E-Paper
Lenders create provision buffers to counter slippages
The Reserve Bank of India (RBI) has asked banks to set aside 10% of those outstanding loans for which a three-month moratorium on repayments was provided. This has to be done in two tranches of 5% each in the March and June quarters.
Private sector lenders are using the covid-19 pandemic to build a war chest of provisions that would come handy in cushioning against future asset slippages. Axis Bank has pegged its covid-19 provisions at ₹3,000 crore, while ICICI Bank said it has set aside ₹2,725 crore in the March quarter and HDFC Bank has made additional provisions of ₹1,550 crore.
The Reserve Bank of India (RBI) has asked banks to set aside 10% of those outstanding loans for which a three-month moratorium on repayments was provided. This has to be done in two tranches of 5% each in the March and June quarters.
HDFC Bank has created a good credit buffer to be able to withstand a shock, anticipating that things will start to normalise around May or June, said Sashidhar Jagdishan, head of finance at the lender. “In case it gets prolonged even beyond, whether it is unsecured, or secured retail, small and medium enterprise, or even corporate, I think we have done enough provisioning to take care of any event that may happen,” Jagdishan said on April 18.
