Axis Bank will classify home loans of credit card defaulters as non-performing loans. The bank said that this is being done as a part of its prudent provisioning practice to tackle with troubled loans.
From the bank perspective, bank would have to take a hit on its earning as it is classified as non-performing assed (NPA). This is because it has to provide for such a loan and, at the same time, any interest payments that it has already received will cease to be regarded as income. On the other side, for the borrower, the bank can now initiate recovery proceedings at some point and may recall the entire loan.
Loans are usually classified as an NPAs when it is overdue for 90 days.
The report noted that, while Axis bank was making provisions from its earnings, proceedings might yet not be initiated due to the Supreme Court order. The RBI allowed banks to go in for one-time restructuring, but the las date for the applications ended on December 31.
This was confirmed by the bank’s MD & CEO Amitabh Chaudhary while announcing the bank’s results for the quarter ended December 2020, The bank reported that profits were “adversely impacted due to prudent expense and provisioning charge of Rs 1,050 crore”.
The bank said that profits slumped 36 percent to Rs 1,116 crore in December 2020 from Rs 1,757 crore, while in third quarter Rs 6,736 crore worth of additional loans slipped into default.
Chaudhry said, “We re in the risk-taking business. We have to make prudent provisions. We have provided as though the Supreme Court dispensation (barring lenders from classifying loans as NPA) is not there. We have reversed interest earnings and fees from our income on these loans.
