Punjab National Bank (PNB) reported a loss of Rs5,367 crore, the largest-ever loss reported by an Indian lender based on available data
Skeletons continue to tumble out of the cupboards at state-owned banks, after an asset quality review conducted by the Reserve Bank of India (RBI) late last year. The review brought to light a mountain of stressed assets, which these lenders had not classified appropriately as non-performing loans.
By keeping such loans out of the non-performing category, banks had kept their provisions low and, hence, their profits intact. That is no longer the case. As banks are forced to reclassify these loans and make provisions against them, profits have been wiped out at a number of large and mid-sized public sector banks. On Wednesday, Punjab National Bank (PNB) reported a loss of Rs5,367 crore, the largest-ever loss reported by an Indian lender based on data since 1990 available with corporate database provider Capitaline.
Mint looks at the largest losses reported by Indian banks and the reasons behind these losses.
Punjab National Bank: PNB’s staggering Rs5,367 crore loss comes against the backdrop of a surge in bad loans. The lender has reported gross bad loans of Rs55,818 crore compared to Rs34,338 crore in the previous quarter. As a percentage of its loan book, PNB’s bad loans are now at 12.9%. To cover for these bad loans, provisions have been increased, which has led to the bank reporting the worst loss in the history of the Indian banking sector.
Bank of Baroda (BoB): The second and third largest losses have been reported by Bank of Baroda in the December 2015 and March 2016 quarters. As the new management of the bank, led by chief executive officer P.S. Jaykumar, has moved to clean the bank’s balancesheet. BoB has reported two consecutive quarters of losses. In the December 2015 quarter, the bank reported a loss of Rs3,342 crore which was followed by a loss of Rs3,230 crore in the March quarter. The March quarter losses were on account of the bank’s decision to increase its provision coverage ratio to safer levels of 60%. The bank’s gross non-performing assets (NPAs) have surged to 9.9% as of the end of March.
IDBI Bank: In the December 2015 quarter, IDBI Bank reported a loss of Rs2,183 crore. This is the fourth highest loss reported by any bank. The bank is currently in the midst of trying to draw in external investors as part of the government’s plan to restructure the bank. The bank is still to report its March quarter earnings. In the December quarter, IDBI Bank had gross NPAs of 8.94% of its total loan book.
Syndicate Bank: On Tuesday, the lender reported a Rs2,158 crore loss. This is the fifth highest loss reported by any bank. In the case of Syndicate Bank, the loss was on account of an exceptional charge taken due to a fraud detected by the bank. The lender wrote off Rs.882.64 crore in the fourth quarter (the three months ended 31 March) because of fraud at its branches in Jaipur over the last four years.
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