Axis Bank on Tuesday reported an 83% drop in net profits for the July-September quarter. The company recorded profits of Rs 319 crore in Q2 as against Rs 1,916 crore in the same period last year, The Hindu reported. The fall in profits came on the back of a sharp increase in bad loans, with the company increasing its provisioning for them to Rs 3,623 crore from Rs 707 crore.

Axis – the third largest private sector lender – reported that the gross value of its non-performing assets rose to Rs 16,379 crore in a year. The company said Rs 8,193 crore in loans turned into non-performing assets during the period, of which 89% were form a “watch list” of Rs 22,600 announced at the beginning of the financial year. Axis Bank Chief Financial Officer Jairam Sridharan said, “We now believe a materially higher proportion of the watch list could turn into NPA by end of the financial year 2018.”

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India’s banks continue to face an asset quality crisis, with the total amount of bad loans growing to $138.5 billion (approximately Rs 9.25 lakh crore) in June. The rise represents a growth of 15% in the value of bad loans from the December 2015 figure of $121 billion (approximately Rs 8.08 lakh crore). State-run banks account for 88% of the stressed assets, with private sector lenders and the local arms of foreign banks accounting for the remainder.

The data on bad loans was originally made available by Indian banks after the Reserve Bank of India ordered an asset quality review. RBI Governor Urjit Patel on October 4 said 65% of the financial stress in public-run banks were contributed by five sectors, and that the central bank would deal with the situation “with firmness but also with pragmatism”.