HDFC Bank, India’s largest private sector lender, expects the retail segment to report a higher incidence of asset quality stress because of the second wave of COVID-19 infections. Borrowers who had to avail cover under regulatory dispensations like moratorium and restructuring after the first wave will be the highest impacted.
Sashidhar Jagdishan, chief executive and managing director, HDFC Bank, termed the near-term expectations as tepid and made it clear that the bank will be cautious in these extraordinary times. He said that first time in so many years, the bank may not have any grip on what is going to happen.
He said the bank has told the field staff to prioritize health and safety over business needs, and hence, there will be a slowdown in collections, which will translate to some amount of higher delinquencies in the near term. “But I don’t want to say it will be dramatically high. It will be high, I don’t think it will be a loss. They should cover up in coming quarters,” he said, expecting things to get back to normal in two quarters.
Jagdishan highlighted that the overall system was on a roll till April and one could not anticipate the surge that will impact and take a toll higher than the first wave. The broader financial system’s experience is also most likely to mirror what HDFC Bank witnesses; stress on retail accounts will be higher across the system. He said the ongoing second wave has gone deeper into the rural areas, impacting people who are otherwise insulated, and it has consumed more lives than the first as well.
Jagdishan explained that the purpose of introducing an organizational change was to get those who are second in the hierarchy in the management line to the fore by giving them leadership responsibilities. “The small business lending will get a renewed focus as part of the efforts to make it future-ready.”