Note Ban Hits Loan Recovery Badly
For top eight lenders, recoveries have fallen by nearly a quarter from second quarter to third
Mumbai: Demonetisation has not only dampened banks’ core business of lending, it has also hit them where it hurts — loan recovery. Recoveries from bad assets have fallen nearly a quarter among the top 8 lenders.
Banks, which had set lofty targets for loan recoveries at the start of the year after the Asset Quality Review exercise, are likely to miss their targets as bad loans continue to pile up. Top banks recovered just ₹ 7,909 crore from such loans at the end of the December quarter against ₹ 10,177 crore at the end of the September quarter.
These numbers are dismal, especially when compared with the quantum of dodgy loans banks have accumulated since December last year. Data compiled by ETIG shows that at the end of September 2015, banks’ absolute gross non-performing assets stood at ₹ 3.50 lakh crore, which climbed by a staggering ₹ 1 lakh crore to ₹ 4.49 lakh crore in merely 3 months when the RBI announced the asset quality review exercise.
At the end of March last year, gross non-performing assets in 41 listed banks stood at ₹ 5.91 lakh crore. The country’s largest lender State Bank of India showed recoveries of ₹ 1,003 crore against ₹ 1,344 crore sequentially.
For the 9-month period of this financial year, the bank managed to recover only ₹ 3,994 crore and up-
Top banks recovered just 7,909 crore in Q3 against 10,177 crore in quarter ended September
graded accounts worth ₹ 2,434 crore.
“We were very hopeful of seeing most of the resolutions come in during this quarter. But demonetisation has actually pushed this by another quarter,” said Arundhati Bhattacharya, chairman, State Bank of India.
For ICICI Bank, recoveries and upgrades slowed to ₹ 625 crore against ₹ 800 crore sequentially. It also managed to sell loans worth ₹ 87 crore to as- set reconstruction companies.
“We have always said that the recovery as well as the decision-making environment have been quite challenging -- we continue to navigate the environment and press forward on all the resolutions,” said NS Kannan, ED, ICICI Bank.For Axis Bank, recoveries and upgrades nosedived to ₹ 350 crore compared with ₹ 1,073 crore quarter-on quarter, a fall of nearly 250%.