Amount is 140% higher than lenders’ losses
New Delhi : Public sector banks have written off bad loans worth Rs 1.20 lakh crore, an amount that is nearly one-and-a-half times more than their total losses posted in 2017-18, according to official data. This is a double whammy for the struggling PSBs as they had massive write-offs as well as huge losses in the last financial year.
This is for the first time in a decade that banks have made huge write-offs of bad loans along with booking of hefty losses.
Till 2016-17, 21 state-owned banks made combined profit while in 2017-18, they posted a staggering loss of Rs 85,370 crore, as per the data.
During 2016-17, PSU banks wrote off non-performing assets (NPAs) worth Rs 81,683 crore as against combined net profit of Rs 473.72 crore.
SBI alone has written off bad loans of Rs 40,196 crore, nearly 25 per cent of the total write-offs during 2017-18. This was followed by Canara Bank (Rs 8,310 crore), Punjab National Bank (Rs 7,407 crore) and Bank of Baroda (Rs 4,948 crore).
As per the data provided by rating agency Icra, Indian Overseas Bank has written of NPAs worth Rs 10,307 crore, followed by Bank of India (Rs 9,093 crore), IDBI Bank (Rs 6,632 crore) and Allahabad Bank (Rs 3,648 crore). These banks along with 7 others come under Prompt Corrective Action framework of RBI.
As per the government data, banks’ write-offs stood at Rs 34,409 crore in 2013-14. The figure has jumped nearly four-fold in five years. In 2014-15, the banks wrote off Rs 49,018 crore; Rs 57,585 crore in 2015-16, Rs 81,683 crore in 2016-17 and hitting a record high of Rs 1.20 lakh crore (provisional) in 2017-18.
Write-off in banking parlance means that the bank has made 100 per cent provision from its earning against that account. Following this, NPA is no longer part of its balance sheet.
However, a write-off puts pressure on balance sheet of banks as it erodes operating profit.
Indian banking sector is grappling with mounting NPAs and host of scams and frauds. NPA in the banking sector stood at Rs 8.31 lakh crore as of December 2017.
RBI allows lenders to spread Q1 bond loss provision over four quarters
Mumbai: The RBI on Friday eased the provisioning norms for bond losses incurred by banks also in the first quarter ending June 30, allowing them to spread these over four quarters. In April, RBI had allowed banks to spread over four quarters the provisioning for bond losses incurred in the third and fourth quarters of 2017-18. “In view of the continuing rise in the yields on Government Securities, as also the inadequacy of time to build investment fluctuation reserve (IFR) for many banks, it has been decided to grant banks the option to spread provisioning for their mark to market (MTM) losses on all investments held in AFS (available for sale) and HFT (held for trading) for the quarter ending June 30, 2018 as well,” an RBI notification said.
“The provisioning required may be spread equally over up to four quarters, commencing with the quarter ending June 30, 2018.” The RBI, however, placed certain conditions for banks that utilise the option to spread the provisioning for these two quarters. The banks have been asked to “make suitable disclosures in their notes to accounts/quarterly results providing details of the provisions for depreciation of the investment portfolio for the quarters ended December 2017 and March 2018 made during the quarter/year, and the balance required to be made in the remaining quarters”. Yields have risen sharply within the last year pulling down bond prices as a result.
