Public sector banks to report Rs 50,000 crore loss

Public sector banks to report Rs 50,000 crore loss

Courtesy : Agencies05/10/2018 20:11

MUMBAI: Public sector banks will report losses on high bad loan provisioning requirements for third consecutive year with an estimated shortfall of Rs 50,000 crore, though less than last fiscal’s Rs 85,000 crore, CRISIL Ratings said.

“Provisioning cover for non-performing assets (NPAs) in the banking system is expected to touch 60% (net of technical write-offs) by the end of fiscal 2019, compared with 50% last fiscal,” it said.

While overall profitability will remain subdued, private banks will pull the sector into positive territory, CRISIL said.

“Provisioning costs will remain elevated at over Rs 2.8 lakh crore this fiscal despite our expectation that fresh slippages to NPAs will reduce progressively. The high provisioning will be due to ageing of NPAs and high-level of haircuts on many  NPAs referred to National Company Law Tribunal for resolution, specifically for NCLT 21 and subsequently referred accounts,” Krishnan Sitaraman, Senior Director, CRISIL Ratings said,

Though most banks have already made provisions for cases before NCLT, some stressed assets like those in power sector may need higher provisioning as banks take a bigger haircut. Power sector loans account for around 25 per cent of the 100 largest NPAs.

The silver lining is expected profitability improvement in the banking system from the second half of this fiscal.

“Increase in credit growth, mainly in the better-yielding retail loans segment, and lower interest reversal on NPAs due to reduced slippages will mean improvement in net interest margins and will support pre-provision profits for the banking system,” said Rama Patel, Director, CRISIL Ratings.

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