The effects of the second Covid-19 surge are beginning to show on bank customers, with the instances of cheque bouncing rising by mid April, according to HDFC Bank.
Dishonoured cheques in April 2021 (half-way through the month) have risen slightly, possibly due to some panic caused by worsening medical conditions. But this does not necessarily point to a trend, bank officials said in an analyst call after the announcement of Q4 results.
Cheque returns were higher in April than in March. Between October 2020 and March 2021, there was clear reduction in cheque bounces and demand resolution. The return rate is back to January 2021 levels. Maharashtra, Madhya Pradesh, Punjab, and Telangana are seeing higher check bounce rates, according to domestic brokerage Motilal Oswal.
According to HDFC Bank’ website (learning centre section) there are times when the payer’s bank or the payee’s bank refuses to honour this commitment. The reasons for this ‘decline’ may vary. In such a case, the cheque bounces and is called a ‘dishonoured cheque’.
Another domestic broking entity Emkay in its research note on Q4Fy21 performance said reported non-performing assets (NPAs) were lower (quarter-over-quarter) at 1.3 per cent vs. 1.4 per cent (pro forma) in Q3. But, the bank sees rising incidence of EMI bounces in the system due to localized lockdowns implemented after Covid-19 second wave.
Bank officials said the system is facing the second wave (of Covid-19) in terms of medical conditions. It has not yet impacted the financial system the way may expect.
When we consider medical conditions versus financial conditions in the first wave (Covid in 2020) and second wave, the gap is much wider in the second wave. The financial conditions have not deteriorated to that extent.
Lockdowns have been localized and sporadic. Most restrictions are benign for economic activities (week end and night). Manufacturing, logistics and transportation has been allowed to continue. Ofcourse, after this point of time it can change.
Meanwhile, HDFC Bank in its filing with BSE said its board has given nod to raise tier-I capital, tier II capital bonds and long term paper upto Rs 50,000 crore through private placement. The long term securities will involve issuing bonds to raise funds for finance infrastructure and affordable housing. The approval is valid for 12 months and is subject to approval of the shareholders at the ensuing Annual General Meeting and regulatory nod.