Barring the one cement account that resulted in about ₹5,300 crore of slippages, additions to bad loans for ICICI Bank declined sequentially during the March quarter.

But the asset quality pain for the bank appears to be far from over. On the face of it, slippages (excluding the cement account) moderating to ₹5,911 crore from the peak of around ₹8,200 crore in the June 2016 quarter, may appear comforting. But the still sizeable additions to bad loans, around ₹19,000 crore of outstanding accounts in the watchlist, notable portion of loans restructured under 5:25 scheme and strategic debt restructuring (SDR), and also divergences observed in asset classification and provisioning from RBI norms — all suggest more pain for ICICI Bank in the coming quarters.

Until the December 2015 quarter, when the slippages first shot up, ICICI Bank’s quarterly additions to bad loans were in the ₹1,600-2,200 crore range. At nearly ₹6,000 crore, the latest March quarter slippages still remain elevated.

Outstanding accounts

ICICI Bank had outstanding accounts of around ₹44,000 crore as of end March 2016 under the watchlist. This has shrunk by more than half as of March 2017. Nonetheless, given that chunk of the reduction (about ₹20,000 crore) in these accounts have happened from slippages to NPAs, the bank can see more pain in the coming quarters. Assuming that the outstanding accounts under the watchlist slip into NPAs over the next four quarters, the pace of quarterly slippages are likely to hover in the ₹4,500-4,700 crore range.

ICICI Bank has about ₹5,200 crore worth of accounts restructured under SDR and ₹2,600 crore under 5:25. Slippages, if any, from these accounts could add to the asset quality pain.

The RBI’s recent circular requires banks to make suitable disclosures in case of material divergences in asset classification and provisioning from its norms (pertaining to fiscal 2016). According to ICICI Bank management, the RBI assessed incremental gross NPA to the tune of ₹5,100 crore as part of this exercise. About 40 per cent of this was accounted for during the June 2016 quarter, according to the management, and as of FY17, all such accounts have been classified as NPAs and provided for accordingly. A chunk, 84 per cent of these accounts, was part of the bank’s watchlist.

Core performance

Overall loan growth (including overseas loans) stood at a muted 6.7 per cent. However, on the domestic front, loans grew 14 per cent year-on-year, far higher than the overall 5 per cent growth for the sector.

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