Ad Here  
WTO Meet: resolved to meet again The Jan Dhan bonanza Adapt Vajpayee dinner diplomacy Mu Sigma – is no more SoA @ 80 Tribute – UCAL Selvan… Strengthen the base... Remembering Indira Sivasailam... No engine for this car Marketing expert Balagopal is no more Fall in crude prices help in oil sector reform The rise and rise of KCP Pharma – overdose of copying Bihar – Nitish Kumar adopts the Lalu model Auto components surge… TIAM turns a full cycle R Sridhar steps down as CEO of Shriram Capital A Grand Finale for SN’s MS centenary at the US… Parliament in paralysis... Eternal support for capitalisation of PS banks Tatas moving out of urea production... Should we change the official year? Diamond jubilee of Egmore Samskrt School The balancing act Chennai and Kolkata miss opportunity to grow as Delhi and Mumbai West Bengal: mindless malignancy The brown list of Venkitaramanan Waning interest in public discussions… A professional at the helm of IRDA... Cement prices continue to rise… Modi and the lady Rahman at CIC to the lack of interest on the part of these to focus on original research. This despite the much lower costs of such research in India. The industry which thrived on the protection of a closed economy and the advantage of a vast domestic market, has failed to organise its evolution on healthy lines China invests in India Noble nonagenarians... Making ‘my Amaravati’... Godspeed, Chief Minister JJ EEC at the National Media Centre Roaring Ro-Ro facility Gas is the way forward S V Raju – a ‘good’ true liberal Come elections, come advertisements... Revving up the manufacturing sector The star of Spencers is no more More heat than light Align crops to agro climate endowments… IPL type auction for VCs? A more liberated TN… Nuclear power at the nucleus Quality education through the PPP mode Why land prices zoom in TN? Towards speedy justice Moily’s bold thrust Return to king coal for urea... Road development slows down Tihar, Puzhal not different from Parappana Agrahara Quality silica from Neyveli No Maha Koottani in TN... Dr C Rangarajan returns to Chennai CIPET hqrs to stay at Guindy – for the present? Measuring roof tops in terms of KW/MW The ‘Ayyo-yes’ is no more Air Asia India will set new benchmarks for budget travel When the President was rendered homeless… Valli, they are more marginalised Lesson from Chandrababu Naidu When Ratan Tata visited SRM For whom the MIDS bell tolls? A Grand Finale for SN’s MS centenary at the US… Small units prefers to remain small... A think tank for Chennai IPL - no surprise this scam The few handicaps... Vibrant Gujarat Kulandai was a giant Like Hinduism: many paths to reach God... Limit foreign borrowings to hi-tech, export potential projects... Solar thermal shines… Infrastructure funding – lessons learnt Scientists urged to take up farmer-oriented research Readers' Mail B H Kothari - a tribute Wise Presidents Increasing non co-operation of state leaders Fortune 500 review ONGC at KG Basin Shale gas and its shallow future There was flood of milk. Reason: no milk commissioner! TN accounts for the largest recruits by the IT sector How Air-India loses customs... Things happen by accident and not by design... Lalu’s envy, India’s pride Not just in-laws (and outlaws); they’ve renowned academics at the helm! The Swadeshi Trump Where a state respects its litterateurs… S Ramanathan – a versatile musician, musicologist More Shakthi to Das’ elbow Protest masters... Tribute – Manikam Ramaswami Don’t seem to feel the pulse… Tough task taking states together IAS invades NDDB... Rs.1600 crore paper board plant of TNPL Streamlining mandatory third party cover The Ports’ Pasha expands into Tamil Nadu MHC should not return to its old indisciplined ways F C Kohli - his concerns all embracing Delhi is distant Liberal imports idling indigenous capacities Varuna (rain) in 2015; Vaayu (air) in 2016. Chennai devastated A friendly business group Robber barons everywhere Five star activism stalls development activity TN – agglomerate land holdings without alienating ownership Land reclamation from sea appears cheaper! Silver