Public lender IDBI Bank’s gross non-performing assets (NPAs) at the end of March 2016 were lower than the Reserve Bank’s estimate, with a divergence of Rs 6,816.60 crore. According to the bank’s annual report for 2016-17, as of March 31, 2016, the bank had reported gross NPAs or bad loans to the tune of Rs 24,875.07 crore whereas the apex bank had put gross bad loans on the bank’s balance-sheet at Rs 31,691.67 crore.
In case of net NPAs by this period, the divergence is of Rs 4,755.60 crore. The lender had reported net NPAs worth Rs 14,643.39 crore as against RBI’s estimate of Rs 19,398.99 crore.
During 2015-16, the bank had reported a net loss of Rs 3,664.80 crore because of a surge in bad loans on its books. This led to an overall divergence in the bank’s provisioning at Rs 2,061 crore.
The annual report data further showed that the bank’s total exposure of 20 largest borrowers and customers by the end of March 2016 stood at Rs 62,329.21 crore (14.55 per cent of total advances), which further increased to Rs 63,967.81 crore (15.53 per cent) as of March 31, 2017. The total exposure to the top four NPA accounts was Rs 11,576.97 crore at the end of the fiscal ended March 2016 and Rs 13,172.74 crore by March 31, 2017.
In his message to shareholders, MD and CEO Mahesh Kumar Jain said that the good performance during 2016-17 was overshadowed because of a deterioration in asset quality. As a consequence of higher NPAs and stressed assets, provisioning rose, which in turn negatively impacted the bottom line of the bank and raised concerns on the capital adequacy front, he said.
“These developments have led to implementation of a prompt corrective action (PCA) framework on your bank by RBI. We are ensuring the RBI guidelines relating to distribution of dividend, branch expansion, capital expenditure, investment in subsidiaries are followed,” he said.
Jain said that the bank has devised a comprehensive turnaround strategy that seeks to leverage its strengths and entail identification of areas for containing cost and revenue maximisation that would ensure sustainable growth and profitability.
Earlier in May, IDBI Bank came under RBI’s PCA watch because of the high level of bad loans on its balance-sheet. In April this year, RBI had issued a set of enabling provisions under the revised PCA framework with a clause that if the bank does not improve, it could either be merged or taken over by another bank.
Under PCA, the RBI has powers to curb a bank’s capacity for giving fresh loans, besides putting restrictions on dividend distribution, among others. Banks are now required to state their bad loan divergence in their financial statements if it exceeds 15 per cent.