The second wave of Covid-19 has hit private lenders hard as ICICI Bank, HDFC Bank, Axis Bank, Yes Bank and Federal Bank have reported signs of stress in the retail loans portfolio of the quarter ended on June 2021.

Signs of worry

ICICI Bank has reported that loans worth Rs 7,231 crore have turned bad during the quarter. A major chunk of Rs 6,773 crore of it came from the retail and small business segment. Of this, the jewellery loan portfolio accounted for Rs 1,130 crore.

HDFC Bank saw its retail loans contract in June quarter by around 1% compared to the March quarter. Retail loans, including housing loans contracted by 30% to Rs 43,600 crore for the period under review.

Yes Bank registered a rise in overdue retail loans of between 61-90 days to Rs 790 crore in the quarter ended June compared to Rs 234 crore in the quarter ended March.

“The bank would avoid lending to Covid-hits sectors such as hospitality, tours, and travels, and real estate for the current financial year,” Prashant Kumar, CEO of Yes Bank said, according to a report in The BloombergQuint.

Axis Bank too had similar woes to share. The gross non-performing assets (GNPAs) stood at 3.85% as on June 30 as a percentage of total advances. This was up by 15 basis points (bps) from the March quarter. Nearly 84% of its slippages in the quarter ending June came from the retail segment.

Federal Bank too had gold loans and small enterprises segments lending shown as non-performing in its books. The bank’s total slippages increased to Rs 640 crore in the quarter ended June compared to Rs 598 crore in the quarter ended March. Bad loans in business banking (retail segment) increased to Rs 169 crore in June from Rs 73 crore in March. The bank has further restructured gold and business banking accounts worth Rs 539 crore.

RBI asks banks to monitor asset quality

The Reserve Bank of India (RBI), meanwhile, has advised banks to closely monitor the asset quality of MSME and retail portfolios.

The rise in non-performing loans is attributed to the second wave as it has resulted in a downward trend in credit demand inquiries.

RBI in a report said, after they permitted restructuring of temporarily impaired MSME loans of up to Rs 25 crore under three schemes, the public sector banks (PSBs) restructured loans under all the schemes. Despite this, the stress in the MSME portfolio of PSBs remains high.

Optimistic of recovery

Both private and public sector banks, however, remained optimistic, stating though banks and NBFCs have seen the worst in April and May of this year due to the second wave, recovery in the coming months is bound to happen provided the third wave is thwarted to a large extent.