Private sector lender Bandhan Bank, which witnessed a massive 10-fold year-on-year rise in its non-performing assets (NPAs) for the second quarter this fiscal, has said it is confident that the NPA level will reduce “substantially” in the next few months as there is clear visibility of improving asset quality day-by-day.
The bank on Friday reported a whopping net loss of Rs3,008.59 crore for the second quarter on the back of Rs5,577.92 crore provisions as the lender saw a huge surge in bad loans. In absolute terms, NPAs of the bank soared to Rs8,763.60 crore from Rs873.97 crore for the corresponding period last fiscal. On a quarter-on-quarter basis, NPAs grew 36% from Rs 6,440.38 crore in the first quarter this fiscal.
“The option was to take it (provisions) over three quarters or take it upfront. But what happens is if I take it over three quarters, the people, the readers will not get the sense of what is the level of stress and how long it can remain. Today, when I am taking it upfront, I am taking the entire possible stress portfolio, whether it is restructuring or whether it is NPA upfront. As I am fully provided, going forward, it will be business as usual and you will see the real strength of Bandhan Bank what it used to be in the pre-pandemic period,” Sunil Samdani, chief financial officer, Bandhan Bank, told FE on Saturday.
During the second quarter, the bank made an accelerated provision on NPA accounts of around Rs1,500 crore. In addition to this, it also provided an additional standard assets provision amounting to around Rs 2,100 crore and provision on restructured assets amounting to around Rs 1,030 crore.
Asked about the Rs2,100 crore provisioning on the standard accounts, Samdhani said, “It is not that we are seeing stress against our standard book. Since we have restructured some accounts, when they come out of restructuring, surely there will be some portions that will fall into the NPAs. So, against that we have taken this provisioning.”
Bandhan Bank MD and CEO Chandra Shekhar Ghosh said this was a “right time” to make one-time provisioning and focus more on future growth. “In the ground level, there are very good improvements. The scenario is becoming normal as Covid-related lockdown restrictions have been removed in most parts of the country. Business is coming back. This is the right time we go for one-time provisioning and focuss more on future growth. It is better to make provision in one quarter and then register profits in the subsequent quarters,” Ghosh pointed out.
“Our bank’s collection efficiency on month-on-month basis improving in a good way. Credit growth is coming back. Whatever we are seeing now, we may see normalcy in the third quarter itself,” he said.
In a post-earnings conference call on Friday, Ghosh said the majority of the bank’s customers are either part paying or full paying their dues. “There is clear visibility of improving asset quality day-by-day. In the last month alone, we have seen that per day 14,000 customers standardized their accounts every day. I firmly believe that the most difficult period with respect to Covid-related disruptions and asset quality challenges are behind us,” he said. The lender was now in a position to accelerate the next phase of its growth with a strong balance sheet, he emphasised.
“If economic growth is coming back as the recoveries come in, there is a strong possibility of a part of this provisioning getting retained back. With credit growth rising, collection efficiency improving, recoveries gathering steam, we are confident that our NPA level will reduce substantially in the next few months,” Ghosh added.
Samdani, during the post-earnings conference call, said the bank was very confident that by the end of this fiscal it would be able to recover around Rs6,000 crore of bad loans. “If we look at collections, disbursement and demands from customers and DPD (days past due) position, there has been substantial improvement,” he added.
In September, the lender’s collection efficiency for non-NPA customers stood at 94%. Sector-wise, EEB (erstwhile microbanking segment) collection efficiency stood at 93% as against 77% in June. In Assam and West Bengal, collection efficiencies improved.
During the second quarter this fiscal, the bank’s gross NPAs as a percentage of total loans increased 964 basis points on year-on-year basis to 10.82% from 1.18% during the same quarter last fiscal. On a quarter-on-quarter basis, the gross NPA ratio soared 264 basis points from 8.18% in Q1FY22.