Kotak Mahindra Bank tightens lending norms in post-Covid world

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Published: May 14, 2020 3:40:08 AM

Gross NPAs stood at 2.25% of gross advances, down from 2.46% on December 31, 2019. The net NPA ratio stood at 0.71%, down from 0.89% on December 31, 2019.

The bank’s net profit for the quarter ended March fell 10% year-on-year (y-o-y) to Rs 1,267 crore as it set aside Rs 650 crore as Covid-related provisioning.The bank’s net profit for the quarter ended March fell 10% year-on-year (y-o-y) to Rs 1,267 crore as it set aside Rs 650 crore as Covid-related provisioning.

Kotak Mahindra Bank (KMB) said on Wednesday that it had tightened lending norms and turned cautious about who it would lend to in the post-Covid world, while reiterating concerns around unsecured retail credit. The bank’s net profit for the quarter ended March fell 10% year-on-year (y-o-y) to Rs 1,267 crore as it set aside Rs 650 crore as Covid-related provisioning.

Uday Kotak, executive vice chairman and managing director, KMB, said the bank feels the need to maintain a strong deposit franchise and strengthen its balance sheet. “In the post-Covid era, the unsecured retail lending is also going to go through tough times,” Kotak said, adding that the bank had three focus areas while making lending decisions. “We have to be very clear about right sectors to which we lend. Whenever we look at specific businesses or companies in the sector, we are focused on what is the level of fixed operating cost of that company…Third, (we look at) what is the level of leverage that business is carrying,” Kotak said.

The bank has taken provisions such that the total provisions taken up to March 31, 2020, cover its entire net non-performing assets (NPAs) book. “Therefore, we start April 1, 2020, on a clean slate in terms of a balance sheet from the point of view of all provisioning which we felt was necessary and actually more than the net NPA figure itself,” Kotak said.

KMB has seen 26% of its customers by value avail the loan moratorium so far and the retail applicants outnumber corporate applicants by far, Kotak said. Net interest income (NII) increased 17% y-o-y to Rs 3,560 crore and net interest margin (NIM) increased 3 bps sequentially to 4.72%. Advances grew 7% y-o-y to Rs 2.2 lakh crore and total deposits rose 20% y-o-y to Rs 2.58 lakh crore. Current account savings account (CASA) deposits comprised 56.2% of total deposits as on March 31, 2020.

Gross NPAs stood at 2.25% of gross advances, down from 2.46% on December 31, 2019. The net NPA ratio stood at 0.71%, down from 0.89% on December 31, 2019.
KMB’s shares closed at Rs 1,189 on Wednesday on the BSE, up 2.57% from their previous close.

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