By Subrat Patnaik and Devidutta Tripathy
MUMBAI (Reuters) – India’s state-run banks posted a combined loss of 853.7 billion rupees (9.5 billion pounds) in the fiscal year ended this March, according to data compiled by Reuters, as their provisions for bad loans surged following stricter central bank rules.
All but two of the 21 banks in which India owns a majority plunged into losses in the March quarter after the Reserve Bank of India in February withdrew half a dozen loan restructuring schemes and put in place other curbs.
For the fourth quarter alone, total losses in the state-run banking sector were 626.81 billion rupees – negating modest profits at Indian Bank <INBK.NS> and Vijaya Bank <VJBK.NS>.
(Graphic: India’s State Banks Plunge Into Losses In 2017/18 – https://tmsnrt.rs/2KP0zbY)
To be sure, state banks as a whole posted losses in the prior two years too, hurt mostly by bad loans. But the 2017/18 loss is the highest ever in their history.
(Graphic: Indian State Banks’ loss/profit in the past five years – https://tmsnrt.rs/2JeK2Rn)
Gross non-performing loans at the 21 banks rose about 15 percent from three months earlier to 8.96 trillion rupees ($133 billion) at the end of March. Bad loans as a percentage of total loans also rose at most banks, with IDBI Bank <IDBI.NS> clocking the highest bad-loan ratio of 27.95 percent, followed by Indian Overseas Bank’s <IOBK.NS> 25.28 percent.
(Graphic: Gross Non-Performing Assets at India’s state banks – https://tmsnrt.rs/2L6C61P)
The bad-loan surge and the record losses come at a time when New Delhi has drawn up a 2.11 trillion-rupee, two-year, plan to recapitalise the state lenders which account for two-thirds of the country’s banking assets in its efforts to kick-start lending growth.
However, some fear that most of the banks will be left with no funds for growth after meeting provision requirements and higher capital ratios mandated by global Basel III banking rules to be fully effective by March 2019.
(Graphic: Indian State Banks’ Core Capital Ratio as of March 31, 2018 – https://tmsnrt.rs/2KKElYu)
(Reporting by Subrat Patnaik and Devidutta Tripathy; Editing by Euan Rocha and Adrian Croft)