Understanding Axis Bank's Q1 Results: Impact of a One-Time Technical Adjustment Explained by Management

Axis Bank’s Q1 results were impacted by a one-time technical adjustment, leading to higher slippages and affecting profitability. The bank's CFO explained the impact using a simple example during a post-results conference call.

Previously, the bank would upgrade accounts to 'good' once the days-past-due (DPD) returned to zero. But now, stricter criteria are applied, delaying the upgrade until all settlement terms are met and qualitative checks are satisfied.

This shift resulted in more accounts being classified as bad loans, causing higher reported slippages for the quarter. The technical impact pushed Q1 slippages to Rs 8,200 crore, with Rs 2,709 crore attributed to the new parameters. Without the adjustment, slippages would have been Rs 5,491 crore.

The technical impact also affected profitability metrics, reducing profit after tax by Rs 614 crore, lowering return on assets by 15 basis points, and decreasing return on equity by 140 basis points.

Axis Bank tightened its rules to prioritize repayment quality over just resetting the overdue count to zero. The bank emphasized that this is just one example, with criteria changing across various scenarios.

According to the source: Moneycontrol.