ICICI Bank at higher risk of bad loans: Ambit Capital Report


The loans that are falling behind in terms of payment are classified as standard loans and they have increased almost two folds in number at ICICI Bank in the previous fiscal year. This has increased the risk involved in higher bad loans in the future. This was revealed by securities firm Ambit Capital.

The absorption of risk for the banks is increasing by 32.8 percent of the capital funds exposure to each corporate group with the same management. This is an increase from 29.1 percent in the previous year, stated a regulatory filing.

Regarding this, Ambit Capital cites ICICI Bank’s filing with SEC (Securities Exchange Commission) of the U.S. claiming that the misbehavior breakup of the standard loan book proposes that early misbehavior have doubled from 3.6 percent of the loans in the last fiscal year to almost 6.4 percent of the loans in the current fiscal year.

It further noted that in absolute terms, the revelation to the major corporate group has increased 18 percent annually this fiscal year. The corporate group’s name remains unknown, but it is a highly stressed corporate.

Among the existing banks in the private sector, analysts and investors have expressed concerns regarding the quality of the loans at the ICICI Bank. This is because the bank lent money to the infrastructure groups while that is not the case with HDFC Bank. Though the profit generated by the bank increased to 12 percent, the gross bad loans increased to Rs 15.138 crore or 3.68 percent of the overall loans.

While the amount of the loans they were behind payments by 30 days increased, it is not a major cause of worry as these are not classified as bad loans. Loans are classified as nonperforming assets (NPA) when the borrower falls short to repay the amount within a time period of 90 days from the due date. The bank allocated 15 percent of the total loan amount as the provisions.

When a borrower does not repay the loan on the set due date, it is an indication of stress to the lender. RBI has asked the banks to create a joint lenders forum immediately as the loan is overdue for more than 60 days in order to avoid the stress.


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