The MFI book contracted by over ₹2,000 crore, or 5% sequentially, to ₹37,046 crore. Disbursements for the quarter were ₹8,000 crore, much lower than the historical average of ₹12,000-13,000 crore. The vehicle finance portfolio fell 5% on year and 6% on quarter.
Anshika Kayastha
Published26 Jul 2024, 09:57 PM IST
The bank also consciously reduced its personal loans and credit card portfolio.(Bloomberg)
Mumbai: IndusInd Bank’s microfinance (MFI) and vehicle finance portfolios shrank in Q1 FY25 as incremental disbursements slowed due to seasonal factors, election-related disruptions, and heatwaves in several parts of the country. This also led to muted collections, which combined with a fall in the assets under management (AUM), led to a jump in the share of bad loans in the MFI book.
The private sector lender’s MFI book contracted by over ₹2,000 crore, or 5% sequentially, to ₹37,046 crore as of 30 June. Disbursements for the quarter were ₹8,000 crore, much lower than the historical average of ₹12,000-13,000 crore.
The vehicle finance portfolio fell 5% on year and 6% on quarter to ₹11,260 crore. The two business segments account for 38% of total loans. The bank also consciously reduced its personal loans and credit card portfolio.
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Also Read: IndusInd Bank Q1 Results: Net profit rises 2% to ₹2,171 crore, NII up 11% YoY
MD and CEO Sumant Kathpalia, in the earnings call, said that the rural areas were most impacted as they are still also coming out from the impact of the pandemic. However, the bank is seeing progress in these areas with disbursements already starting to pick up since July and expected to normalize in the current quarter.
The current quarter should be better for the bank, both in terms of disbursements as well as overall performance in these two domains, he said, reiterating the loan growth guidance of 18-23% for FY25.
Loan growth as well as deposit growth for the quarter was at 15% on year. On quarter, loans grew 1% to ₹3.5 trillion whereas deposits grew 4% to ₹4.0 trillion.
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Slippages for the quarter were ₹1,536 crore of which consumer slippages were ₹1,488 crore. Within consumer slippages, vehicle finance accounted for ₹660 crore, MFI for ₹340 crore and other retail loans for ₹490 crore.
Gross NPA ratio for the MFI portfolio rose to 5.16% from 4.53% in the previous quarter. For the total loan book, gross NPA ratio worsened to 2.02% from 1.92% a quarter ago, and net NPA ratio to 0.60% from 0.57% as of March 2024.
‘Focus will be on collections, cautious disbursements’
Kathpalia said that the focus will be on collections and cautious disbursements. Saying that the turbulence and seasonal weakness is behind the bank, credit cost for FY25 should be 110-130 basis points as against 121 bps (annualized) for the reporting quarter.
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He also flagged an increase in delinquencies in the credit card book, saying that the bank has seen 30-40 bps rise, more than the industry average of 20-30 bps. Whether the stress is seasonal or permanent will need to be watched out for in Q2, he said, adding that even so credit cost for the cards portfolio remains within range.
Following reduction in personal loans and credit cards, their share fell to 5.25% of total loans. Kathpalia said that the bank’s stated intent is to keep their share around 5.5-6.0% of advances and so the bank will continue to grow these segments.
Return on assets for the bank fell to 1.7% in Q1 from 1.9% in the previous quarter and year-ago period due to lower disbursements and it being a weak quarter. Kathpalia said that historically the RoA has been at 1.8-2.2% and should come back to this level given that opex growth is expected to start normalizing and revenue is expected to exceed opex in the coming quarters “as operating leverage and seasonality plays out”.