FINANCE

SBI, ICICI Bank, others’ customers opt in for loan moratorium; check which banks top the list

ICICI Bank

The loan moratorium announced by the Reserve bank of India in March, to help borrowers suffering from the slowdown in the economy aided by the coronavirus pandemic, has been touted as something that will hit the banking sector hard. With the initial announcement of three months of moratorium now extended for another three the pain could lead to liquidity crunch among banks. The loan moratorium could act as a catalyst to an even greater build-up of credit losses once the moratoriums are lifted, according to Moody’s even some brokerage and research firms.

Almost all big private banks have seen a significant number of borrowers opt in for the loan moratorium. ICICI Bank leads the way with 30% of the total loans under the moratorium, as the bank reported earlier in May. Uday Kotak led-Kotak Mahindra Bank 26% of the loan book under moratorium by total loans. Kotak Mahindra Bank said that more retail investors have opted in for the moratorium than corporate investors. “Extension of moratorium is good for the economy but in substance will negatively impact banks and NBFCs,” Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote had said earlier last month when RBI extended the moratorium. The  Impact of the loan moratorium and the expected NPAs arising from the moratorium will only be known in the second half of the year.

Announcing its results today, India’s biggest PSU bank State Bank of India said that 21.8% of its customers have opted for the moratorium, translating to 23% in loan value from the total loan book. SBI’s gross advances at the end of March 2020 stood at Rs 24,22,845 crore. India’s largest private sector lender has only 8%-9% of the loan book under moratorium. Axis Bank said 10%-12% customers opted in for the moratorium that is 28% of the loan book value. Total loan book of Axis Bank stood at Rs 5.8 lakh crore putting the value of loans under moratorium at Rs 1.6 lakh crore. IndusInd Bank has only 5% of the loan book, by value, under the loan moratorium.

RBI has also asked lenders to make provisions against loans kept under the moratorium. With askl to maintain a 10% provision, banks have seen a huge spike in provisioning in the March quarter. SBI’s total provisions stood at Rs 13,000 crore with the provision coverage ratio standing at 83.6% Axis Bank made provisions of Rs 7,730 crores including Rs 3,000 crores related to COVID in the March quarter. ICICI Bank had announced keeping aside Rs 607 crore as provisions relating to the loan moratorium while it made a provision of another Rs 2,725 crore keeping in mind the impact that the coronavirus pandemic will have on operations of the bank. Kotak Mahindra Bank’s provision coverage ratio was reported at 76.30% at the end of March quarter as it reported provision for NPAs and other provisions at Rs 2,126 crore.

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