StanChart India sees rise in bad loans

Gross NPA close to 6%; gross advances at the end of FY13 at Rs 96,394 crore

 

Standard Chartered Bank, which regained its position as the most profitable foreign lender in the country in 2012-13 (April-March), has seen a sharp rise in non-performing loans that could stress its India earnings in the current financial year, people familiar with the development said.

It is learnt a couple of large corporate credit accounts slipped into the non-performing category, resulting in an increase in bad loans. One of the accounts is from the gems and jewellery sector; the other is from telecom.

“The spike (in bad loans) is primarily on account of two large accounts. Adequate provisions have been made against these loans and the bank is also making efforts to recover the money that was lent,” a source familiar with the development told Business Standard, asking not to be named.

The lender’s gross bad loan ratio in India continues to remain close to six per cent, one of the highest among foreign banks operating in the country. Standard Chartered Bank’s India branches reported a gross bad loan ratio of 5.98 per cent and net non-performing asset ratio of 1.63 per cent at the end of March 2013. The fund and non-fund based loan exposure to the gems and jewellery segment was Rs 3,542 crore, while to the telecom industry it was Rs 4,139 crore. Gross advances (fund- and non-fund based) at the end of 2012-13 were at Rs 96,394 crore.

Sources, however, claim the foreign lender had turned cautious in offering fresh loans in the current uncertain economic environment that prevented significant deterioration in credit quality of the bank’s India branches. “There is stress but it is not alarming. It is not as if a large number of accounts have become non-performing,” said another person, without wanting to be identified

A spokesperson of Standard Chartered Bank in India declined to comment.

Standard Chartered will announce its global results (including India earnings) for calendar year 2013 in the first week of March. The lender’s financial performance in India for 2013-14 (April-March) is expected to be published in June or July.

Standard Chartered is the largest foreign lender in the country in terms of distribution network. The bank has 99 branches in India and also has one unused branch licence. While the lender had slipped behind rivals Hongkong and Shanghai Banking Corporation (HSBC) and Citibank in terms of profitability in 2011-12; higher interest income, tight cost control and lower loan impairment charges allowed it to regain the top spot a year later.

The bank’s India branches reported a 71 per cent rise in profit after tax at Rs 2,960 crore in 2012-13.