Second COVID wave may hit retail asset quality: HDFC Bank

Impact to be highest on those who needed exemptions during first wave: MD

HDFC Bank expects the otherwise resilient retail segment to report a higher incidence of asset quality stress because of the second wave of COVID-19 infections.

Borrowers who had to avail cover under regulatory exemptions such as moratorium and restructuring after the first wave will be the highest impacted, its CEO and MD Sashidhar Jagdishan said on an investor call.

Terming the near-term expectations as ‘tepid’ and making it clear that the bank would be ‘cautious’ in these extraordinary times, Mr. Jagdishan said, “[For the] first time in so many years, we may not have any grip on what is going to happen”.

“We are reasonably sanguine on the asset quality on the corporate and the SME (small and medium enterprises) side, but from the retail or the segment of people who have or were stressed out in COVID 1.0, who had taken moratorium and restructuring, I think they will continue to feel the kind of pain and stress. So, probably, these are the ones which will show a little bit of stress this time around,” he said on the call organised by Australian brokerage Macquarie.

Mr. Jagdishan said the bank had told its field staff to prioritise health and safety over business needs, and hence, there will be a slowdown in collections, which will translate to some amount of higher delinquencies in the near term.

“But I don’t want to say it will be dramatically high. It will be high, I don’t think it will be a loss. They should cover up in coming quarters,” he said, adding that he expected things to get back to normal in two quarters.

Admitting that strictures passed by RBI such as banning new credit card issuances were a “blot” on the bank’s reputation, he said it had taken the right lessons from the interventions.

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