Adding to the mounting woes of the banking sector, state-run Indian Overseas Bank (IOB) has reported a net loss to Rs 1,425 crore for the December quarter on the back of higher provisioning against bad loans as against a net loss of Rs 516 crore in the same quarter last fiscal.
Gross NPAs, as a percentage of total advances, rose to 12.64 per cent (Rs 22,672 crore) from 8.12 per cent (Rs 14,500 crore) in the same quarter a year ago. Net NPAs went up to 8.32 per cent compared with 5.52 per cent in the year-ago period. On Tuesday, Dena Bank posted a net loss of Rs 662.85 crore in the December quarter and Allahabad Bank made a loss of Rs 486.14 crore.
On account of increased provisions for domestic and overseas advances including provision made for asset quality review, as per the RBI direction, resulted in net loss, IOB said. Total income declined to Rs 6,445.78 crore during the quarter under review from Rs 6,647.45 crore in the same period a year ago. Total provisions, excluding for income tax, increased to Rs 1,896.06 crore as against Rs 1,183.04 crore in the same period last fiscal. IOB shares declined by 5.20 per cent to Rs 23.70 on the BSE on Wednesday.
IOB’s net interest margin of the bank declined to 1.93 per cent in the December quarter. Total business of the bank stood at Rs 4.10 lakh crore at the end of third quarter of the current fiscal. The bank has been put under “prompt corrective action” by the RBI since October 2015 with the view to improve internal processes to deal with mounting non-performing assets.
The RBI has specified certain regulatory trigger points, as a part of prompt corrective action (PCA) framework, in terms of three parameters — capital to risk weighted assets ratio (CRAR), net NPA and Return on Assets (RoA) — for initiation of certain structured and discretionary actions in respect of banks hitting such trigger points.
As per the PCA framework, the bank has to undertake special drive to reduce NPAs, review loan policy and strengthen credit appraisal skills and follow-up of advances. Also, the bank has to put in place proper credit-risk management policies, reduce loan concentration, restrictions in entering new lines of business, making dividend payments and increasing its stake in subsidiaries.