For long term good, clean up of balance sheet hit banks: Rajan

From The Hindu Business Line

But RBI Governor Raghuram Rajan said that though the profitability of some banks may be impaired in the short run, the system, once cleaned, will be able to support economic growth in a sustainable and profitable way.

On Thursday, while India’s largest bank SBI reported a 62 per cent decline in profits in the third quarter ended December 31, 2015, Bank of India posted a net loss of ₹1,505.58 crore. Union Bank of India’s third quarter net profit for FY16 shrank year-on-year by over one-fourth at ₹78.54 crore.

Results declared by other state-owned banks showed a similar trend, including Punjab National Bank, Central Bank of India, Allahabad Bank, Dena Bank and Indian Overseas Bank.

A huge jump in slippages and consequent provisioning proved to be a drag on the profitability of SBI in the third quarter. Standalone net profit declined to ₹1,115 crore (₹2,910 crore). Fresh slippages in the reporting quarter jumped by ₹20,692 crore (₹7,043 crore). SBI Chairman Arundhati Bhattacharya told reporters, “There is, of course, a lot of worry because of the numbers, especially the NPA (non-performing asset) numbers. “In this connection I would like to tell you that even in the earlier quarters we had been saying that there are a few large accounts where workouts were happening and if they happened then things should be alright, if not probably we need to classify them (as bad loans).”

Bank of India has posted a net loss of ₹1,505.58 crore in the third quarter ended December 31, 2015 as against a net profit of ₹173.38 crore in the same quarter of the previous year.

Gross Non-Performing Assets of BoI increased from ₹29,894 crore in the September quarter to ₹36,519 crore in the December 2015 quarter. Union Bank of India’s gross NPAs increased to 7.05 per cent from 5.08 per cent.

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