Mumbai: Fresh additions to bad loans are likely to increase across the banking sector this year as the Reserve Bank of India (RBI) finishes its supervisory assessment of lender accounts, analysts say.
Axis Bank Ltd is an example. On Tuesday, the lender reported that its bad loan divergence—the difference between RBI’s assessment and that reported by the lender—was around Rs5,630 crore at the end of March. Similarly, the divergence in provisions made to cover the bad loans was Rs1,318 crore.
Most banks are expected to feel the impact of the central bank’s so-called annual risk-based supervision; the timing of the loan reclassification will depend on the completion of the exercise.
“Theoretically, the divergence is expected to be an industry-wide phenomena. Corporate-focused banks will see similar impact either in the second or third quarter. We all were hoping that we are at the bottom of NPA problem . But new things are cropping up. Our assessment is that the profitability of banks will be under pressure in the near to medium-term,” said Asutosh Mishra, lead analyst, institutional at Reliance Securities Ltd.
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