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    Q1FY22 Banking trend: Slippages elevated, write offs lowest in last 3 quarters

    Q1FY22 Banking trend: Slippages elevated, write offs lowest in last 3 quarters

    Q1FY22 Banking trend: Slippages elevated, write offs lowest in last 3 quarters
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    By Abhishek Kothari   IST (Published)


    Banks are confident of recovering bad loans as well as upgrades—bad loans reclassified as standard—going ahead. 

    The second wave of COVID has added to the banking sector’s non-performing assets (NPA) problem, but there is still something to cheer about. Write-offs as a percentage of slippages have been the lowest in the last five quarters. Write-offs are loans, which a bank thinks is not recoverable at all. Slippages, in banking parlance, is when a standard asset becomes an NPA owing to the borrower not paying interest for more than 90 days.
    During the first quarter of the previous financial year, banks were writing off nearly Rs 300 for every Rs 100 of fresh slippages added to the system. What this means is that many of the older bad loans were becoming irrecoverable. There has been a significant improvement in this rate during the quarter just gone by, with the write-off ratio now down to 38 percent from 200 percent.
    Two factors are driving this trend- one, banks are able to recover some of the bad loans, and two, an improvement in the financial health of some borrowers has led to the resumption of interest payments.
    In absolute terms, the bulk of the write-offs has been done by SBI, Union Bank of India, Bank of Baroda, PNB, Axis Bank and YES Bank.
    Banks that have written off more bad loans than fresh slippages are UCO Bank, IDBI Bank, Bank of Maharashtra & Indian Overseas Bank. A high proportion of write-offs indicates poor quality of credit risk assessment.
    The lowest write-offs in the last five quarters are from Punjab & Sind Bank, Suryoday SFB, DCB Bank, CSB Bank and Equitas SFB.
    Slippages trend
    The highest slippages for the sector was in Q4FY21 when loans under moratorium (in COVID 1.0) were to be recognised as NPAs if the borrowers had not made interest payments. Total slippages in Q4FY21 were at Rs 1,86,749 crore. Slippages in Q1FY22 remained on the higher side at Rs 98,536 crore due to the second wave of COVID-19.
    Total SlippagesRs, cr
    Q1FY21         24,532
    Q2FY21         17,335
    Q3FY21         25,340
    Q4FY21      186,749
    Q1FY22         98,536
    Cumulative      352,492
    Annualised slippage ratio has remained elevated at 3.75 percent in Q1FY22
    The highest slippages have been for SBI, PNB and Bank of Baroda
    The lowest slippages have been for Dhanlaxmi Bank, CSB Bank and Equitas SFB
    Annualised Slippage Ratio%
    Q1FY21          0.98
    Q2FY21          0.70
    Q3FY21          0.99
    Q4FY21          7.05
    Q1FY22          3.75
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