If you are employed with a private bank, this financial year may not bring you cheer as far as increments are concerned.
The reason? Blame it on rising NPAs or non-performing assets. Banks including the largest private sector lender ICICI Bank, have increased their provisioning due to mounting NPAs — loans that do not yield returns and are termed bad. These loans have risen in the past but without affecting increments.
But with the Reserve Bank of India (RBI) tightening provisioning norms, banks have allocated more funds to “clean up” such bad loans. “RBI guidelines on provisioning are eating into profits,” a senior executive at a large private sector bank told HT.
ICICI Bank registered a profit of just 4% in the October-December quarter of the current financial year on account of higher provisioning for NPAs, which have increased 190% year-on-year and 202% quarter-on-quarter.
Axis Bank registered over 15% increase in net profit. However, its NPA provisioning for the quarter rose by over 40% year-on-year.
Industry insiders say that the average increments may be as low as 4-6%. The average salary hike last year was between 9% and 15%. To deal with possible attrition that could be prompted by low increments, banks may offer employee stock ownership plans (ESOPs) and promotions, they added.
The annual appraisal process for most banks would begin soon.
Higher provisioning has hit public sector banks even harder. Delhi-based Punjab National Bank posted a net profit of just Rs 51.01 crore against Rs 774.56 crore in the corresponding quarter a year ago due to higher provisioning.
However, salaries of employees at public sector banks will not be affected as they were revised under wage revision that took place last year. Under the revision, employees of 43 public sector banks had received a 15% hike in salaries.
While NPAs put pressure on banks from one side, increased competition -- mainly from payments and small finance banks may squeeze their business from the other. RBI issued licenses for setting up 11 payments and 10 small finance banks last year.