Punjab National Bank reported the biggest-ever quarterly loss in Indian banking history, partly a fallout of the Rs 14,000-crore fraud involving jewellers Nirav Modi, Mehul Choksi and their firms. The Reserve Bank of India’s new stressed asset framework also added to the bank’s pain.
The bank reported a net loss of Rs 13,420 crore in the fourth quarter ended March compared to a profit of Rs 262 crore in the year-ago period, the state-run lender said in an exchange filing. The reported loss is much higher than the Rs 3,835 crore estimated by analysts tracked by Bloomberg.
What Contributed To The Loss
The net loss was a result of a surge in non performing assets and provisions.
- Gross NPAs rose to Rs 86,620 crore in Q4 compared with Rs 57,519 crore in Q3.
- Rs 7579 crore in gross NPA addition was due to the Nirav Modi fraud; Rs 10,237 crore was due to RBI’s new stressed asset circular.
- Gross NPA ratio rose to 18.38 percent compared with 12.11 percent in Q3.
- Net NPA ratio rose to 11.24 percent compared with 7.55 percent in Q3.
- The bank set aside Rs 20,353 crore as provisions compared to Rs 4,467 crore in Q3.
- Provisions for bad loans stood at Rs 16,203 crore compared to Rs 2,996 crore in Q3.
The bank said that provisions worth Rs 3,120 crore have been made against accounts where stressed asset schemes were under implementation. The RBI, in a February circular, had withdrawn existing stressed asset schemes and asked banks to re-classify these accounts as bad loans if the implementation of these schemes was not yet complete.
On account of volatility in bond prices, the bank made a provision of Rs 741 crore but it chose to defer provisions of Rs 1,088 crore to subsequent quarters. This has been permitted by the RBI.
Overall, the bank’s provision coverage ratio stands at 58.4 percent.
As a result of the high provisions, the bank saw its capital adequacy ratio dip below the minimum laid down by Basel-III norms. It fell to 9.2 percent compared to the regulatory requirement of 11.5 percent. The core equity tier-1 ratio of 5.96 percent is marginally above the regulatory minimum of 5.5 percent.