In the June quarter, the GNPAs of Bank of Baroda as a percentage of total loans stood at 9.4 percent. Fresh slippages in the quarter fell to Rs 2,740 crore, compared to Rs 3,050 crore in the preceding quarter
Bank of Baroda (BoB) had a little over 21 percent of its loan book under moratorium at the end of June quarter — a relatively higher figure compared to some of its large competitors.
In order to absorb the COVID-19 shock, the bank has ramped up provisions to the tune of Rs 1,806 crore, out of which Rs 996 crore was provided in the June quarter. That’s understood given that one-fifth of the loans is under moratorium, and there is a possibility of a rise in slippages if COVID-19 pandemic pain lasts in the economy.
The Reserve Bank of India (RBI) has predicted that the gross non-performing assets (GNPAs) in the system would increase to nearly 15 percent by March, 2021, in a worst-case scenario.
The key thing to watch in BoB numbers is the trend of asset quality. In the June quarter, the GNPAs of the bank as a percentage of total loans remained at the same level—9.4 percent. Fresh slippages in the quarter stood at Rs 2,740 crore, compared to Rs 3,050 crore in the preceding quarter.
Keep in mind that this was a quarter under the moratorium scheme, and, hence, the published NPA numbers do not tell us the whole story. What is worth noting is that even during this quarter, NPAs have remained at elevated levels, and there are signs of continuing stress all over.
For instance, of the outstanding advances to NBFCs (non-banking financial companies) at Rs 1,02,538 crore as of June, the share of companies with lower ratings has slightly gone up. The share of papers rated BB and below stood at Rs 1,155 crore, or 1.07 percent of the book, as on June-end. This was Rs 958 crore in the March quarter. The share of papers rated BBB has increased to Rs 2,357 crore, from Rs 2,248 crore in the March quarter.
The RBI has announced a one-time loan restructuring facility for loan accounts impacted by the COVID-19 pandemic. With nearly 9.5 percent GNPAs and about 21 percent loans under moratorium, BoB will be in the watch list of analysts for likely worries ahead.
Under the RBI rules, post restructuring banks need to set aside 10 percent of the loan amount as provisions. This implies substantial capital requirement for banks that go for big scale loan restructuring.