The cumulative loss of 20 public sector banks (PSBs) that have declared their Q4FY16 results as of Wednesday has crossed the $2 billion mark. In fact, at Rs 14,283.5 crore, their losses put together, are more than the current market capitalisation of each of them except the largest three.
The main reason behind this negative swing from a total profit of Rs 3,918.1 crore that they had reported in the same quarter last year is a 151.3 per cent surge in provisions, necessitated by their gross non-performing assets (GNPAs) almost doubling (Y-o-Y) to close to Rs 3 lakh crore.
- Tracked so far: Rs 75 crore in Dera bank accounts
- Gross NPAs cross Rs 50,000 crore: Nearly a quarter of IDBI Bank loans turns bad; loss at Rs 853 crore
- Bank of India turns the corner with Rs 88 crore profit
- ICICI profit declines 8.2% on high NPAs
- HDFC Bank net up 20.22% on higher interest income, Q1 profit at Rs 3,893.84 crore
- IDBI Bank loss at Rs 1,736 cr
The surge in the cumulative provisions of these 20 banks to Rs 39,392.6 crore, which includes Rs 882.6 crore written off by Syndicate Bank on account of an alleged fraud discovered at three of its branches, was largely on account of the direction by Reserve Bank of India (RBI) —following an extensive asset quality review (AQR) — to come clean on stressed assets and make adequate provisions for them in the last two quarters of FY16.
“There are two polar approaches to loan stress. One is to apply band aids to keep the loan current, and hope that time and growth will set the project back on track. An alternative approach is to try to put the stressed project back on track rather than simply applying band aids. This may require deep surgery. But to do deep surgery such as restructuring or writing down loans, the bank has to recognise it has a problem — classify the asset as a non-performing asset (NPA),” Reserve Bank of India Governor Raghuram Rajan had said.
The central bank had also asked each member of a consortium of banks to declare an account as NPA if a majority of the other members had done so.
But while provisions surging in the last two quarters of FY16 was anticipated, given the RBI’s diktat, what has come as a surprise is the fact that even banks such as Bank of Baroda, which had categorically said that all required provisions had been made in Q3 itself, reported massive provisioning numbers even in Q4.
“We have put the uncertainty behind us. If something has to be done, it might as well be done now. As far as we can see, we have taken all the required provisions,” PS Jaykumar, its managing director, had said after the announcements of Q3 results. Despite this, the bank reported a loss of over Rs 3,000 crore for the second successive quarter as its provisions rose 11.2 per cent Q-o-Q to Rs 6,857.7 crore.
Punjab National Bank, which reported its Q4 numbers on Wednesday, turned an already miserable quarter for PSBs into a disaster with the highest-ever quarterly net loss by any Indian bank. With provisions almost trebling (Y-o-Y) on the back of GNPAs more than doubling, the New Delhi-headquartered bank reported a net loss of Rs 5,367.1 crore for the quarter and said one in every eight rupees it lent has turned bad.
PSBs’ performance this quarter has also been affected by the fact that while the growth in their non-interest income slowed to 5 per cent (Y-o-Y) as compared to 24.5 per cent in the same quarter last year, their employee expenses, at 6.2 per cent (Y-o-Y), has risen at a faster pace compared to 5.4 per cent (Y-o-Y) recorded in the same quarter last year. FE