The slippages doubles to 5 percent because of the low loan offtake and moratorium of the top five private sector banks. The banks are HDFC bank, Axis bank, ICICI Bank, Kotak Mahindra Bank and IndusInd bank. These banks together control one-fourth of the system and three fourth parts of the private banking space.
The slippages double to around 5 percent of these banks from 2.3 percent in the financial year 2019 and 2.7 percent in the financial year 2020. The slippages can be lowered to 4 percent if refinancing is challenging.
Since loan demands are less, banks are investing their excess liquidity in low yielding options like government bonds and top-rated corporate securities because of their higher credit chance discernment and broadening length spreads, even as deposit inflows have been vigorous.
There is growth in deposits for these banks from 18.5 in the financial year 2019 to 18.8 in the financial year 2020. But there is a decrease in the case of a loan from 19.1 to 15 percent this year. Through the capital market over the last six months. Reserve bank has injected Rs 1.7 lakh crore of liquid assets in the system.
A major increase in delinquent assets because of the troubles the economy is facing due to the GDP destruction, in the banking sector caused by covid19.
Banks have moved a lot of the excess liquidity into reverse repo where the rates have declined by 215 bps over the most recent one year, yielding 3.35 percent and with the cost of assets tumbling to 5-6 percent, this could bring about a negative impact.
Pre-provisioning working benefit or working cradles of these lenders to be around 80 bps lower than their consistent state pre-provisioning working benefit, which in FY20 was 4.9 percent which may reduce their capacity to withstand credit costs without capital disintegration.
At the point when the division was taking care of its business after the keep going six difficult years on the corporate side, despite the fact that retail, SME, and Agri advances were at that point showing up torment regions before the pandemic hit us all.