New Delhi: State-run lender IDBI Bank Ltd’s fiscal first-quarter profit fell 28% because of higher provisioning for bad debts.

Net profit fell to 306.95 crore in the three months ended 30 June from 427.34 crore in the year ago, the lender said on Thursday.

The stress on asset quality will abate in the coming quarters and the provisioning requirement will drop, said M.S. Raghavan, chairman and managing director of IDBI Bank.

Provisions (other than tax) rose 63% to 829.67 crore from a year earlier. Provisioning for non-performing assets (NPAs) rose to 739 crore in the June quarter from 377 crore in the year earlier. Net NPAs rose to 2.16% from 2.07%.

Net interest income rose 16% to 1,475 crore. Net interest margin, a measure of profitability, widened to 2.12% from 2.09%.

IDBI Bank witnessed sequential asset quality deterioration as “absolute gross NPA levels increased by 45% sequentially, on an already large base", Vaibhav Agrawal, an analyst at Angel Broking Pvt. Ltd, said in a note.

The bank will adopt a wait-and-watch approach before taking a call on reducing the lending rates. Some public sector banks cut their base rates after finance minister P. Chidambaram asked banks to review them.

The bank will require a capital infusion of around 3,000 crore from the government to maintain its tier I capital above 8%. “The bank will look at all sources of fund raising," said B.K. Batra, deputy managing director.

While the bank’s deposit growth contracted 4% to 1.83 trillion, advances were up 7% to 1.78 trillion.

“We shed bulk deposits in the quarter that led to a fall in deposits. But for the full year, deposit and credit growth should be at 12%," Raghavan said.

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