ICICI Bank changes its lending & underwriting norms to trim NPAs

ICICI Bank, the country’s largest private sector lender, has after a rise in bad loans during 2014-15 decided to change its lending and underwriting norms, to contain the rise in its non-performing assets (NPAs) and the restructuring book.

Under the new norms, it will be more careful in lending to the construction sector. “In this space, where there are lots of receivables, things have got delayed, which in turn has put pressure on those companies, leading to devolvement of guarantees. That is one sector, where one has to be a bit careful,” said N S Kannan, executive director, in an analyst conference call.

In lending to this sector, it will take a closer look at the credit ratings and in certain cases might demand additional security.

At end-March, gross NPAs were Rs 15,095 crore or 3.78 per cent of gross advances, compared with Rs 10,505 crore a year before.

ICICI Bank has been continuing to grow its corporate book cautiously. In the fourth quarter, domestic corporate loan growth was 9.8 per cent year on year; the retail loan book grew at 24.6 per cent over a year. Kannan says they’ve decided to move towards lending to higher-rated companies.

In the past financial year, pressure on asset quality was seen as more of the restructured assets slipped to NPAs. The management had said the restructuring of the loans was done on the assumption that economic activity would pick up but with this staying volatile, the slippages to NPAs had remained high.

The net restructuring book at the end of the March quarter was Rs 11,017 crore. The bank made Rs 2,033 crore of provisioning in the quarter. The management had indicated about 25 per cent of the restructured accounts had been downgraded, in line with the sector average.

“In the context of our restructured loans, there is some lumpiness in terms of one or two assets and if they slip, they create a bit of volatility in the provision. We would aim to minimise a similar situation, going forward. Incrementally, we are looking at tighter concentration thresholds, so that anything above, say, a particular number gets highlighted and escalated to the higher level committees,” said Kannan.