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