While reading an article by The Morning Context on Indian Banking and an article by The Economic Times which highlighted the pains in banking industry and those pains being reflected in the gross NPAs and specially in Write Offs, I decided to look at BASEL Pillar 3 disclosures of IDFC First Bank to understand their write off situation since the start of the bank.
The disclosures used to come up with this data can be seen here: Regulatory Disclosures | IDFC FIRST Bank
Summary of observations
Since the formation of IDFC First Bank (the merger took place in Dec 2018 - these numbers includes disclosures made during fiscal year ended Mar 2019):
- IDFC First Bank declared assets worth 27,997 Crores as NPAs
- Against these, they provided (Gross provisions) for 21,240 crores.
- Of these provisions, 14823 Crores have been written off and 5054 Crores have been upgraded/recovered back. So about 53% of NPAs have been written off and 18% has been recovered/upgraded.
- Excluding write-offs (Assuming no write-offs were made - as was called out in above themorningcontext.com article that the real pain is hidden in write-offs), the closing Gross NPA would have been ₹18,541 crore instead of ₹3,718 Crore (as it is at the end of Mar 31 2024) - roughly 5x or (5x1.88% GNPA = 9.4%)
- For the last financial year (FY24) IDFC First Bank declared NPAs: 5251 Crores (Gross NPA), out of these IDFC First Bank provided for 4437 Crores (NPA Provision). The bank wrote off 2982 Crore (~57% of NPA) and recovered 1477 Crores (~28% of NPA)
- That said, write-offs have been fully taken into P&L as per accounting rules and also as required by the regulator, but this goes on to indicate the pain in banking industry.
Doubts:
- Any one who has been looking into banking disclosures for a while, can you please highlight if I am looking and interpreting the numbers correctly?
- Gross NPA (assuming nothing was written off) at 9.4% - does this indicate a grim situation at Indian Banking industry?
Link to Google Sheet: