RBL credit card book may come under stress in coming quarters

RBL Bank expects that the loans of 5% of its credit card customers who availed of the moratorium could turn bad in the coming quarters, it said. These customers have not paid a single instalment over the last six months, the management told analysts after the quarterly earnings announcement.

Despite this stress in the credit card portfolio, the private bank sector has seen a 41% year-on-year growth in lending against credit cards to ₹11,401 crore at the end of September quarter.

The credit card advances in the previous quarter stood at ₹10,862 crore. The bank also issued nearly 100,000 credit cards in the month of September, the highest during the lockdown.

However, the management claimed that it has seen improved collection in credit cards and does not expect asset quality to worsen further in the coming months.

The bank’s s gross non-performing assets rose to 3.34% at the end of the September quarter from 2.6% in the same quarter last year. The fresh bad loans added during the quarter stood at ₹145 crore. The asset quality could have been worsened by another ₹90 crore had not a top court order put a standstill on recognition of bad loans, saying that lenders cannot label loans as bad even in case of a default.

Provisions fell to ₹525 crore at the end of the September quarter compared to ₹540 crore during the same quarter last year. The bank made covid-related provisions of ₹310 crore in the second quarter.

“Provision buffer created by the bank till now looks adequate to address the issue of delinquency in the credit card portfolio. Overall credit loss on this portfolio is well within the management’s earlier expectation,” said Ashutosh Mishra, head of research, Ashika Stock Broking.

RBL’s capital position became better with tier 1 capital adequacy ratio improving to 17.4% at the end of the September quarter.

The bank reported a 165% rise in its net profit at ₹144.2 crore in the quarter ended 30 September, compared to ₹54.3 crore in the corresponding quarter last year. The lender also recorded a 7% jump in net interest income to ₹932cr, while net interest margin stood flat at 4.34% compared to the corresponding period of the previous year.