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Spotting emerging risks, Axis Bank turns cautious on lending

MUMBAI: Third largest private sector lender Axis Bank is seeing newer risks emerging in the economy and has therefore decided to be "cautious" with lending, a top official said Thursday.

The comments come even as the banking system is coming out of the bad loan mess which has afflicted it for over the past five years, resulting in a slowdown in credit offtake as capital went more into writing off or providing for stressed assets than fresh asset creation.

"We are cautious given whatever is happening in the economy as some new signs of stress are emerging in the system," managing director and chief executive Amitabh Chaudhry told reporters.

Elaborating on the newer areas of stress, Chaudhry said some borrowers are defaulting or there are reports of stress being felt by lenders and specifically cited real estate and non-banking lenders as the two segments which are of bother for the bank, but was quick to add that many of them are in good shape.

"We want to be conservative, we want to get our risk management practices right. Anyway, we want to be more conservative than before and there are signs of emerging stress," he added.

He, however, was quick to clarify that this should not be construed as Axis Bank is cutting down on its core business of taking risks and lending.

It can be noted that with NPAs waning off, overall bank credit growth grew over 13 percent in FY19 but has been trending lower in the first quarter of FY20.

On the stress within NBFCs, Chaudhry said while it is true that a solution has not been found for nearly a year, it is necessary to have a nuanced view on the subject as some companies are doing fine.

Stating that he does not expect a "systemic issue" because of troubles, he said it will take time for the system to come out of the difficulties.

It is evident that a few companies need equity infusions at the earliest, he said, exhorting them to go in for fund raising immediately and pointed out that it is unfair to expect an RBI or government bailout.

On the portfolio buys from NBFCs given the policy boost on the same, Chaudhry said his priority is to build own portfolio but it will also continue to look for such opportunities.

Meanwhile, on the plans to raise capital, he said the bank management is seeking an enabling resolution for such an issue but did not specify the timelines and the route with which it mop up the funds.

Axis Bank scrip closed 0.24 percent down at Rs 766.65 on the BSE as against a 0.69 percent gains on the benchmark.
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