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