We are a Rs 80,000-crore book on the corporate side. So, `1,000 crore is actually a really small amount in comparison.
Given the macro environment, Axis Bank will be treading cautiously in the small and medium enterprises (SME) segment, while the retail book shows no signs of stress, MD and CEO Amitabh Chaudhry told reporters after the bank’s Q2 results. Edited excerpts…
What is your outlook on slippages?
If you look at our overall stock of stressed assets, you will see that our stock has come down. Secondly, some of the assets in our stock of BB and below have been there for a long period of time. In a deteriorating economic environment, you will see some of this stock go into slippages. So yes, our slippages will remain at elevated levels if economic conditions don’t improve. And, on the SME side, we have to be cautious given what we are seeing. Payments are getting delayed. As far as our retail book is concerned, we are not seeing any signs of any stress in our portfolio at this point of time.
Do you see your BB and below-rated book swelling?
A large amount of the slippages in this quarter came from the BB book. So, there is a natural movement of clients of about Rs 1,000 crore. I think we are pretty much there as far as the transition rate is concerned. I don’t expect to have gross additions any lower than this in future. As far as that is concerned, we are not worried about a Rs 1,000-crore addition. We are a Rs 80,000-crore book on the corporate side. So, Rs 1,000 crore is actually a really small amount in comparison. That much will keep moving into BB and that much will keep moving out of BB every quarter. I don’t consider that extraordinary at all.
What is your assessment of the stress in the retail and MSME segment?
Given some of the predictions, the bank is being cautious about the credit opportunity in the SME segment right now. If you look at the overall split, Rs 2,800 crore are the gross slippages from the wholesale, Rs 1,400-odd crore from retail and about Rs 760 crore from SME. But, on a net basis, there have been very strong recoveries in retail. So, net additions in retail are only about Rs 450-odd crore. That said, given that there is some stress playing out at the larger corporates, where some of them are not getting payments on time and they, in turn, are not paying the SMEs on time. That creates a little bit of stress in the system. So, overall we have gone a little cautious.
What are the contingency provisions against?
We continue to be conservative in terms of provisioning on NPAs as well as the stressed pool, whether it is the BB pool or the SMA pool, etc. We decided early this year to start providing for them on a formulaic basis consistently. So that is what it is. There is nothing special about it.