Axis Bank has set aside over $900 million fearing COVID-19 may sour loans
- India’s third largest private bank clocked a 19% fall in profit in April-June 2020 compared to the same time last year.
- The beating comes after the bank already reported a massive 200% fall between January through to March.
- The total money set aside as provision for loans that may borrowers may not be able to return due to the COVID-19 crisis is ₹ 6898 crore (over $900 million).
This is over and above the money that is needed to be set aside for non-performing assets (NPA) in the normal course of business, according to the bank. The fear is that the economic crisis brought upon by the COVID-19 pandemic might affect people’s ability to repay the loan. And therefore, the bank has set aside a portion of its profit to cover the possible losses in the future.
Axis Bank asserts that only 9.7% of its total portfolio has currently opted for the Reserve Bank of India's (RBI) moratorium set to expire in August.
This has led to a 19% fall in the bank’s profit, to ₹1112.17 crore, between April and June 2020 compared to the same time last year.
As expected, the number of fresh loans and deposits between April and June fell sharply as compared the previous quarter despite slashing base rates that determine both lending and deposit rates after much prodding by the Reserve Bank of India (RBI). However, they showed 16% and 17% growth respectively.
Axis Bank says 90% to 95% of all its loans are rate A or better. The rating will not change until the moratorium is in place.
The bank’s share price rose over 2% ahead of its earnings with investors expecting it to fare better than peers.
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