HDFC Bank’s net profit rose 20% to ₹3,893.8 crore during the first quarter of the financial year FY18 in spite of the lender reporting higher non-performing assets (NPAs) mainly from its agricultural portfolio as farm loan waivers impacted recoveries.
The country’s second largest private sector lender, which reported its April-June quarter earnings on Monday, said its gross non-performing loans, as a percentage of gross advances, increased to 1.24% in June, 2017 compared with 1.04% as on June, 2016.
“There was some increase [in NPAs] in this quarter and almost 60% of that increase has come through from the agricultural portfolio,” said Paresh Sukthankar, deputy managing director, HDFC Bank, at the post earnings address to the media.
“We believe that a fair portion of this impact does reflect changed customer behaviour in anticipation of loan waiver which were announced,” he said adding the lender had made higher provisioning for these NPAs than the regulatory requirement. The bank said recoveries from agricultural advances were impacted during the quarter by borrower expectations of farm loan waivers arising out of policy announcements in certain states.
Bankers flag waivers
Bankers, as well as Reserve Bank of India Governor Urjit Patel, had been cautioning the slew of farm loan waivers announced by several states, including Uttar Pradesh and Maharashtra, as they distort the credit culture.
Net interest income rose 20.4% to ₹9,370.7 crore driven by average loan growth of 20.7% and a core net interest margin of 4.4%.
Other income increased 25.3% year-on-year to ₹3,516.7 crore during the quarter. Provisions for the quarter were ₹1,558.8 crore as against ₹866.7 crore.