Years of Madras Musings PPP mode for upgrading Corporation Hospitals Build close rapport with business leaders Colour-Chem’s colourful KRVS Building loyalty through the stomach Maximising the micro pricing … Naidu will soon build a new Hyderabad Haul over the coal Preserving for the future The Gulf aviation boom Kudos to NDTV... Plummeting profits of PSBs Wanted: a second airport for Chennai Bihar elections - the Rajaji formula worked Modi storms Silicon Valley London, London Narayan GNS - 100: our first subscriber The rise and fall of Annamalai University Delhi returns to BJP He continues the focus on social amelioration PC’s preference for professionals Revive development banks... Alexa – Talking Wikipedia Shanti and Sadhana through Music The nuclear option All eyes on Sankara Nethralaya Reliance’s TV – 18 ready to launch Tamil News Channel Whistle-Stop Tour of Raghuram Rajan The sea- saw battle continues... Editor's Notes When TN politicians can emulate Kerala's A rich pool of talent not utilised…. Muffled voices for merit… Airlines in India: cost and space Editor's Says Russi Mody – a tribute The why of tax incentives Cleaning Ganga – relocate tanneries and install electric crematoria No mega rail project for Tamil Nadu The ‘Jayanthi Tax.’ Padma Bhushan for A Ramakrishna Inflation: are we emulating Argentina and Brazil? L&T: focus on infrastructure and more infrastructure… Tax agriculture Contrarian cousins Focus on quality of power - its only around 170-180V Sweet news for TN sugar mills When small is no larger beautiful.. TELANGANA at last…BUT Telangana in top gear… An informal presentation - analytical, forward locking... EVM is tamper-proof Computation of GDP – conundrums continue Tribute – M V Murugappan CSR and CMI: promise of another Srinivasan Ramanujan... When online building permits work…. Mersal magnified New IT products of Ramco in the pipeline… More Shakti to resource mobilisation... An enemy’s enemy is a friend TN-leverage strength of BHEL, NLC... Welcome focus on core competence Convulsions in The Hindu A yen for wastage… Cutting the nose to spite the face Welcome thrust on trade in Modi’s foreign visits... Funding the un-funded A welcome initiative by the judiciary Demise of a media baron... Online not in line with brick and mortar businesses... He saved millions from starvation... Medical costs hit the roof... Recognition to role of NBFCs.... Delhi Chalo... Of course, Gujarat is vibrant Permanent secretariat for TN GIM Multi-faceted Venkat Fuel for thought Poor representation for Kerala and TN in Cabinet Polls and promises Odisha: spectacular win by Naveen Patnaik Make standards certification mandatory... GM Technology at last! CRS, a jewel among managers, is no more. Welcome changes that testify to Jayalalithaa’s return to health Secularism and anti-Hinduism A proud Madrasi An inexplicable neglect This scant respect for Law Shaming of Tamils by Tamil farmers at Delhi Paytm karo... Gay abandon in pricing Sweeter prospects for sugar Sri Lanka votes for change Another Indian music maestro at the UN Breaththrough in malaria control Banning booze... Solar, solar everywhere … Discoms deserve better… The power-full Hindujas Music happens CII projects higher growth… Boy, can you beat these? A C Muthiah – his munificent bequeaths to science Fortune for Indian Airlines When nations steal growth from one another… Intellectual of rare qualities …and of a popular trade leader For whom the bell tolls? Tatas moving out of urea production... Poor quality of university VCs Where is Rajaji? Delhi is distant… Insurance companies bleeding, yet no decision on increasing FDI limit! Welcome GST More tributes to GR Which side are you, Montek? A glass full of corruption Why this malaise in medical education? Excel Generators provide the vital back-up Naidu’s return augurs well for Seemandhra Adharma of opposition politics Kinetic Karnataka Engineering seats go abegging Tribute L&T- the specialty of special purpose vehicles Shipping woes of Chennai companies Put expensive assets created to use... TGS- The king storyteller
Plummeting profits of PSBs

