HDFC Bank bad loan ratio may widen to decade high, says CEO-designate

The bad-loan ratio might widen to 1.4% to 2%, which will be close to the highest level since the global financial crisis, Sashidhar Jagdishan said in a conference call with analysts on Friday

Country’s largest private lender HDFC Bank’s gross bad-loan ratio might widen on slippages from loans in moratorium, its Chief Executive Officer - designate Sashidhar Jagdishan said.

The bad-loan ratio might widen to 1.4 per cent to 2 per cent, which will be close to the highest level since the global financial crisis, Jagdishan said in a conference call with analysts on Friday. Jagdishan will takesover charge as MD & CEO from Aditya Puri on October 27, 2020.

The bank’s Gross Non-performing Assets (GNPAs) - bad loan ratio -- was at 1.36% at end of June as against 1.4 per cent in Q1Fy20. The GNPA were at 1.26 per cent at end of March 2020. The net NPAs declined to 0.33 per cent in June 2020 from 0.43 per cent in June 2019. The Net NPAs were at 0.36 per cent in Mach 2020.

The provisions (including for NPAs) and contingencies by 48.9 per cent to Rs 3,891.5 crore in Q1Fy21 from Rs 2,613.7 crore in Q1Fy20. The specific loan loss provisions stood at Rs 2,739.8 crore in Q1Fy21 as against Rs 2,248.0 crore in June quarter last year. The general provisions and other provisions rose multi-fold to Rs 1,151.7 crore in Q1Fy21 from Rs 365.7 crore in Q1Fy20.

The bank said it has used its analytical models to determine slippages, resulting in a more expedited recognition of NPAs, and accelerated corresponding specific provisions. The Bank also continues to hold provisions against the potential impact of Covid-19 based on the information available at this point in time. These provisions are in excess of the norms prescribed by Reserve Bank of India.

The country’s second-largest lender is targeting to increase its market share by 6-7 percentage points to about 15%; eyes more business in smaller cities and villages.