**ICICI Bank Faces Asset Quality Challenges Despite Stable Financials**
In a quarter marked by otherwise stable financial performance, ICICI Bank Ltd encountered challenges related to asset quality that are affecting India’s banking sector. The bank reported an increase in retail and rural loan slippages, indicating a rise in loans that have turned sour, while also moderating its growth in personal loans.
During the December quarter, ICICI Bank’s total gross loan slippages amounted to ₹6,085 crore, with ₹5,304 crore attributed to retail and rural loans, which included ₹714 crore from the kisan (farmer) credit card segment. The remaining ₹781 crore in slippages came from the corporate and business banking sectors. The bank noted that it typically experiences higher additions of non-performing assets (NPAs) from the kisan credit card portfolio in the first and third quarters of the fiscal year. In the latest third quarter, ICICI Bank achieved loan recoveries of ₹3,392 crore, with retail recoveries accounting for ₹2,786 crore, while also writing off loans totaling ₹2,011 crore.
Sandeep Batra, the executive director, mentioned during an earnings call that ICICI Bank had recovered ₹3,900 crore over the nine-month period ending in December. He indicated that while retail recoveries are expected to continue, recoveries from the corporate sector may slow down as most of the recoveries have already occurred.
The bank’s gross NPA ratio improved to 1.96% in December, compared to 1.97% in the previous quarter and 2.30% a year earlier. The net NPA ratio remained stable at 0.42%, slightly better than 0.44% from the previous year. Net provisions for the third quarter rose to ₹1,227 crore, reflecting a year-on-year increase of 16.8% and a quarter-on-quarter increase of 0.5%.
Batra emphasized that ICICI Bank is committed to maintaining the quality of its loan portfolio and is actively monitoring for early signs of stress. He stated that the overall quality of the portfolio remains stable. “Our retail portfolio is based on the principles of capital return and cash flow assessments, without focusing on any specific segment or product,” he added. The growth in personal loans has slowed to 8.8% year-on-year in Q3, down from mid-30% levels in the previous year, a decision made consciously to prioritize risk assessment.
In response to warnings from the Reserve Bank of India last year, ICICI Bank has tightened its underwriting and risk assessment criteria, leading to a more measured approach to growth in the unsecured loan sector.
In terms of loan growth, ICICI Bank’s domestic loan business grew by 15.1% year-on-year and 3.2% quarter-on-quarter, reaching ₹12.8 trillion. The retail loan portfolio increased by 10.5% year-on-year and 1.4% sequentially to ₹7.0 trillion, representing 52.4% of the bank’s total loan portfolio. The personal loan segment grew by 8.8% year-on-year but saw a decline of 1.3% quarter-on-quarter, totaling ₹1.2 trillion and accounting for 17.2% of total retail loans. The credit card portfolio experienced a growth of 17.9% year-on-year and 2.8% quarter-on-quarter.
