In the interview, it seems that IDFC First bank considers write-offs as a line item below provisions, i.e. first they provide money according to ECL norms and subsequently write-off a given amount. This is normal industry practice.
However if we look back in time at capital first’s book, their approach was not the same. Capital first used to write-off and show it in their other expenses item, subsequently NPA numbers looked better but the underlying ROAs were impacted as other expenses as a % of revenues was high (for details, I have attached the series of posts below). I was looking at IDFC First’s other expenses item and it seems this number hasn’t grown so much, so probably there is a change in this strategy. Am I correct in my interpretation? This would signify gross NPAs correctly represent stressed asset pools.
