Lockdown: Loans worth 6 lakh crores sanctioned in last 2 months by PSB

Loans worth 6 lakh crores sanctioned in last 2 months by PSBs. And, a cursory view of ICICI Bank’s stock.
Looks like whether it is a public property or a public sector bank, they are ‘Open For All’. We’re saying this in terms of usage. The scale at which the public sector is used is extensive. The latest example of this is the amount of loans sanctioned by the Public Sector Banks (PSBs) in last two months. You may be surprised to know that in the period from March 1 to May 8, the banks sanctioned loans worth 5.95 lakh crore!

These loans have been offered to more than 46 lakh accounts that belong to sectors including MSME, retail, agriculture and corporate. Besides this, total financing worth 1.18 lakh crore was provided to the Non Banking Financial Companies (NBFCs) during this period. All this was recently informed by Finance Minister Nirmala Sitharaman through twitter.

What Does This Mean?

The nationwide lockdown was imposed since March 25 and it is still going on. The amount of loans sanctioned in last two months shows that most of them would have been issued during the lockdown itself. These loans probably would have given a sigh of relief to the account holders. As we’re all aware that the Coronavirus has hit the economy hard therefore, these loans might prove to be crucial in the economic revival. With the stimulus package announced by PM Modi yesterday, we might see an economic recovery (better than the economies of the world) in near future.

ICICI Bank Ltd (IBL)

The Market Capitalization of the ICICI Bank (IBL) is INR 199835 crores. It reported sales growth at 11.47%, operating margin at 16.24% resulting in 5.61% growth in profits that is core operating profit of 22,072 crores with an increase of 16.54% and Net income of INR 27,015 Crores on total assets of 9,64,459 crores (average ROA track record of 0.36%) for FY 2019 with net interest margin (NIM) of 3.42% and Capital Adequacy Ratio (CAR) of 16.89%. It observed a decrease in net NPA ratio from 4.77% at March 31, 2018 to 2.06% at March 31, 2019 which it continued to improve to 1.8% Q1FY20 in and 1.6% Q2FY20.

Deposits and advances growth (14.1%) are more than its respective 3-year CAGR growths. The ROAE, ROE and ROCE of the company stood at 3.2%, 5.2% and 5.9% respectively which are below industry standards. IBL has consistently paid dividends over last 5 years having dividend payout ratio of 19.17%.