The eight consortium accounts that were classified as non-performing assets by Axis Bank last week after a directive from the Reserve Bank of India will have to be classified as NPAs by the other lenders who are part of the consortium, bankers said.
The eight consortium accounts that were classified as non-performing assets by Axis Bank last week after a directive from the Reserve Bank of India will have to be classified as NPAs by the other lenders who are part of the consortium, bankers said. The banking sector’s exposure to these accounts would be close to Rs 40,000 crores, Axis Bank told analysts at its recently-held second quarter post-earning call. “The other banks will definitely have to treat them as NPA since these are consortium accounts,” a senior banker with a state-run lender said. Some of the smaller accounts may have already been classified as NPA by the other lenders, he said. A senior official at Axis Bank said more clarity on these accounts will emerge once the other large banks announce their second quarter results. In its post-earnings call with analysts, Axis Bank said the joint lenders’ forum have taken certain decisions regarding these accounts. “We have been in line with the decisions taken by the JLF, and to some extent, we need to see how RBI treats these accounts across bank,” Axis Bank said.
Axis Bank has reclassified 9 standard assets as non-performing assets after the RBI asked them to be reclassified as part of its annual review process.
Axis Bank said that as on June 30, 2017, these 9 accounts were classified as standard assets across most consortium banks, with only about 6% of the total outstanding of these accounts being classified as NPAs across the sector.
As on 30th September 2017, the fund-based outstanding of these 9 accounts for Axis Bank was Rs 4,867 crore, all of which now stands as NPA, it said, adding that Rs 2,400 crore of this is from accounts that are either a part of the bank’s watch list or were restructured as on March 30. One of these large accounts is in the steel sector, which contributes Rs 1,128 crore. The power sector has 3 accounts amounting to R1,685 crore and there is one account in the IT/ITES sector, which contributes Rs 1,143 crore. The remaining 4 accounts together comprise Rs 911 crore.
Axis bank is the sole banker for the account in the IT/ITES sector. It said it expects a fairly significant part of the account to get repaid after the conclusion of a business sale transaction for which the binding agreement is already in place. Axis Bank has created a total provision of Rs 1,618 crore for these 9 accounts during the July-September quarter.