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Banking sector Q1 earnings suggest continuation of NPA stress

Updated : July 19, 2019 05:57 PM IST

Problems in the country's banking sector aren’t entirely over. Many small banks have started showing trouble and in Q1 earnings, some of them have shown continuation of stress. Federal Bank slippages are up quarter-on-quarter (QoQ) by 62 percent and DCB sees 48 percent higher slippages QoQ. RBL Bank reported only a 9.2 percent rise in slippages QoQ, but they have guided that if a couple of dicey accounts go under, then it could be a substantial rise.

Yes Bank is a case by itself. While they cannot be called a victim of the current slowdown, there is a doubling of NPAs. Bandhan Bank and IndusInd Bank do not show the trend that others show; the slippages did not increase, and in the case of IndusInd, slippages fell . However, these are microfinance players.

Looking at Federal Bank, DCB Bank and RBL Bank, the next slowdown cycle is likely to hit them. Either they have been hit by the next slowdown cycle or the last vestiges of the previous NPA cleanup are still not over.

There is inadequate evidence and we would be able to speak with authority on the banking sector only when get Axis Bank and Bank of Baroda, which are third and fourth largest banks, or the ICICI Bank and SBI, which is the largest in terms of corporate exposure. However, from the limited evidence available, the fear is that before the cleanup of the previous cycle ends, we are going to see the start of a fresh cycle of slowdown.
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