A strong retail focus has seen deterioration in the asset quality of India?s leading private banking sector player, ICICI Bank. The bank?s annual report for 2006-07 reveals that gross non-performing assets (NPAs) in the retail segment went up by 117.91% at the end of FY07 to Rs 3,114 crore, from Rs 1,429 crore at the end of March 31, 2006.
Overall, the bank?s gross NPAs in FY07 rose 83.37% to Rs 4,168 crore, from Rs 2,273 crore in the previous fiscal. The share of retail gross NPAs to total gross NPAs increased to 73.8% in 2006-07, from 62.3% the previous year. This is in line with the growing retail focus of the bank. Gross retail advances formed 65.2% of the total advances, up from 62.9% the previous year.
However, analysts believe that the net NPA numbers, as a percentage of net customer assets, at 0.98% in FY07 (0.71% in FY06) is way below the industry average of 1.2% and therefore there is no cause for alarm.
Krishnan Sitaraman, head-ratings, Crisil, attributes higher NPAs to a ?seasoning? effect, caused by the inherent nature of retail lending where at times aging of the retail portfolio causes NPAs to rise.
Nevertheless, the ICICI Bank?s NPA figures come at a time when most other banks, especially in the public sector, are improving their numbers.
Analysts also express concern over the fact that ICICI Bank?s home loans formed 49.4% of its retail portfolio and a further rise in interest rates could see further deterioration.