Axis Bank, which declared its results last week, is likely to see some more pain in the coming quarters. The still sizeable additions to bad loans, stress from outside the watch list and, more importantly, divergences in asset classification and provisioning from the RBI norms — all indicate that asset quality woes are yet to bottom out. Earnings have shrunk by 55 per cent in fiscal 2017.
The RBI’s recent circular could have impacted Axis Bank’s bad loan book significantly during the latest March quarter. This is because, loans of ₹9,478 crore, according to the RBI, should have been declared as NPAs in fiscal FY16 itself. But a majority of these accounts formed part of the bank’s watchlist and have been declared as bad loans during the first three quarters of 2016-17.
Axis Bank’s core performance has also taken a knock over the past year. After growing its loan book by 21 per cent in 2015-16, the bank managed just a 10 per cent growth in loans in 2016-17.