What makes the PSBs go RED !!!

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Indian economy is the fastest growing economy in the world. However, the current growth is still short of the mark required by the nation to improve job creation and social stability.


As per RBI data of March 31, 2018, Non-Performing Assets (NPA) of the government banks amount to ₹6.41 lacs Cr, of which Corporate Industry NPA is around ₹4.7 lacs Cr (73%), Agriculture Sector NPA is ₹ 57,000 Cr (9%), Services Sector NPA is ₹ 85,000 Cr (13%) and Retail Sector NPA is around ₹24,000 Cr (4%). It is important to note here that the Corporate Industry Loans are sanctioned by government-appointed Board Level Executives to corporate bodies like Reliance, Adani Group, Bhushan Steel, Lanco Infra, Essar Steel, Amtek, Monnet Ispat, and to personalities like Nirav Modi, Vijay Mallya, etc.


As per Rating agency (ICRA), though provisions by public sector banks (PSBs) are expected to decline, these are expected to surpass the operating profits, resulting in continued losses for them, even as the profitability of the private banks improves in FY19.



Agricultural NPA is mostly due to Farm Loan Waiver policies by elected governments just before or after elections, and Services NPA is mostly like MUDRA loan, where the current central government bars Banks to take collaterals, and hence Banks cannot recover and the borrowers happily default.


Retail NPA that account for around 4% is the only NPA where a common branch level Banker makes a sanction in form of Housing, Car, Personal Loan et al. Hence, the one million banking employees find cheated today to be punished for the crime done by political decisions. 


10 loss-making companies have been observed in the S&P BSE 500 index; out of this list nine are PSBs. The only non-bank entity being debt-laden is Reliance Communications. The total losses of PSBs in the BSE 500 index in FY18 amounted to ₹79,745 crore.

While scam-hit PNB led with a record loss of ₹12,130 crore in FY18, others such as IDBI Bank (₹8,132 crore), IOB (₹6,299 crore), Bank of India (₹5,961 crore) and Oriental Bank (₹5,871 crore), were also deeply in the red. 

“With big losses being reported by PSU banks in FY18, most banks have reported a depletion in their capital level despite a large-scale capital infusion (₹88,140 crore); this will make it difficult for them to comply with the Basel III requirement and they will require more capital,” says Nitin Aggarwal, Vice-President (Research), Motilal Oswal Institutional Equites.

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