Mumbai: The country’s largest private sector lender HDFC Bank expects the otherwise resilient retail segment to report a higher incidence of asset quality stress due to the second wave of COVID-19 infections.
Borrowers who had to get coverage under regulatory dispensations such as moratorium and restructuring after the first wave will be most affected, said Sashidhar Jagdishan, CEO and managing director.
Jagdishan called the short-term expectations “lukewarm” and made it clear that the bank would be “cautious” in these extraordinary times, saying: “For the first time in so many years, we may not have a grip on what is going to happen”.
‘We are quite particular about the asset quality on the part of the corporate and SMEs (small and medium enterprises), but of the retail or the group of people who are stressed or COVID 1.0, who have taken moratorium and restructuring, I think they will still feel the kind of pain and tension. So it’s probably those who’ll show some tension this time around, ” he said during the call arranged by Australian broker Macquarie.
Jagdishan said the bank has urged field staff to prioritize health and safety over business needs, and therefore the collection will have a slowdown, which will lead to some higher crime in the short term.
‘But I do not want to say it will be dramatically high. It will be high, I do not think it will be a loss. They have to cover up in the coming quarters, ‘he said, expecting things to return to normal within two quarters.
He said the overall system is up and running until April and that one cannot predict the boom that will have a higher impact than the first wave.
The experience of the broader financial system is also likely to reflect what HDFC Bank is looking at, he said, adding that tensions on retail accounts will be higher in the system.
The ongoing second wave went deeper into the rural areas, affecting people who were otherwise isolated, and it also cost more lives than the first, he noted.
Meanwhile, Jagdishan explained that the goal of instituting an organizational change was to bring to the fore those who came second in the hierarchy in the management line by giving them leadership responsibilities.
The loans for small businesses will be refocused as part of efforts to make them future-oriented, he noted.
Jagdishan conceded that the restrictions adopted by the RBI, such as banning new credit card issuance altogether due to the shortcomings on the technological front, are a “stain” on the bank’s reputation.
“The fundamental part where we could probably do better is resilience and how you recover faster when an interruption occurs,” he added.
HDFC Bank dissertation closed 2.02 percent lower at 1,478.80 Rs on the BSE.
Source: Telangana Today