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HDFC Bank sees tepid growth in retail lending in Q3

HDFC Bank building

HDFC Bank reported a net profit of ₹8,758.3 crore, for the October to December quarter of 2020, up by 18% from ₹7416.5 crore in the same period of the previous year. While the banks’ overall loan book grew by 15.6%  year-on-year (YoY) to ₹10.82 lakh crore at the end of Q3FY21, its retail loan book witnessed tepid growth during the quarter — 5% compared to the same quarter last year.

The bank reported ₹16,317.6 crore in net interest income during Q3FY21, up by 15.1%. Net interest income is the difference between the interest income earned by a bank and its interest expenses. Total deposits held by the bank grew by 19% YoY to over ₹12.7 lakh crore at the end of the December quarter of 2020. The banks’ current account-savings account ratio improved to 43% at the end of Q3FY21, from 39.5% in Q3FY20.

On the asset-quality front, the banks’ gross non-performing asset (NPA) ratio stood at 0.81% at the end of Q3FY21, compared to 1.08% as on Q2FY21 and 1.42% in Q3FY20. The net NPA ratio improved to 0.09% in Q3FY21, down from 0.17% in Q2FY21 and 0.48% in Q3FY20. In September 2020, the Supreme Court directed banks to not classify accounts as NPA after a August 31, until further orders.

“However, if the Bank had classified borrower accounts as NPA after August 31, 2020 using its analytical models (proforma approach), the proforma Gross NPA ratio would have been 1.38% as on December 31, 2020, as against 1.37% as on September 30, 2020 and 1.42% as on December 31, 2019. The Bank’s proforma Net NPA ratio would have been 0.40%. Pending disposal of the case, the Bank, as a matter of prudence, has made a contingent provision in respect of these accounts,” HDFC Bank said.
Under the Reserve Bank of India’s COVID-19 restructuring scheme, only 0.5% of the banks’ total advances was restructured, it said.

“While there has been a gradual pickup in economic activity since the easing of lockdown measures, the continued slowdown led to  a decrease in loan originations, the sale of third party products, the use of credit and debit cards by customers and the efficiency in collection efforts. The slowdown may lead to arise in the number of customer defaults and consequently an increase in provisions there against,” HDFC Bank

In December, the RBI imposed business sanctions on HDFC Bank due to a number of incidents over the last two years which saw the banks’ internet banking, mobile banking, and payments channels go offline.

Tepid retail lending growth

While the overall lending book grew by 15.6% YoY, the banks’ retail loan book grew by 5% YoY to ₹5.04 lakh crore at the end of Q3FY21 compared to ₹4.8 lakh crore in the same period of the previous year.

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  • Personal loans: ₹1.15 lakh crore, up by 5,5% YoY
  • Auto loans: ₹81,880 crore, down by 2% YoY
  • Home loans: ₹66,644 crore, up by 7.9% YoY
  • Credit cards: ₹63,332 crore, up by 9.8% YoY
  • Two-wheeler loans: ₹9,504 crore, down by 6.35%
  • Gold loans: ₹6,696 crore, up by 26% YoY

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