BoB posts highest-ever Rs 3,342 cr loss in industry; Govt to reduce stake in PSU banks to 51%

THE state-owned banks are facing tough time. Bank of Baroda (BoB) posted highest-ever quarterly loss by an Indian bank of Rs 3, 342 crore in the quarter ended December 2015. This was due to an almost five times increase in provisions for bad loans. It had posted net profit of Rs 333 crore in the same period last year.
In the quarter to December 2015 alone, nine state-owned banks...
have reported a combined loss of Rs 11,251 crore.
Meanwhile, the government will soon announce a series of major banking reforms, including lowering its stake in state-owned banks to 51 per cent, Union Finance Minister Arun Jaitley said on Sunday. “Public sector banks have played an important role in financial inclusion but at the same time, political government needs to maintain arm’s-length distance from these banks and allow them to have more professionalised bank boards. The banks will have to work on banking considerations,” said Jaitley at the CNN Asia Business Forum in Mumbai.
The PSU banks had written off Rs 1.14 lakh crore over the last three years, and how a spike in loan write-offs and bad loans over the last two quarters prompted corrective action from the government and RBI.
 “A lot has happened in the past that has given us a bad reputation. Unreasonable tax demands can never bring you revenue. We are, one by one, getting rid of all legacy issues. And I am glad to say that from retrospective taxation fears to some exaggerated demands, most of those fears have been addressed. Two problems still remain. We are trying to solve them,” said Jaitley.
BOB’s net interest income for the quarter declined to Rs 2,795 crore from Rs 3,286 crore a year ago. Other income, comprising items like fees and treasury, was flat at Rs 1, 112 crore in Q3 FY16, compared with Rs 1, 090 crore in Q3 FY15.
The country’s second largest bank by assets said its provisions for bad loans grew to Rs 6,474 crore, nearly five times more than Rs 1,149 crore in Q3 last year.
Bank of Baroda posts highest-ever loss in industry BoB’s earnings came a day after State Bank of India, India’s top lender by assets, reported its biggest fall in quarterly profit in nearly five years because of a jump in bad loan provisions. Public sector lenders account for about 85 per cent of banking sector’s troubled assets.
Reserve Bank of India (RBI) has asked all lenders to treat troubled accounts as non-performing even if an actual default is yet to happen and make adequate provisions.
On February 13, BoB said it has made provisions for all weak assets identified under RBI’s Asset Quality Review.
PS Jayakumar, BoB’s managing director and chief executive officer said, “We wanted to put uncertainty behind us. Going forward, we expect fair degree of stability”. Having made provisions in one go, BoB expects profit in fourth quarter ending March 2016, he said.
BoB’s gross NPAs stood at 9.68 per cent in December 2015, up from 3.85 per cent last year. Fresh slippages during Q3 were Rs 15,603 crore. The provision coverage ratio (PCR) stood at 52.70 per cent.
BoB’s capital adequacy ratio was 12.18 per cent with Tier-I of 9.57 at the end of December 2015.
Based on existing position of capital including common equity Tier-I (9.04 per cent), the management has advised the government that the bank does not currently require additional support by way of subscription to equity. The government of India holds 59.24 per cent stake in the bank.
The bank’s first priority is efficient use of resources to conserve and generate capital before seeking extra equity infusion. This could be done by rationally unutilised credit lines, helping in efficient allocation of capital, Jayakumar said.