Surging non-performing assets (NPAs), or bad loans, weighed on the country’s largest bank, State Bank of India, leading to a 66% fall in net profit in the January-March quarter to Rs 1,264 crore on higher provisioning towards bad loans. It had reported a net profit of Rs 3,742 crore during the fourth quarter last year.
The Reserve Bank of India (RBI) has asked the state-owned banks to clean up their balance sheets that led to the surge in bad loans in the past two quarters, forcing them to set aside more funds and leading to losses at more than a dozen state-run lenders.
SBI chairman Arundhati Bhattacharya while addressing reporters said the decline was due to the impact of the RBI’s asset quality review (AQR) to the extent of Rs 9,000 crore during the period. The levels of stressed assets and NPAs had come down due to AQR impact as well, she added.
“Most of the stress on the books has been recognised. Another Rs 31,000 crore are under special watch list. We have provisions of Rs 3,300 crore and could be used if the accounts in the special watch slip (into NPAs)… We have really gone through account by account to try and determine the weaknesses and recognised as much as possible…Our recovery efforts have helped us in the second-half and as the economy has still not seen much pick up, the stress has gone out of the system,” she said.
The AQR process was carried out by the RBI across banks over the third and fourth quarter in a bid to clean up the bad loans from the banking system by March 2017.
SBI has recognised the provisioning impact in line with AQR as well as in respect of other weak accounts to proactively address possible future requirements.
Gross NPA increased by 225 basis points at 6.50% as on March end 2016. Net NPAs went up by 169 basis points at 3.81%. Slippages into bad loans rose to `30,313 crore during March end against Rs 20,692 crore in December-end 2015.
For the full year, SBI’s net profit declined by 24% Rs 9,951 crore from Rs 13,102 crore in 2014-15.
However, its net interest income during the quarter under review grew by 4% to Rs 15,291 crore against the year-ago period. Non-interest income rose by 26% to Rs 10,696 crore driven by fee income and recovery in written off accounts.
Total gross advances increased 13% to Rs 15.10 lakh crore as on March end 2016 on the back of growth in corporate loans (17%) and retail loans(20%). Total deposits grew 10% to Rs 15.77 lakh crore.
On the SBI’s merger with the associate banks, Bhattacharya said,the permission from the government on the merger will be forthcoming, and “I assure the merger will not have any impact on capital and profitability”.