Over the last year, Kotak Mahindra Bank consciously kept its foot off the growth pedal and reduced its unsecured loan portfolio. The bank reported a net profit of Rs 1,682 crore in the fourth quarter of FY21, up by 33% from Rs 1,267 crore in the same period of FY2020, according to its financial results.
While the banks’ management says that consumer spending has improved month on month, demand for unsecured loans has not grown at the same pace. “Unsecured retail loans have gone from 7.5% of our total advances book in March 2020 to 5.8% of our total advances book as of March 2021,” said Jaimin Bhatt, President and Group Chief Financial Officer, Kotak Mahindra Bank Ltd. during a media call on Monday.
The banks’ credit card book decreased to Rs 3,969 crore as of March 2021, compared to Rs 4,701 crore in March 2020. Similarly the personal, business loan and consumer durables book also decreased to Rs 7,024 crore as of March 2021 compared to Rs 9,754 crore as of March 2020. “You have to see spending of customers on credit cards as mainly revolver, which is around 40-45% of the base. Spends have been increasing month on month in terms of these revolver customers,” said Dipak Gupta, Joint Managing Director, Kotak Mahindra Bank Ltd.
Unsecured loans, credit cards, personal loans and other types of loan are always going to face the biggest risk going forward, given the impact of the pandemic on the economy, said Uday Kotak, Managing Director and Chief Executive Officer, Kotak Mahindra Bank. “We do believe there are pockets where we have to be careful, and there are also pockets for growth. We are committed to growth, but we will take up opportunities only on terms that makes sense for us,” he said.
Challenges due to COVID-19
As the second wave of COVID-19 virus hit the country hard throughout the month of April, the banks’ ability to collect loan repayments began to deteriorate in the second half of last month, said Kotak. “There is a huge collection challenge coming for the financial sector,” he said.
The bank announced that only essential-services employees will be allowed to go out of their home to work, for the next week at the least. “We are restricting branch employees to three essential people, whereas normally it is 10-15. We are encouraging our sales and collections employees to do their work digitally, and not physically,” Kotak said. Only employees with specific senior management permission will be asked to leave their homes for work, he added.
Kotak said that the bank is working on plans that take into the account the possibility of a third wave of the COVID-19 virus.
Digital Banking Highlights
- Mobile Banking: Transaction volumes up by 75% YoY and value up by 41% YOY
- Net Banking: 1.2x increase in monthly logins YoY
- Robotic Process Automation: 2.x increase in requests processed by Bots
- WhatsApp Banking: Monthly active users increased 110% YoY
- Savings Account: 94% of savings account transaction were digital or non-branch modes
- Monthly Transactions: 87% are digital
Financial Highlights
- Net Profit: Rs 1,682 crore in Q4 FY21, vs Rs 1,267 rore in Q4 FY20
- Net Interest Income: Rs 3,843 crore in Q4 FY21 vs Rs 3,560 crore in Q4 FY20
- Cumulative provisions: Rs 7,021 crore in Q4 FY21
- Advances: Rs 2.23 lakh crore in FY21 vs Rs 2.19 lakh crore in FY20
- Deposits: Rs 2.8 lakh crore in FY21 vs Rs 2.62 lakh crore in FY20
- Gross NPA: 3.25% in FY21 vs 2.25% in FY20
- Net NPA: 1.21% in FY21 vs 0.71 % in FY20
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