Yes Bank under-reported bad loans in March 2016, says annual report disclosure

Yes Bank reports its bad loans (NPAs) classification varied with RBI’s to the tune of Rs4,176 crore at the end of March 2016


Yes Bank is the first to report this divergence after RBI increased disclosure norms for banks since it noted instances of divergences in banks’ asset classification. Photo: Abhijit Bhatlekar/ Mint
Yes Bank is the first to report this divergence after RBI increased disclosure norms for banks since it noted instances of divergences in banks’ asset classification. Photo: Abhijit Bhatlekar/ Mint

Mumbai: Yes Bank Ltd said on Friday that its non-performing asset (NPA) classification as of March 2016 varied from that of the Reserve Bank of India (RBI) to the tune of Rs4,176 crore.

Yes Bank had reported gross bad loans of Rs748.98 crore at the end of March 2016 compared with Rs4,925 crore assessed by the central bank.

Yes Bank shares lost 6.04% to close at Rs1,483.85 after the lender disclosed this information in its annual report for financial year 2017 released on Friday. The benchmark Sensex shed 0.21%.

A higher bad loan classification would have necessitated higher provisions. The bank’s actual provisions of Rs464.5 crore fell short of RBI’s calculation of Rs1,322. 5 crore.

Adjusted for provisions, Yes Bank’s net profit for fiscal year 2016 would have been Rs1,978.3 crore instead of Rs2,539.4 crore.

For financial year 2017, the bank reported net profit of Rs3,330.1 crore and gross bad loans of Rs2,018 crore. It said these numbers incorporate “the current impact of divergences observed recently by RBI”.

“With ongoing remedial actions undertaken by the Bank during FY 16-17, there have been several reductions/exits/improvement in account conduct”, and the impact of the divergence is Rs1,040 crore, said the annual report.

This includes Rs911 crore exposure to an account which the bank didn’t identify. It refers to Yes Bank’s exposure to Jaiprakash Associates Ltd’s cement assets which are being purchased by UltraTech Cement Ltd, three people aware of the matter told Mint when the bank declared its March quarter results on 19 April.

“The bank reiterates that there is no carry forward impact of the divergence observed by RBI in fiscal year 2017-18,” Yes Bank said in a separate notification issued to the stock exchanges.

Yes Bank is the first lender to report this divergence after RBI increased disclosure norms for banks as it noted instances of divergences in banks’ asset classification and the provisioning required as per its norms.

The regulator told banks to make a disclosure in the “notes to accounts” if the additional provisioning requirement assessed by RBI exceeded 15% of their net profit. Banks also had to make additional disclosures if the additional gross NPAs identified by RBI under its asset quality review were greater than 15% of the incremental gross NPAs.

“We expect investors to be closely tracking this data at all banks, and would also be concerned about potential divergence in F17 (fiscal 2017) results as well (will be disclosed a year later),” wrote Morgan Stanley analysts in a note to clients on Friday.

Some banks with sizeable bad loan problems saw their shares drop as investors became wary that these lenders, too, may make such disclosures. Axis Bank shares lost 2.8% and ICICI Bank Ltd shed 1.23% in comparison with the BSE Bankex’s 0.89% decline.

“It will be interesting to see divergence of other banks who have a high corporate (loan) book,” said Asutosh Mishra, a banking analyst at Reliance Securities.

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