With rising concerns on additional provisionings to be made on accounts headed for insolvency, Axis Bank today said it has exposure to eight of the 12 companies named by the regulator and has already set aside adequate money for the same. The third largest private sector lender said the overall fund-based exposure to these eight accounts is Rs 5,071 crore and the non-fund based one is only Rs 212 crore. Around 80 per cent of this outstanding loan is secured, it said in an exchange filing made before the start of the trading today. The bank, which is amongst one of the hardest hit after a regulatory crackdown on non-performing assets, said it has a provision of Rs 2,497 crore against the outstanding loans to these eight companies.
On June 16, the RBI had named these 12 accounts and asked banks to increase provisions for them under the Insolvency and Bankruptcy Code in the National Company Law Tribunal (NCLT) to 50 per cent of the outstanding. Investors cheered the disclosure made by Axis Bank and its stock climbed 3.48 per cent up to Rs 511.70 a piece on the BSE, whose benchmark index gained 0.08 per cent. Banking scrips have been witnessing some selling after the RBI’s reported direction on additional provisioning and estimates of banks having to set aside up to Rs 40,000 crore during the current fiscal came out.
The Axis Bank statement comes a day after SBI chief Arundhati Bhattacharya sought to allay fears by saying the top lender’s profits will not be impacted by the RBI move. “The increased provisioning requirements, more or less, in all of these accounts we have pretty large provisions. But yes, we have to make a little more but it should not very badly impact our earnings going forward,” the SBI chief had said after the AGM yesterday. It can be noted that domestic ratings agency Crisil had earlier in the week estimated that led by public sector banks, lenders will have to take a huge haircut towards these bad loans.
As per a Crisil report, the banks have collectively set aside Rs 2 trillion in provisions which will go up by Rs 40,000 crore with the RBI move. It has pegged an additional burden of Rs 40,000 crore, or 25 per cent more towards provisioning for these 12 accounts which have been sent for insolvency by RBI. These 12 large accounts had become NPAs by end-March 2016 and Crisil estimates show the banks had already provisioned 40 per cent for these NPAs worth Rs 2 trillion or about Rs 80,000 crore. The largest 12 accounts named by RBI are Bhushan Steel, Lanco Infra, Essar Steel 37,284, Bhushan Power, Alok Industries, Amtek Auto, Monnet Ispat, Electrosteel Steels, Era Infra, Jypaee Infratech, ABG Shipyard and Jyoti Structures.
These companies together owe more than Rs 2 trillion to banks. These accounts have not been serviced since March 2016. Of these six accounts have already been sent to NCLT by banks — Bhushan Steel, Essar Steel and Electrosteel Steels by SBI; Bhushan Power by PNB; Lanco Infratech by IDBI and Amtek Auto by Corporation Bank — for possible liquidation.