NPA provisioning of banks increases sequentially in Q1 driven by select lenders

economictimes.indiatimes.com:

The number of banks in the sample which reported a sequential increase in the loan loss provisioning for the June quarter increased to 14 from 10 in the previous quarter. The sequential jump in the NPA provisioning was driven by the PSBs including State Bank of India and Bank of Baroda, and private sector banks such as Axis Bank and Kotak Mahindra Bank. Each of these banks reported more than two-fold increase sequentially in their respective NPA provisioning for the June quarter.

Their share in the sample’s NPA provisioning increased to nearly 23% from 11% in the prior quarter. Based on the year-on-year comparison, the sample’s provisioning dropped by 11.4% marking it to be the sixth quarter of fall. The trend was in line with the year-on-year improvement in the collection efficiency and asset quality.

The CareEdge Debt Quality Index (CDQI), which captures the health of credit markets, improved to 93.79 in June from 92.56 in the corresponding month of the previous year. It has been improving on a monthly basis since November 2021. The year-on-year NPA provisioning by PSBs fell by 24.3% whereas for the private sector banks, it increased by 30.8% in the June quarter.

The sample’s net interest income (NII) continued to grow year-on-year in the double digits in the June quarter for the sixth consecutive period. However, the repricing of deposits amid firm interest rates has caused a deceleration in the pace of NII growth which peaked in the December 2022 quarter at 34.5%. It rose by 26.4% to Rs 1,28,386 crore in the June quarter.