State-run banks posted a combined loss of Rs 85,370 crore ($12.65 billion) 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 Rs 62,681 crore ($9.30 billion) - negating modest profits at Indian Bank and Vijaya Bank.
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.
Gross non-performing loans at the 21 banks rose about 15 per cent from three months earlier to Rs 8.96 lakh crore ($133 billion) at the end of March. Bad loans as a percentage of total loans also rose at most banks, with IDBI Bank clocking the highest bad-loan ratio of 27.95 per cent, followed by Indian Overseas Bank's 25.28 per cent.
The bad-loan surge and the record losses come at a time when Delhi has drawn up a Rs 2.11 lakh crore, 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.
© Thomson Reuters 2018
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