Barclays India has slashed its exposure to banks from Rs 9,830 crore in 2018-19 (FY19) to just Rs 3,090 crore in the April-June quarter (first quarter, or Q1) of 2020-21 (FY21).
The bank’s loan book reduced 33 per cent year-on-year in 2019-20 (FY20), largely led by higher repayments in the shorter tenure of the book.
Also, it did export-related financing, largely through priority sector lending certificates rather than packing credit loan in foreign currency-based loans.
The foreign bank increased its engagement with non-banking finance entities and trading segment, with growth in exposure to Rs 1,070 crore in Q1FY21, from Rs 840 crore in FY19, according to India Ratings and Research (Ind-Ra).
Barclays India mainly lends to corporates with exposure largely to highly rated clients and subsidiaries/operations of multinational companies.
The majority of Barclays India’s loans constitutes bill discounting (50 per cent of the loan portfolio in FY20) and short-term lending (28 per cent in FY20).
Ind-Ra affirmed Barclays India’s short-term issuer rating at ‘A1+’. The branch’s (Barclays India) balance sheet is consolidated at the parent level. The branch’s liabilities are those of the parent, with any risk of default signifying a default at the parent level.
The bank’s exposure to the infrastructure sector, which has been facing headwinds, increased to Rs 4,750 billion in Q1FY21 (Rs 4,000 crore in FY19), though it is restricted to highly rated corporates, said the rating agency.
Barclays India’s lending policy remains conservative. It is oriented towards global multinational corporates, focusing on shorter-tenor trade financing and the maintenance of a stable corporate book.
Its gross non-performing assets (NPAs) increased 3.52 per cent in Q1FY21 (FY20: 3.19 per cent; FY19: 1.89 per cent), mainly due to 33 per cent reduction in the FY20 loan book. However, the bank made 100 per cent provisioning, leading to nil net NPAs in Q1FY21 (FY20: nil; FY19: 0.35 per cent).
Barclays India’s tier 1 ratio, part of capital adequacy, stood at 14.6 per cent as of Q1FY21 (FY20: 14.87 per cent; FY19: 15.59 per cent). It provides the required capital buffers against unexpected credit losses from stressed sectors, if and when losses materialise.