orion">Financial Stability Report</keyword> released on June 30 presents a rather satisfactory picture of the Indian banking system and the GNPA ratio is one of the most important indicators to check the health of the banking system. The GNPA ratio of SCBs had been on a downward trajectory since March 2019, owing to recoveries and higher write-offs by multiple banks and one time restructuring (OTR) scheme announced by RBI. As per the stress tests conducted by RBI, the SCBs GNPA ratio could improve from 5.9 per cent in March 2022 to 5.3 per cent by March 2023 under the baseline scenario driven by higher bank credit growth and a declining trend in the stock of GNPAs. "However, the GNPA ratio may rise under the medium/severe stress scenarios, the GNPA ratio may rise to 6.2 per cent/ 8.3 per cent, respectively," CARE Ratings said. SEE ALSO : <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/stock-market/news/adani-enterprises-adani-ports-and-adani-total-gas-are-going-ex-dividend-on-july-14-should-you-buy-them/articleshow/92823532.cms">These three Adani stocks are going ex-dividend on July 14 – should you buy them?</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/careers/news/after-techies-its-aviation-crew-salaries-thatll-be-up-in-the-air/articleshow/92818738.cms">After techies, its aviation crew salaries that’ll be ‘up in the air’</a>

Banks' non performing assets hit a six year low, says CARE Ratings

The CBI on Monday carried out searches at seven locations here in connection with a corruption case registered against Yes Bank founder <keyword id="128581" type="PERSON" weightage="20" keywordseo="Rana-Kapoor">Rana Kapoor</keyword>, Dewan Housing Finance Limited (DHFL) as well as its promoter Kapil Wadhawan. Primarily, the exact locations searched by the <keyword id="6354889" type="COMPANY" weightage="20" keywordseo="central-bureau-of-investigation">Central Bureau of Investigation</keyword> (CBI) teams were not known yet but agency sources confirmed that the places belonged to the accused named in the First Information Report (FIR). The CBI move came after the Enforcement Directorate arrested Kapoor on Sunday morning after over 30 hours of questioning in connection with a probe into a money laundering case involving DHFL. He was later sent in three-day ED custody by a Mumbai court. The CBI had registered a case of corruption, criminal conspiracy and cheating against Kapoor, a former MD and CEO of Yes Bank, DHFL and Wadhawan, on Sunday. The agency also named Doit Urban Ventures (India) Limited in its FIR registered under the Indian Penal Code and the Prevention of Corruption Act. The FIR mentions that Kapoor extended financial assistance to DHFL to get "substantial undue benefits" for himself and his family members through companies held by them. The case is being handled by the CBI's BS&amp;FC unit -- a specialised unit which looks into bank fraud cases across the country. The CBI has begun a probe into the short-term debentures of DHFL for which Yes Bank invested Rs 3,700 crore from April to June 2018. The probe is part of another investigation pertaining to Yes Bank's purchase of debentures from DHFL against which the company was granted loans totalling Rs 600 crore against a collateral security of around Rs 40 crore only. The loan amount later turned into <keyword id="463915" type="PERSON" weightage="20" keywordseo="non-performing-asset">non-performing asset</keyword>. It was alleged that DHFL's Wadhawan simultaneously paid kickbacks totalling Rs 600 crore to the Kapoors in the form of a loan of a similar amount to Doit Urban Ventures, a venture owned by his daughters -- Rakhee Kapoor Tandon, Roshni Kapoor and Radha Kapoor. It was also alleged that Yes Bank did not initiate action to recover the loans extended to DHFL.

Rana Kapoor corruption case: CBI raids 7 locations in Mumbai

The <a href="http://www.businessinsider.in/searchresult.cms?query=RBI&amp;sortorder=effectivedate">Reserve Bank of India </a>(RBI) silenced all rumours and confirmed it had no plans to introduce <keyword id="4342196" type="UNKNOWN" weightage="20" keywordseo="new-denomination-notes">new denomination notes</keyword>. 
 
RBI Deputy Governor NS Vishwanathan said the RBI is pushing for more <a href="http://www.businessinsider.in/searchresult.cms?query=cashless+transactions&amp;sortorder=effectivedate">cashless transactions</a> now. 
 "Presently RBI has no idea to introduce currencies of new denominations. The central banking institution wants to encourage <keyword id="6445679" type="UNKNOWN" weightage="20" keywordseo="cashless-transactions">cashless transactions</keyword>, which are helpful to the people,” said Vishwanathan during a lecture on 'credit culture and financial system'. 
 
