Eight banks posts highest ever annual losses of Rs 53,000 crore

Private and public sector banks amplified their losses during the last financial year (FY18) with the economic growth unable to repair the stressed balance sheets of Indian companies. Bankers say the corporate loans led by the infrastructure sector were hit the hardest forcing several lenders to shrink their loans to companies while they clean their books.

Eight big banks reported losses of Rs 53,000 crore in FY18, as they set aside money to cushion themselves from rising loan defaults. The gross NPAs at the end of March 2018 were close to Rs 9 lakh crore. For a long time, the Reserve Bank of India (RBI) had allowed banks to restructure their loans, which could then be held as standard loans and escape the NPA tag.

However, RBI lifted this leeway on February 12 when it insisted that all restructured loans should be classified as NPA. So, banks were forced to push all the loans in various restructuring schemes into its gross NPAs.

The February 12 circular from RBI was a red letter day for all banks that put an end to the window dressing banks undertook to show lower defaults. This meant that banks could continue to restructure loans but would have to classify it as NPA. The spike in bad loans for all banks during the quarter was due to this regulatory dispensation being lifted.

However, State Bank of India (SBI), which is sitting on a huge NPA base of over Rs 2.23 lakh crore, was unnerved saying that most of the distress of defaults are recognised. This forced the bank to set aside Rs 66,058 crore of capital as a cushion against bad loans.

Rajnish Kumar, chairman, SBI, after the bank's result, said in a media interaction that,"This year is one of hope and next year will be one of happiness as the bank reverses its losses and reports lower NPAs."

Punjab National Bank (PNB), the second largest public sector bank, reported the highest quarterly loss of Rs 13,417 crore. Caught in a letter of undertaking scam of over Rs 13,000 crore, the bank added Rs 40,672 crore of fresh NPAs to its books during the year. Loans to power, iron and steel companies continued to lap up the bank's earnings and the frauds hit the bank hard during the quarter taking its gross NPAs to 86620 crore.

Private sector banks like Axis Bank and ICICI Bank also had considerable NPAs slipping from their corporate book.

ICICI Bank had a gross loan outstanding of Rs 54,063 crore, of this Rs 28,720 crore was added during the year under review. However, the bank has indicated that its bad loan accretion will come down in the current financial year.

Chanda Kochhar, CEO and managing director, ICICI Bank, said in a media concall, "We believe that since a lot of the stress is already recognized, going forward our focus will be on recovery and resolution. And while there would be some additions to NPAs with the focus on recovery, we will work to bring down the net NPA ratio to 1.5% in two years' time," she added.

Axis Bank has gross bad loans of Rs 34,249 crore of which the additions during the year was Rs 16,536 crore, another fallout of RBI lifting the regulatory cushion available for restructured loans. The bank also reported its first quarterly loss of Rs 2189 crore during the quarter.

Like other lenders, Axis Bank also sounded optimistic with Jairam Sridharan, CFO of Axis Bank, saying in a media concall, "We believe the new NPA formation in this financial year will be significantly lower. Our watchlist of stressed loans is closed with the end of this quarter and will no longer exist,"he said.