Axis Bank Shares Gain 4% after it declares 80% bad loans as Secured

Shares of Axis Bank Ltd on Thursday gained as much as 4% after the bank clarified to the exchanges that its 80% insolvent loans are secured.

Intra-day, the stock hit a high of Rs514.15 a share. At 10.21am, it was trading at Rs511.55 on the BSE, up 3.5% from its previous close, while the benchmark Sensex index rose 0.68% to 31,045.13 points.

This move is seen positive because provisioning requirement on secured loans is lower as compared to unsecured loans.

The bank said in a notice to the BSE that it had exposure to eight out of the 12 stressed accounts that the Reserve Bank of India (RBI) advised initiating insolvency process on.

The total fund-based outstanding from these eight accounts is Rs5,070 crore. Non-fund-based outstanding was Rs212 crore.

Against this outstanding, the provision held was Rs2,497 crore, the bank added.

On 15 June, RBI has advised banks to initiate insolvency resolution process in select accounts under the provisions of the Insolvency and Bankruptcy Code (IBC).

Banks have started a preliminary assessment of additional credit costs after the central bank asked them to set aside 50% provisioning against secured exposures and 100% against unsecured exposure in all cases referred for bankruptcy.

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