About A Third Of Private Bank Loan Books Go Under Moratorium

The moratorium announced on March 27 was applicable for payments due between March and May.

Keys hang from a lock of a deposit box sit inside the precious metals vault.  (Photographer: Dominik Osswald/Bloomberg)
Keys hang from a lock of a deposit box sit inside the precious metals vault. (Photographer: Dominik Osswald/Bloomberg)

India’s private lenders have seen about a third of their loan books go under the three-month loan moratorium offered to term loan customers by the Reserve Bank of India. The moratorium announced on March 27 was applicable for payments due between March and May.

With the exception of HDFC Bank Ltd. and IndusInd Bank Ltd., which reported their earnings early in the season, most private lenders have provided information about the number of borrowers and value of loans under moratorium. The managements at these banks said that most borrowers have used the moratorium as a way to conserve liquidity and many continue to have the ability to repay their dues.

HDFC Bank: Early Requests ‘Low’

The country’s largest private lender was the first to report earnings on April 17. As such, it had only seen moratorium requests for two weeks when the management addressed analysts to discuss the quarterly results.

Actual requests in the large corporate segment remain low, the management said at the time. “While requests have started coming in and are being processed after checking eligibility and other criteria, it is difficult to set a trend this early,” said Rahul Gopalprasad Shukla, group head for corporate banking and business banking at HDFC Bank.

According to the management, while larger corporates are using the moratorium to conserve liquidity, smaller private players in the wholesale SME segment, without access to liquidity via public markets, would look to reduce their operating and financing costs.

“As of now, a very small percentage of BBG (Business Banking Group) customer base has indicated they will avail moratorium. However, given that they can make an application anytime within the time frame permitted by RBI, the current survey may not reflect the final trend,” Shukla said. In the retail segment, as of April 17, the proportion of the book under moratorium was in “low digits”, Shukla said, adding that the numbers may change.

ICICI Bank: About A Third Of The Loan Book Under Moratorium

According to Sandeep Batra, president - corporate centre, ICICI Bank Ltd., about 30 percent of the bank’s loan book by value is under moratorium. This includes about 32 percent of the bank’s customer base, spread across retail and corporate customers. The bank’s total loan book as on March 31 stood at Rs 6.45 lakh crore.

While announcing the bank’s January-March quarter results, Batra said that ICICI Bank had set aside Rs 2,725 crore worth provisions against loans under moratorium owing to the Covid-19 pandemic. This is considerably higher than the Rs 600 crore worth provisions the bank would have had to make as per RBI guidelines in the March quarter. The banking regulator mandates that banks must make at least 10 percent provisions against loans under moratorium over six months between March and June.

According to Batra, the provisions made should be able to cover any future losses arising from these accounts. However, the bank did not give any guidance on asset quality, as there are many uncertainties at play. The bank would be carefully assessing any moratorium requests from non-bank lenders, which have borrowed from ICICI Bank, before approving it, Batra told reporters.

Axis Bank: More Than A Quarter

At Axis Bank Ltd., more than a quarter of the loan book has gone under moratorium.

In an analyst call after the bank’s earnings, the lender’s Chief Executive Officer Amitabh Chaudhury said 25-28 percent of loans by value have opted for the moratorium. That accounts for 10-12 percent of customers by number, he said.

Axis Bank has a loan book of Rs 5.8 lakh crore.

The bank had used an ‘opt-in’ strategy for its wholesale borrowers and an ‘opt-out’ strategy for wholesale clients.

Commenting on the retail customers that have opted for moratorium, Chaudhury said that the opt-ins are across all income bands, geographies, industries and category of customers. “Majority of the customers opted in, in fact, almost two-thirds of the customers have enough money in their bank account to pay their EMI,” he said. “The trend seems to be to conserve liquidity and protect immediate cash flows.”

Chaudhary said that trend seen across Axis Bank’s loan book is similar to what other lenders are observing. “We have been doing our informal checks in the banking industry. We believe that we are comparable to the peer set banks,” Chaudhury said.

IndusInd Bank: ‘Very Few’ Early Requests

IndusInd Bank did not provide precise data but said that the retail and microfinance portfolio was seeing repayments despite being offered a blanket moratorium. ‘Very few’ corporate clients had opted for the moratorium, the bank said in a conference call post its earnings on April 27.

“I think, on the on the retail side, we’ve put all our accounts on moratorium, but we are receiving payments, and 95 percent of our clients are giving us repayments,” said Sumant Kathpalia, chief executive officer of IndusInd Bank. “On the corporate side, clients have to opt in and I think very few clients have opted for it. But it's only one month over,” Kathpalia said.

RBL Bank: A Third Of Loan Book Under Moratorium

In the case of RBL Bank Ltd., one-third of the loan book is under moratorium, Vishwavir Ahuja, chief executive of the bank, said in a post-earnings conference call on May 7.

The bank’s loan book stands at Rs 58,019 crore.

Ahuja said the moratorium was extended to all customers in the agricultural and rural loan portfolio. These customers are expected to return to regular repayments after the moratorium ends.

About 13 percent of the bank’s credit card customers have availed of the moratorium and 46 percent of the retail loan customers have taken the benefit. About 23 percent of the bank’s wholesale loan book by value is under moratorium.

Ahuja, however, said that he doesn’t believe that there is a correlation between the proportion of borrowers opting for a moratorium and the eventually asset quality impact.

Yes Bank: 40-45 Percent Under Moratorium

Yes Bank Ltd., which has seen elevated bad loans after a new management and board took charge of the lender, has so far reported the largest proportion of customers by number and value going under moratorium.

In an investor presentation released on May 6, the bank said that 15-20 percent of its corporate borrowers by number and 40-45 percent by value have opted for the moratorium. Of its MSME clients, 35-40 percent of the loan book is under moratorium. In the retail segment too 40-45 percent of the book is under moratorium.

Overall, about 40 percent of the bank’s domestic loan book of Rs 1.57 lakh crore is under moratorium.