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