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 Slippages | Rs, 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 cr | Q2FY22 |
| 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 cr | Q1FY21 | 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.
(Edited by : Yashi Gupta)
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