Free Press Journal

Spike in NPA provision: ICICI net at 11-year low



Mumbai :  With bad debts knocking at its door and the Reserve Bank insisting on an asset-quality review, the ICICI had little choice in the matter but to make bigger provisions to cover losses accruing from the loans that went sour. This, apart from creation of contingency reserve for any potential future shocks, has driven its quarterly profit down to a decade low.

The ICICI Bank on Friday posted a massive 87 per cent plunge in consolidated net profit to Rs 406.71 crore for the March quarter.

The spike in provisioning for bad loans – almost double in view of the Reserve Bank’s asset quality review — and the creation of the contingency reserve will cost the bank Rs 3,600 crore.

According to insiders, this may not be the end of the tale as the ICICI Bank expects more loans made to sectors like steel to turn sour. The other sectors that could throw up bad surprises are mining, power, oil rigs and cement – a fall-out of the headwinds from a steep commodities downturn. The sluggish demand in the domestic market had added to the turmoil.

‘‘The weak global economic environment, downturn in the commodity cycle and the gradual nature of the domestic economic recovery has adversely impacted borrowers.

It may take some more time for the resolutions to be worked out,” Chanda Kochhar, managing director and chief executive, told reporters.

The bank saw loans worth Rs 7,000 crore slipping into non performing assets during the March quarter, taking the gross NPA ratio to 5.82 per cent, from 3.78 per cent a year ago and from 4.72 per cent at the end of the preceding quarter.

Result: Its net profit fell 76 percent. According to a commercial wire service, the quarterly profit was the smallest for ICICI since the June quarter of 2006. No wonder ICICI shares closed 1.3 percent lower in Mumbai market,