HomeFinance NewsAxis Bank's concall highlights pain in the economy

Axis Bank's concall highlights pain in the economy

Axis Bank mentioned that 10-11 percent of customers asked for moratorium and it formed 28 percent in value of the total loan book.

Profile image

By Abhishek Kothari  April 29, 2020, 8:03:10 AM IST (Updated)

Axis Bank's concall highlights pain in the economy
Axis Bank’s concall has highlighted a key sense of worry on the moratorium given by the RBI to accounts that can't pay their dues due to the coronavirus lockdown in India. It gave a true picture of the economy in terms of growth ahead and need for conservation of capital among banks rather than going for growth.


While on one hand IndusInd Bank mentioned that 5 percent of its customers asked for moratorium -- they didn’t specify the amount, on the other hand, Axis Bank mentioned that 10-11 percent of customers asked for moratorium and it formed 28 percent in value of the total loan book.

Axis Bank’s total advances are at Rs 5.7 lakh crore, which means that around Rs 1.6 lakh crore of loan book has asked for moratorium.

Highlighting the pain in the economy, Axis Bank management stated that it expects credit cost to rise going ahead even as fee income and loan growth slow.

The bank expects COVID-19 impact on economy and financial sector to be long drawn and thus remains cautious in its approach. There is an expectation that rating agency downgrades of accounts will make it even tougher for banks to lend to customers.

Downgrades will also lead to swelling up or increase in the watch-list of the banking sector. Given the looming uncertainties, the bank has decided not to offer any forward looking guidance.

What’s also worrying and true is that banks are not giving moratorium to NBFCs where there is uncertainty in terms of future repayments.

The bank’s assessment is that economic activity is likely to be very low for at least the next 6-12 months. This chimes with the comments on CNBC-TV18 by the management of Sundaram Finance, a leading commercial vehicle financier, that it doesn't expect economic activity to pick up till September.

Given that any vaccine is at least 18 months away, an early, well-planned and calibrated reopening of the economy will go a long way in mitigating risk of a very severe recession, that might be difficult for India to swiftly crawl its way out of.
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!