Axis Bank on Tuesday said there was an uptick in the number of borrowers who opted for loan moratoriums after June and emphasised that the lender will be "judicious" in restructuring borrowings under the new rules.
About Non-Performing Assets (NPAs), the bank's Chief Executive Officer and Managing Director Amitabh Chaudhry said its stress tests are now showing lower slippages across any scenario than earlier.
"The 9.7 (per cent) was the number as of June 30. Obviously over a period of time some more customers do ask for moratorium, so I can definitely say that the number has gone up a little bit rather than coming down, which has happened for everyone," Chaudhry told PTI in an interview.
The chief of the country's third largest private sector lender was responding to a query on the quantum of loans under moratorium at the end of August and how it compares with the figure for June.
The six-month moratorium for accounts impacted by the COVID-19 pandemic ended on August 30 and subsequently, the Reserve Bank of India (RBI) came out with a loan restructuring framework.
Chaudhry said the bank has received restructuring requests from both corporate and retail borrowers, and is presently formulating a framework under which such cases will be resolved. Once the framework is ready, it will be presented to the bank's board for ratification.
According to him, the picture on asset quality will be clear only after December as the bank will be accepting restructuring proposals till then.
The bank will entertain restructuring proposals where a business has chances of revival but will not extend the benefit to cases where it sees no hope for a revival, Chaudhry said.
"I think you have to be judicious, we should definitely help the first category. But (for) the second category we must be honest enough to admit that restructuring will not help and let's call NPA an NPA, or spade a spade," he pointed out.
He also made it clear that sustainability of the business is very important for Axis Bank and it will not kick the can down the road.
"We want to be seen as a conservative institution, we do want to very clearly tell our investors and depositors that we will do the right thing and we will take the provisions upfront," he said.
When asked about capital, Chaudhry said the buffers were anyways sufficient to take care of the requirements before a Rs 10,000 crore-infusion in August and added that the exercise was a cautious move carried out on the recommendation of RBI and investors.
He said the stress tests being carried out by the lender are showing that the impact on the bank in either the base, moderate or severe scenarios will be lower than what was assumed earlier which gives it a lot of comfort.
"Our models now show that the overall losses which we would take, have only come down over a period of time. Our position has become a little more comfortable," he said.
Chaudhry said NPAs in the retail category, which has been the focus for lenders for nearly a decade, will see a spike because of the unprecedented crisis brought about by COVID-19 and that the situation will turn around with a revival in the economy.
He stressed that the bank will go back to serving the retail segment as any big bank will be doing.
At present, there is a fight for quality borrowers in the system which has resulted in Net Interest Margins (NIMs) for banks coming under pressure, Chaudhry said, and added that the same trend will be on display in the second quarter results as well.
Corporates are repaying debt through equity infusions as well, he said, pointing out that this may lead to a reduction in corporate loan books as well at banks.
He, however, declined to share any numbers for Axis Bank citing the silent period that it is in before the announcement of quarterly financial results.
The bank continues to seek to achieve the 18 per cent target on return on equity but the COVID-19 crisis may push the timeline for it because a year's gains have been impacted, Chaudhry said.
On senior management exits, Chaudhry said the largest bulk of exits were triggered by concerns over personal conduct like corporate governance or integrity, a few were due to a mismatch of responsibilities and individual aspirations, and the rest were due to personal compulsions.