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IndusInd Bank slumps 20 percent as bad loans may rise amid Covid-19 outbreak

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CIO Insider Team

Indusind Bank’s shares were tied in 20 percent lower circuit in an organisation market, at a price of 329.25, on the BSE after the bank announced the outbreak of coronavirus that can increase up its credit costs to almost 200 to 210 basis point by the end of March 2020, indicating a rise in bad loans. At 9:45 am, the S&P BSE Sensex was at 28,996.35, up 556 points or nearly 2 per cent.

In an analysts call on Monday the management said “the near-term impact of covid-19 would have limited impact on their portfolio, assuming a 3-month disruption. The base-line assumptions say the impact of covid-19 would remain for 3-4 months and demand would recover post June 2020”. The authorities also highlighted that base-case acceptance will be recounted if the position provokes. The call was considered as the first analyst call after Sumant Kathpalia was appointed as the new managing director and chief executive officer of the bank.

“The bank expects its commercial vehicle segment to be the first to bounce back once the situation normalises. In fact, in the later part of March, it had witnessed some recovery in the commercial vehicle segment. While operation of its micro finance business (10 per cent of loans) has got affected due to the lockdown, personal loans, including credit card (5 per cent of loans) is likely to see higher delinquencies amid covid-19. Further, up to 8 per cent of its business banking and loan against property portfolios could see asset quality pressure as these are from the impacted sectors like retail, tour, travel, etc” says the bank authorities.

The previous week, the private lender stock had kicked an 8 year low of an amount of Rs 235.55 on the National Stock Exchange with the market-capitalisation of the bank that is falling below Rs 20,000 crore in the market.

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