Banks expect tougher Q4 as Reserve Bank tightens norms
New Delhi, March 28: Profitability of banks will be hit in the current quarter as bad loans surge following changes by RBI in loan restructuring guidelines to align them with the Insolvency and Bankruptcy Code, bankers said.
Withdrawal of all debt restructuring tools by the RBI will lead to more assets being classified as non- performing or bad loans, for which provisions will have to be made in the current quarter ending March 31, a top banker said.
So, bottomlines of all banks, including those in the private sector, will be subdued in the last quarter of the current fiscal, the banker added.
RBI last month scrapped numerous loan restructuring programmes including Corporate Debt Restructuring, Sustainable Structuring of Stressed Assets or S4A, Strategic Debt Restructuring, and Flexible Structuring of Existing Long Term Project Loans.
It even disbanded the Joint Lenders Forum designed to resolve potential bad debts.
Besides these changes, there would be fresh slippages adding to the woes, said another top official at a public sector bank. Hit hard by Nirav Modi scam, PNB alone would have to make provision for fraud losses to the tune of ` 14,500 crore.
“PNB has apprised that the total loss reported by it due to frauds was ` 341.03 crore in the financial year ( FY) 2015- 16, ` 2,633.82 crore in FY 201617, and ` 14,506.39 crore ( including contingent liability) in FY2017- 18 ( till date),” MoS ( finance) Shiv Pratap Shukla said in a written reply to the Rajya Sabha on March 20.
“The total amount involved is reported as ` 13,923.14 crore, which includes a report dated February 22, 2018 on additional amount involved of ` 1,251.96 crore,” he had said.
If advance tax numbers for the fourth quarter are anything to go by, it gives a clear indication of the muted growth for the quarter. Both SBI and PNB has deposited significantly lower advance tax during the quarter. Even the private sector peers Axis Bank and ICICI Bank have reported lower advance tax payout.