Cautious approach makes RBL Bank confident of maintaining asset quality

MUMBAI: RBL Bank expects to maintain its credit cost guidance of 335-340 basis points of its loan book in the current fiscal year, as a cautious approach to corporate loans will make up for the risks posed by the Covid 19 outbreak. One basis point is 0.01 percentage point.

The bank has consiously avoided taking bulky loan exposures in the last one year as it brought NPAs under control which had spiralled last fiscal due to loan exposures to Cafe Coffee Day and stressed companies in the media and real estate sectors.

Wholeale loan book has shrunk 18% year on year because of this approach and CEO Vishwavir Ahuja maintains credit costs will not exceed last fiscal’s levels.

“Our asset quality is stable. We have already calibrated our book and if not for this Covid crisis we would have been in a much better position. I expect our credit costs to be within last year’s guidance,” he said.

RBL Bank’s net profit fell 47% to Rs 141 crore in the April-June quarter, due to an over two-fold jump in provisioning and shrinkage of the loan book, and as other income fell due to the impact of the Covid-19 induced lockdown.

Provisions rose to Rs 500 crore from Rs 197 crore a year ago.

Total loans, at Rs 56,683 crore, were little changed from a year ago but down 2% from Rs 58,019 crore in March, as retail loan disbursements fell due to the pandemic. Non-wholesale advances accounted for 53% of net advances.

Other income, which includes fees from credit cards and processing fees, fell 31% to Rs 334 crore because of lower credit offtake and risk appetite.

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“Things are improving but we do not expect to get to our normal loan growth run rate till December. There have been positives like 77% of EMIs are being paid in the rural banking segment but we are still cautious. Things may not worsen much but they also will not be very good. It will plateau at around these levels,” said Ahuja said.

The bank made an additional provisioning of Rs 240 crore to add to the Rs 110 crore in March specifically for Covid related stress.

The total book under moratorium fell to 13.7% from 33% in April, led by a fall to 5% of the wholesale book, from 22% in April.

Business loans had the highest amount of loans under moratorium at 35%, down from 65% earlier, while 21% of the bank’s credit card book was still under moratorium.

Gross NPA ratio declined sequentially to 3.45% from 3.62% in March because fresh slippages were miniscule and recoveries were at Rs 40 crore. Higher provisions meant the provision coverage ratio improved to 70.46% from 64.04% in March.



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