Meanwhile, he expressed concerns over<a href="http://www.businessinsider.in/searchresult.cms?query=non+performing+assets&amp;sortorder=effectivedate"> Non Performing Assets</a> (NPAs), saying they were affecting the income and profit of banks. 
 
“Banks cannot escape from the responsibility of controlling NPAs in their balance sheets,” he said. 
 
The NPA amount of the state-run banks rose to Rs 6.3 lakh crore at end of the current fiscal's second quarter that ended in September. 
 
Banks are expected to base their lending decisions on a careful and prudent assessment of the financial position and repaying capacity of the borrower. Credit would be given to only the right people, he said. 
 
Banks must have good system of credit culture, he added.

RBI won’t introduce new denomination notes, to focus on cashless transactions

Governor of <a href="http://www.businessinsider.in/searchresult.cms?query=RBI&amp;sortorder=effectivedate">Reserve Bank of India</a> (RBI), <a href="http://www.businessinsider.in/searchresult.cms?query=raghuram+rajan&amp;sortorder=effectivedate">Raghuram Rajan</a>, can be credited with introducing a host of initiatives in the <a href="http://www.businessinsider.in/searchresult.cms?query=indian+banking+&amp;sortorder=effectivedate">Indian banking sector</a> to spur growth and reduce bad debt. 
 
Apart from reforms, Rajan has also saved India from a major crisis. Remember <a href="http://www.businessinsider.in/searchresult.cms?query=lehman+brothers&amp;sortorder=effectivedate">Lehman Brothers</a> crisis in 2008? 
 Yes, Rajan, whose term ends in September this year, did enough to prevent the collapse of the <keyword id="183986" type="UNKNOWN" weightage="20" keywordseo="Indian-banking-system">Indian banking system</keyword>, that too very recently. 
 
"Even though the economic recovery is not happening at the desired pace, RBI and the bank boards have made it reasonably clear that they would not la Lehman moment occur in India," Saurabh Mukherjea, CEO Institutional Equities, Ambit Capital, said in an interview with ET Now. 
 
Rajan has many a time stressed that he would make sure India does not have to go through Lehman-like crisis. 
 
"The banking system is not going to the dog house and that is why I took the crisis call off the table. So, assuming a modest scenario of around 10 per cent earnings growth this financial year, it will lead Sensex to around 29,000-29,500 in FY17," said Mukherjea. 
 
Here are initiatives that RBI and the government took to sail banking system in the right direction 
 
Asset Quality Review (AQR): It was introduced by the RBI to make sure that banks were taking steps to clean up their balance sheets and reduce Non-Performing Assets (NPAs). 
 
<keyword id="3424182" type="UNKNOWN" weightage="20" keywordseo="indradhanush-scheme">Indradhanush scheme</keyword>: In a bid to resurrect some life in the public sector banks, the government will launch ‘<a href="http://www.businessinsider.in/searchresult.cms?query=indradhanush&amp;sortorder=effectivedate">Indradhanush’</a> and infuse Rs 70, 000 crore. 
 
The Indradhanush plan is already in works with an allocation of Rs 250 billion in the Union budget for 2016-17 for capital infusion into PSBs. 
It is expected that PSBs will raise the remaining Rs 1,10,000 crore from the market. Also, the government is committed to making extra-budgetary provisions in FY18 and FY19 too. 
 
Bankruptcy code- This will make companies and businesses to exit in a smooth manner and start afresh. The bankruptcy code will solve issues in a swift manner and ensure a data base of serial defaulters is in place. 
 
Structuring of stressed assets: This will enable banks to fight their own challenges over stressed assets coming from loans given to large companies that have turned sour. 
 
As per Crisil estimates, weak assets in the Indian banking system will touch 8 lakh crore by the end of this financial year. 
 
Transmission of repo rates: The banks haven’t passed on the slashed rates. The <a href="http://www.businessinsider.in/searchresult.cms?query=repo+rate&amp;sortorder=effectivedate">repo rate</a> stands at 6.50 per cent and the faster transmission would help credit growth in the system to pick up which has remained almost flat in the last 4-8 quarters. 
 
The banks have reduced their lending rates between 0.6% and 0.8% only. 
 
(Image: Indiatimes)

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