PSBs collectively post loss of Rs 16,600 crore in June quarter
Gross NPAs have exceeded Rs 8.5 lakh crore, up 19% year-on-year, while total provision for NPAs jumped 28% (y-o-y) to Rs 51,500 crore.
The last quarter of the previous fiscal was a disaster for the 21 state-owned banks, with only two of them reporting a net profit - Vijaya Bank and Indian Bank. The rest of the public sector banks (PSBs) had collectively posted a net loss of over Rs 87,000 crore.
The good news is that things have improved significantly in the April-June (Q1) quarter of this fiscal, with seven PSBs posting a profit. Moreover, the overall non-productive asset (NPA) growth rate is reportedly slowing with the biggest bad loan accounts undergoing insolvency resolution. But that does not mean that the sector is out of the woods yet.
According to The Economic Times, collective losses of the PSBs in Q1FY19 have jumped over 50 times against the corresponding period last year on the back of increased provisioning for NPAs. Lower trading income and an uptick in mark-to-market losses due to hardening of bond yields further weighed down their bottomlines.
As per data compiled from regulatory filings, the PSBs collectively posted a loss of Rs 16,600 crore in the last quarter, up from Rs 307 crore a year earlier. Back then, more than half the state-run banks (12) had been in the green.
Meanwhile, gross NPAs have exceeded Rs 8.5 lakh crore, up 19% year-on-year, while total provision for NPAs jumped 28% (y-o-y) to Rs 51,500 crore.
"We believe that the NPAs are close to peaking and we might see the level of NPAs coming down by the end of this year," Karthik Srinivasan, group head, financial sector ratings at ICRA, told the daily. "The RBI has set timelines that the NCLT accounts should be resolved within 6 to 9 months. Even if we account for a delay here they should reach some sort of resolution by the end of the financial year."
Take the scam-hit Punjab National Bank for instance. The bank's recovery of more than Rs 7,700 crore in bad loans during the first quarter in the current fiscal has surpassed the total amount it recovered in the entire 2017-18 financial year. "In the first quarter itself, two-three big accounts have been resolved. As a result, the bank has got over Rs 3,000 crore only through the resolution process," PNB Managing Director Sunil Mehta announced last month.
PNB is not the only one. According to Financial Services Secretary Rajiv Kumar, banks have made recovery of Rs 36,551 crore during the first quarter registering a 49% growth over the last fiscal.
Citing experts, the report added that slippages are improving on a quarter-to-quarter basis - although they remain elevated in absolute terms. All in all, bankers seem to be cautiously optimistic. "In September, we intend to further improve the provision coverage ratio so that from December there would be no looking back and there will be no hangover of past credit cost," SBI chairman Rajnish Kumar told the daily.
But things are yet to pick up among the 11 banks under the RBI's under the Prompt Corrective Action (PCA) framework, including IDBI Bank, Corporation Bank and Allahabad Bank. According to the report, they are yet to show material improvement in operating performance, especially in terms of asset quality.
Nonetheless, the Financial Services Secretary is confident that the banks will come out of PCA in this fiscal itself. He also pointed out that operating profit of the PSBs has risen by 11.5% to Rs 36,632 crore in Q1 while losses fell 73.5% on quarter-on-quarter basis.
According to him, NPAs have been by and large recognised, provisioning by and large made, and the recoveries are on its course. "The resolve of government is extremely clear that every stakeholder has to be responsible. Those who are not prudently behaving will have to face the consequences," he added.
With PTI inputs