HDFC gets battle ready, increases provisions to Rs 11,000 crore to ward-off coronavirus fallout

Housing Development Finance Corporation (HDFC) was seen gearing up for the aftermath of the coronavirus pandemic and the subsequent nation-wide lockdown.

Housing Development Finance Corporation (HDFC) was seen gearing up for the aftermath of the coronavirus pandemic and the subsequent nation-wide lockdown, which is expected to force bad loans to the spike for the banking and financial services industry. India’s largest mortgage lender’s provisions stood at Rs 10,988 crore at the end of the March quarter. The provisions were Rs 6,800 crore over and above what the regulatory requirements demand. HDFC saw its profit fall by 22% in the January-March quarter coming in at Rs 2,233 crore, down from Rs 8,372 crore recorded in the previous quarter. 

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HDFC has made additional provisions for the coronavirus pandemic, keeping aside Rs 5,913 crore to deal with the pandemic. The gross non-performing loans at the end of the quarter stood at Rs 8,908 crore, translating to 1.99% of the loan portfolio. In the previous quarter the gross non-performing assets were at Rs 5,950 crore, equivalent to 1.36% of the total loan portfolio. HDFC’s loan book stood at Rs 4,50,903 crore, growing 11% on-year basis. “During the year ended March 31, 2020, 36% of home loans approved in volume terms and 18% in value terms have been to customers from the Economically Weaker Section (EWS) and the lower-income groups,” HDFC said. The corporation highlighted that it has been approving 9,640 loans on a monthly basis to the EWS and LIG segment, with monthly average approvals totaling to Rs 1,589 crore. 

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The nation-wide lockdown and the pandemic hit about 3% of the borrowers of HDFC, who do not use electronic mode of repayment for their installments. HDFC said that recoveries that would have been done through personal visits to these 3% borrowers were not possible during the second half of March. This resulted in an increase in non-performing individual loans. The reduction in the corporate tax rates helped HDFC trim its tax outgo for the January-March quarter to just Rs 459 crore. The tax outgo in March 2019 stood at Rs 829 crore.