The cumulative loss of public sector banks crossed a whopping ₹87,357 crore in the 2017-18 fiscal, with scam-tainted Punjab National Bank topping the chart with a hit of around ₹12,283 crore, followed by IDBI Bank.
Out of 21 State-owned banks, only two — Indian Bank and Vijaya Bank — posted profits during 2017-18. Indian Bank posted the highest profit of ₹1,258.99 crore; Vijaya Bank’s profit worked out to ₹727.02 crore.
The remaining 19 government-run banks collectively posted a net loss of ₹87,357 crore during the fiscal, as per the latest quarterly numbers posted by these lenders. All 21 banks had together posted a net profit of ₹473.72 crore in the 2016-17 fiscal.
Scam and losses
Punjab National Bank, which is reeling under over ₹14,000-crore scam, allegedly perpetrated by Nirav Modi and associates, posted a net loss of ₹12,282.82 crore last fiscal. In 2016-17, the Delhi-headquartered bank had posted a profit of ₹1,324.8 crore. PNB was followed by IDBI Bank, whose net loss widened to ₹8,237.93 crore in the fiscal ended March 2018 from ₹5,158.14 crore in the previous year.
India’s largest bank, State Bank of India, also added hugely to the combined losses of PSBs. Its net loss in 2017-18 stood at ₹6,547.45 crore, as against a net profit of ₹10,484.1 crore in 2016-17.
Indian banking sector is grappling with mounting non-performing assets (NPAs) and a host of scams and frauds. NPAs in the banking sector stood at ₹8.31 lakh crore as of December 2017. Weak financials due to mounting bad loans have already pushed 11 banks, out of the 21 state-owned banks, under the Prompt Corrective Action (PCA) framework of the Reserve Bank.
The recent tight prudential norms released by the RBI on February 12 have added to the NPA woes.
Asset Reconstruction Company
Interim Finance Minister Piyush Goyal has announced setting up of a committee to give recommendations in two weeks on formation of an Asset Reconstruction Company for faster resolution of stressed accounts. The committee under Sunil Mehta, non-executive chairman of PNB, will make recommendations in two weeks on setting up of an Asset Reconstruction Company or Asset Management Company for faster resolution of stressed accounts.
The finance minister said the committee will consider whether such an arrangement will be good for the banking system and, if any such suggestion is advisable, it will also consider the modalities by which such an ARC and/or and AMC should be set up.