Steps taken by the government and the regulator will help control the fallout of the pandemic, Kathpalia added.
IndusInd Bank on Monday told analysts that if the impact of Covid-19 lasts for up to three months, it would affect the bank’s asset quality to a limited extent. In his first conference call with analysts, newly-appointed managing director and chief executive officer Sumant Kathpalia said, “In terms of asset-quality implications, it will be critical to see how long and deep Covid spreads. Our base case assumption of three months’ disruption suggests limited impact on our portfolio, but this is an evolving event and that is the caveat.”
Steps taken by the government and the regulator will help control the fallout of the pandemic, Kathpalia added. However, the impact could be deeper if the threat lasts for longer than initially envisaged. Despite the impact of the migration to BS IV, overcapacity in the auto industry and the Covid fallout, the commercial vehicle (CV) portfolio of the bank has not come under pressure, the management said. At the same time, the bank could see credit costs inching up in this portfolio and it will close the year with a credit cost of 80 basis points (bps), or 0.8%. CV loans account for 12% of IndusInd Bank’s loan book.
The bank is also comfortable with the quality of its credit-card portfolio, Kathpalia said, as it issues cards to only those borrowers who are holding a single card at the time of issuance. “I think we may have delinquencies getting elevated because of the Covid-19 issue,” Kathpalia said, adding, “The next three months is fine, but the February-March collection may get a little bit impacted. The sense is that the portfolio may resume normalcy soon after the moratorium period.” The delinquencies may stand at 0.3-0.4% of the book, he said.