Money & Banking

‘Karnataka Bank business to be muted in H1 due to economic slowdown’

Mumbai | Updated on June 10, 2020 Published on June 10, 2020

Our Bureau

Karnataka Bank is expecting business to be muted during the first half of FY21 due to economic slowdown across sectors.

Thereafter, depending on the government packages, economic stimulus, calibrated response of the regulators and State governments, business is likely to bounce back, the Mangaluru-headquartered Bank said in an exchange filing.

Accordingly, the private sector bank is expecting a moderate growth in banking business during the second half of FY21.

“Due to subdued business environment the demand for credit may be muted initially, thus affecting the topline of the bank, which has already been factored into while drawing the business plan for the current financial year.

“Additional provision of 10 per cent to be maintained in respect of loan assets where asset classification benefits is taken is already frontloaded in the Q4 (January-March) FY20 results,” the bank said in the filing.

Further, the bank underscored that prolonged lockdown, coupled with subdued economic activities, may have an adverse impact on the repayment of loans and assets quality that are being closely monitored.

The bank observed that with overall subdued domestic growth prospects and volatile purchasing power with individuals, demand for banking products / services may remain comparatively low.

“Branch banking channel may see lower traction, whereas digital channels may experience increased traction. Demand for digital services/products and demand for insurance products could show better traction,” it said.

In accordance with the regulatory package announced by the Reserve Bank of India, Karnataka Bank has extended moratorium for all standard loans outstanding as on February 29from payment of instalments falling due between March 1and August 31.

So far, borrowers consisting of about 34.67 per cent by numbers and 46.62 per cent by value (loan amount), have opted for moratorium benefits eventhough the said facility was extended, the bank said.

Conserve and consolidate

Karnataka Bank said it has initiated various capital /cost conserving measures and is already in a conserve-and-consolidate mode. The bank added that it is adequately capitalised and the financial resources are found optimum to support its business growth

The bank underscored that the impact of Covid on the liquidity of the banking sector is minimised through various liquidity management tools by the RBI.

“The bank’s liquidity position (both short term and long term) is adequate with compliance of regulatory prescriptions.

“The bank has a continuous process of monitoring the liquidity position, including stress testing to ensure that adequate liquidity is available for normal banking operations,” said the filing.

Published on June 10, 2020

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