The Total Cost of Compound interest to the banks is estimated at Rs.15000 Crore. Out of which banks have already paid part of it for borrowers with loans under Rs 2 crore. The further cost to the banks is estimated to be between Rs 7,500 crore and Rs 8,000 crore. According to government estimates, the burden of a complete interest waiver on the banking system could have been around Rs 6 lakh crore.

The Whole Burden of Compound Interest payment is Likely to be taken by the Govt. given the Govt. has already Paid Compound Interest on Loans under Rs. 2 Cr.

Bank Reported Gross NPA Proforma    GNPA Bps Change Reported NPA Proforma NNPA Reported PCR Proforma PCR P/B
HDFC Bank 0.81% 1.37% 56 0.09% 0.40% 89% 71% 2.68
ICICI Bank 4.38% 5.42% 104 0.63% 1.26% 86% 77% 1.75
Axis Bank 3.44% 4.55% 111 0.74% 1.19% 78% 74% 1.24
Kotak Bank 2.26% 3.27% 101 0.50% 1.24% 78% 62% 3.72
Indusind Bnk 1.74% 2.93% 119 0.22% 0.70% 87% 76% 0.72
SBI 4.77% 5.44% 67 1.23% 1.81% 74% 67% 0.77
BoB 8.48% 9.63% 115 2.39% 3.36% 72% 65% 0.33
PNB 12.99% 14.71% 172 4.03% 5.65% 69% 62% 0.37
Federal Bank 2.71% 3.38% 67 0.60% 1.14% 78% 66% 0.55
IDFC First Bank 1.33% 4.18% 285 0.33% 2.04% 75% 51% 0.66
Bandhan Bnk 1.11% 7.12% 601 0.26% 2.36% 77% 67% 2.16
RBL Bank 1.84% 4.57% 273 0.71% 2.52% 61% 45% 0.65
Source: Company Presentation, Capitaline



Among the Leading Private Banks HDFC Bank has the Less Proforma NPA than Others and Reported less Difference between Reported Gross NPA and Proforma NPAs.

After HDFC Bank it is SBI and Federal Bank which reported lesser difference between Reported Gross NPAs and Proforma NPAs

Indusind Bank has created significant Provisions to minimize the impact of higher NPAs.

Other Private Banks has created Provision to lower the impact of NPAs.

IDFC First Bank, Bandhan Bank, and RBL Bank NPAs impacted Most due to COVID. Bandhan Bank Reported the Highest difference of Between Reported Gross NPAs and Proforma NPAs followed by the RBL Bank and IDFC First Bank.

Impact of SC Verdict

In an interim order on 3 September, 2020, the Supreme Court had directed banks not to classify those loans which hadn’t been classified as bad loans as of 31 August, as bad loans. Since September banks are reporting their NPAs in two categories Reported NPA and Proforma NPA.

With the SC stay removed, Banks can now finally start declaring their non-performing assets (NPAs) or bad loans. Bad loans are largely loans which have not been repaid for 90 days or more.

This will now allows banks to officially tag 90 plus days past due accounts from 1st September 2020 as NPAs and pursue the resolution and recovery process.

Hence Q4 will show the true picture of Asset Quality of Banks

Q3FY21 Analysis
Particulars In Rs. Cr. Total Advances Total Deposits NII NIM (%) CASA (%) CAR (%)
Bank Q3FY21 YoY (%) Q3FY21 YoY (%) Q3FY21 YoY (%) Q3FY21 Q3FY21 Q3FY21
HDFC Bank 1082324 15.63% 1271124 19.08% 16318 15.13% 4.2 43 18.9
ICICI Bank 699017 9.97% 874348 22.06% 9912 15.98% 3.67 41.8 18.04
Axis Bank 582754 5.93% 654140 10.56% 7373 14.26% 3.59 42 19.31
Kotak Mah. Bank 214103 -1.23% 265304 10.84% 4007 16.82% 4.51 58.9 21.54
IndusInd Bank 207128 -0.14% 239135 10.35% 3406 10.80% 4.12 40.4 16.34
Federal Bank 128180 6.06% 149278 13.49% 1437 24.42% 3.22 34.48 14.31

Top Picks –

Large Caps- HDFC Bank, ICICI Bank, State Bank of India

Mid and Small Cap – Federal Bank


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