Retail non-performing assets (NPAs) will be higher in the third and fourth quarter of FY21 and will go back to the pre-COVID levels only in the new fiscal year, Axis Bank said on Thursday. The third largest private sector lender, however, said that the asset quality situation is much better than what was feared initially and stressed that it has adequate provisions to take care of the reverses.

It can be noted that the damage to the economy because of the pandemic resulted in job losses or salary cuts, in turn impacting the loan repayment abilities in the otherwise resilient retail segment. "Given the fact that lot of people lost their jobs, some had to take salary cuts, some industries were badly affected that will have some impact on delinquency and portfolio collections. But these numbers are much lower than what we had anticipated," its head of retail lending Sumit Bali said.

He said loan repayments are improving every month, and the stock of sour debt from the past will lead to a higher NPAs in the December and March quarters, before the situation improves to go back to the pre-COVID levels in the new fiscal starting April 2021. In September, when the sixmonth moratorium on loan repayments ended, the bank had been experiencing higher bouncing on electronic fund collection mandates but the same is much lower than the industry's averages, officials explained.

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