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    Q2FY22 Banking trend: Slippages decline QoQ, restructuring highest for small finance banks

    Q2FY22 Banking trend: Slippages decline QoQ, restructuring highest for small finance banks

    Q2FY22 Banking trend: Slippages decline QoQ, restructuring highest for small finance banks
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    By Abhishek Kothari   IST (Published)

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    In our banking sector review for the second quarter of FY22, we found banks' slippage have declined quarter-over-quarter (QoQ). Total slippages were at Rs 79,951 crore as compared to Rs 98,536 crore in the first quarter. The annualised slippage ratio also declined to 2.98 percent in Q2FY22 vs 3.75 percent in Q1FY22.

    The asset quality of the banking sector has been a topic of concern, especially, since the second wave of COVID-19 infections. Cumulatively, India’s banking sector has seen slippages to the tune of Rs 4,32,443 crore in the last five quarters.
    Slippages, in banking parlance, is when a bank’s assets become a non-performing asset (NPA) owing to the borrower not paying interest for over 90 days.
    The highest slippages for the sector was in the fourth quarter of the financial year 2021 (Q4FY21) when the loans under the moratorium (in COVID 1.0). At the time assets were to be recognised as NPAs, if the banks did not receive payments. However, despite the second wave, in the second quarter of FY22, the slippages declined quarter-over-quarter (QoQ). Total slippages were at Rs 79,951 crore as compared to Rs 98,536 crore in the first quarter.


    Total SlippagesRs, cr
    Q1FY21         24,532
    Q2FY21         17,335
    Q3FY21         25,340
    Q4FY21      186,749
    Q1FY22         98,536
    Q2FY22         79,951
    Cumulative      432,443
    Annualised slippage ratio also declined to 2.98 percent in Q2FY22 vs 3.75 percent in Q1FY22.
    Annualised Slippage Ratio Percent
    Q1FY21             0.98
    Q2FY21             0.70
    Q3FY21             0.99
    Q4FY21             7.05
    Q1FY22             3.75
    Q2FY22             2.98
    Restructured book of the banking sector was at Rs 2,68,332 crore in Q2FY22, forming 2.45 percent of the total loans.
    The restructuring was the highest for Suryoday Small Finance Bank, Bandhan Bank, and Ujjivan Small Finance Bank. It was lowest for the banks like Kotak Mahindra Bank, Axis Bank, CSB Bank, SBI, ICICI Bank, and HDFC Bank (all <1.5 percent of their book).
    Restructured Book, Rs crQ2FY22
    SBI     30,312
    Union Bank of India     22,095
    Bank of India     21,275
    Bank of Baroda     20,500
    Indian Bank     19,221
    Canara Bank     18,542
    PNB     17,498
    HDFC Bank     17,397
    Bandhan Bank     13,928
    ICICI Bank        9,684
    IOB        9,500
    Central Bank of India        9,150
    IndusInd Bank        7,949
    YES Bank        6,184
    Bank of Maha        5,996
    Axis Bank        4,461
    Karnataka Bank        4,353
    Federal bank        3,935
    Punjab & Sind Bank        3,446
    IDFC Bank        3,401
    J&K Bank        2,746
    South Indian Bank        2,310
    City Union Bank        2,248
    UCO Bank        2,035
    Karur Vysya Bank        1,937
    RBL Bank        1,876
    Ujjivan        1,480
    Equitas SFB        1,401
    AU Small Finance Bank        1,302
    Kotak Mah Bank        1,262
    Suyoday SFB           793
    CSB Bank           113
    Trend Data 
    Slippages, Rs crQ1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22 Q2FY22 Cumulative
    SBI           3,910        3,085           237     21,934     16,298        4,292             45,464
    PNB           2,476        2,271        1,150     24,172     10,168        9,077             40,237
    Bank of Baroda           3,002        1,520        4,560     12,274        6,194        5,802             27,550
    Union Bank of India           1,750           673           332     14,688        7,049        6,745             24,492
    ICICI Bank           1,160        3,017           471     11,818        7,231        5,578             23,697
    Axis Bank           2,218        1,572        7,933        5,285        6,518        5,464             23,526
    Canara Bank           1,675           415           508     15,287        4,391        6,896             22,276
    HDFC Bank           3,100        2,076        5,032        4,701        7,194        5,300             22,103
    YES Bank                 45           101               -     11,783        2,343        1,783             14,272
    Indian Bank               606           315           195        8,313        4,412        3,852             13,841
    Bank of India               402           274           496        7,368        3,942        1,307             12,482
    IndusInd Bank           1,537           399        2,508        3,829        2,762        2,658             11,035
    Bandhan Bank                 25              11                0        6,851        1,680        2,943                8,568
    Central Bank of India                 20              97              59        5,848        1,281        2,104                7,305
    Kotak Mah Bank               796           264               -        4,400        1,500        1,293                6,960
    IDFC Bank                 72           233                3        3,245        2,847        1,600                6,400
    UCO Bank               384           384           215        2,450        1,708        2,389                5,141
    RBL Bank                   5           234        1,470        1,439        1,342        1,217                4,490
    IOB               358         (127)              28        2,919        1,245        1,440                4,423
    IDBI Bank                 69              32               -        2,355        1,577        1,541                4,033
    Bank of Maha               105           125              16        2,079           937           618                3,262
    South Indian Bank               161              52                5        2,123           883           535                3,224
    Federal bank               193              10              34        1,685           689           339                2,611
    Punjab & Sind Bank                 59              70                5        1,510           443        1,566                2,086
    Karnataka Bank               167                2                1        1,176           414           445                1,761
    J&K Bank                 37              47              25           998           613           704                1,720
    City Union Bank                   3               -               -        1,110           482           297                1,595
    AU Small Finance Bank                   5              23                6        1,244           250           210                1,528
    Karur Vysya Bank                 40                8                6           905           519           164                1,478
    DCB Bank                   8                9                1           664           520           414                1,202
    Ujjivan                 53           111                1           885            600                1,049
    Equitas SFB                 15              23              36           515           375           339                   964
    CSB Bank                   6                4               -           188           435           205                   633
    Dhanlaxmi Bank                 69                5                7           310           194           136                   585
    Suyoday SFB                  -               -               -           399           101              97                   500
    Source: Basel III document, Presentation of the entity
    Outlook
    While the majority of stress has been recognised, growth is yet to make a comeback meaningfully for the corporate book. There has been a rise in restructured books, especially in the retail and SME segment. This could impact asset quality going ahead.
    However, banks are well-capitalised, which will aid the incremental stress in the balance sheet. The gross non-performing asset (GNPA) ratio of public sector banks has been the lowest in the last six quarters, which has helped them score the highest PAT in 24 quarters. GNPA ratio has come down from as high as 15.63 percent as of FY18 to 9.09 percent as of Q2FY22.
    NCLT recovery has slowed down quite a lot. Srei was the painful account in Q2’s performance while DHFL resolution did aid in recovery. The worst of asset quality woes is largely behind for the banking sector.
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