IDBI Bank’s net loss has surged by 84 per cent to Rs 3,200 crore in the quarter to March 2017 as against Rs 1,736 crore in the January-March quarter of 2015-16 mainly due to higher provisioning for bad loans. The bank has reported huge losses after the RBI recently invoked the prompt corrective action (PCA) framework on IDBI Bank because of its rising bad loans and negative return on assets.
The bank’s annual loss for 2016-17 widened to Rs 5,158 crore as against Rs 3,665 crore in the previous fiscal. Gross non-performing assets (NPAs) almost doubled to 21.25 per cent, or Rs 44,752 crore, of the gross advances in the year-ago quarter compared to 10.98 per cent (Rs 24,875 crore) in the corresponding period of the previous fiscal. Net NPAs were 13.21 per cent against 6.78 per cent.
Under PCA, banks are assessed on capital ratios, asset quality and profitability. Failure to meet any of the norms can trigger action such as strictures on lending and branch expansion, change in management and reduction in assets.
The RBI’s action against IDBI came after it raised the threshold limits on various financial parameters for taking regulatory action under the PCA framework last month. It also comes after the centre moved an amendment of the Banking Regulation Act to empower RBI to deal with bad loans directly. Under the new rules, breaching a net NPA ratio of 6 per cent invites action. IDBI Bank’s net NPA ratio breached 6 per cent in the March 2016 quarter and stood at 9.61 per cent at the end of December. It has now hit 13.21 per cent. The bank has already stopped branch expansion.
Shares of IDBI Bank plunged by 7.77 per cent to Rs 70 on the BSE as the results disppointed the market.