The results of the third quarter performance of public sector banks are a great shock to the investors.    

First, we had the results of three public sector banks – Central Bank of India, Allahabad Bank and Dena Bank - that reported losses of Rs 836.62 crore, Rs 486.14 crore and Rs 662.85 crore respectively. Then came the bombshell from State Bank of India, the country’s largest lender, reporting a 61.7 per cent drop in net profit to Rs 1115 crore from Rs 2910 crore in the previous year’s corresponding figures. This reduction resulted in the Sensex plunging by a 21-month record figure of 807.07 points. Later we had the healthy PSB, Bank of Baroda, reporting a loss of Rs 3342 crore, the highest ever quarterly loss posted by any public sector bank in the industry, thanks to a provisioning of a whopping Rs 6474 crore compared to the Rs 1149 crore it provisioned in the previous quarter. The gross NPA was shown as Rs 38,934 crore (9.68 per cent) and net NPA Rs 21,806 crore ie. 70 per cent rise.

Breaking the convention, the NDA-II government drafted bank managers from the private sector to head public sector banks.  Ravi Venkatesan, the new Chairman (drafted from Microsoft India) and P S Jayakumar, the new MD & CEO (drafted from Citibank) of Bank of Baroda, were not weighed down by the baggage and came out boldly with such hefty provisioning.  

IE has been pointing to the gay abandon with which bank chairmen of several public sector banks were lending. We had pointed to Indian Overseas Bank as an instance of such profligacy. Then CMD, M Narendra was enjoying a field day getting kudos for such largesse from industry associations. He was cleverly hedging his bets by having gala functions year after year presenting high ups at the policy level from Finance Minister P Chidambaram to Minister of State for Finance, Namo Narain Meena to Reserve Bank of India Governor, Deputy Governor, et al in lavish functions.

PSBs have seen a surge in their bad loans following directions from the RBI to classify some large corporate accounts as bad debts. Banks have been avoiding to classify these as NPAs, as it would hurt their bottom line. But thanks to RBI Governor Raghuram Rajan voicing seriousconcern, public sector banks started provisioning more. SBI’s provisions for bad loans soared 59 per cent to Rs 7645 crore.

A staggering Rs 52,542 crore of bad loans have been waived off by PSBs, a 52.6 per cent increase over the previous fiscal. Public sector banks indulged in massive settlements in which unrecoverable loans were settled at huge discounts. These are attributed to pressures from politically powerful personalities, eg. a Rs 10 crore outstanding loan settled for around Rs 3 crore with suggestions of liberal kickbacks from political intermediaries.

Such bad management resulted in an inevitable low valuation of the banks’ stocks. This is in contrast to private banks including the large HDFC, ICICI and Axis Bank and smaller ones like City Union Bank, Karur Vysya Bank and Lakshmi Vilas Bank showing healthy balance sheets.

The urgent need is for bold reform of the banking sector. Union Finance Minister Arun Jaitley announced at the CNN Asia Business Forum 2016, his plans to go for a series of banking reforms. There is the hint of the government reducing its holdings in PSBs to 51 per cent.

Such a step would bring in twin advantages: it will make the banks more accountable to the shareholder and secondly force these to earn higher profits and relieve the government of the burden to capitalise these frequently.  Such a step will also pave the way for more mergers and acquisitions. Of course, the task is not easy. Bank employees’ unions are strong and have resisted successfully such significant reforms.


Author :
Reported On :
Sector :
Shoulder :
IE, the business magazine from south was launched in 1968 and pioneered business journalism in south. Through the 45 years IE has been focusing on well-presented and well-researched articles. When giants in the industry stumbled to keep pace with the digital revolution, IE stayed affixed embracing technology.
Read more
Economist Communications Ltd is committed to ensuring that your privacy is protected.
Read more
You agree that your use of this Website and the purchase of the magazine will be governed by these terms and conditions.
Read more
S-15, Industrial Estate,
Chennai - 600 032.
PHONE: +91 44 22501236