The increase in non-performing asset ratio reported by Housing Development Finance Corp. in the third quarter is a result of new RBI norms for recognition of dud assets, according to Keki Mistry.
India's largest mortgage lender's gross NPA ratio rose 32 basis points sequentially to 2.32% in the quarter ended December. This includes loans worth Rs 2,746 crore that were not 90 days past due, but were classified as NPA, the company had said. Excluding this, the gross NPA ratio would have been 1.81% compared with 2% as on Sept. 30.
The Reserve Bank of India in November tightened the asset recognition norms directing lenders to not upgrade an NPA to ‘Standard' until the entire arrears, including interest and principal, are paid to the bank.
“That has added 30 basis points to the non-performing assets,” Mistry said in an interview with BloombergQuint. “If this was not there, the non-performing asset number would have been 1.14%.”
The gross individual NPAs stood at 1.44%, while it was 5.04% for the non-individual loans portfolio.
Mistry said of the 5.04% of non-individual loans, 1.17% of the loans are “not technically 90 days outstanding.” However, they were recognised as non-performing since the bank “saw stress in those loans or these loans were restructured” and were downgraded.
MPC Expectation
The Reserve Bank of India's monetary policy has been “accommodative" so far, keeping the repo rate unchanged since May 2020. The rates are at the lowest level he has seen in his career, Mistry said.
While Mistry doesn't expect a rate hike in the next meeting, he said, “In the course of the year, I would expect the RBI to look at increasing the rates.”
Watch the interview here
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