PNB posts biggest loss in India's banking history
What's the story
Public sector lender Punjab National Bank on Wednesday reported a net loss of Rs.5,367.14 crore for the fourth quarter ending March 31st, on account of higher provisioning for bad loans. This is the biggest quarterly loss in Indian bank history. PNB had posted a net profit of Rs.306.56 crore in the corresponding period of the previous fiscal.
Definition
About Punjab National Bank
Punjab National Bank is an Indian multinational banking and financial services company. It is a state-owned corporation based in New Delhi, India. Founded in 1894, the bank has over 6,300 branches and over 7,900 ATMs across 764 cities.
17 Feb 2016
RBI's clean-up policy
The recent spurt in the number of bad loans being reported is a result of an asset quality review undertaken by the Reserve Bank of India (RBI). This threw up several weak accounts, mostly with exposure to the infrastructure sector, the RBI Governor said at a conference. After the infrastructure sector, a majority of bad loans have exposure to the steel and power sectors.
Reasons
RBI chief blames 'overall economic downturn' for mounting NPAs
Asked to explain the "real causes" of ballooning bad loans in PSBs, RBI Governor Raghuram Rajan put the blame on "overall economic downturn" before the Parliamentary Panel (PAC) examining the NPAs. Others were delays in statutory approvals and aggressive lending practices during upturn. Some other reasons were lax credit risk appraisals, loan monitoring, lack of appraising skills for projects, wilful defaults and frauds.
Definition
What is NPA?
A non-performing asset (NPA) is a classification used by financial institutions that refer to loans that are in jeopardy of default. Once the borrower has failed to make interest or principal payments for 90 days, the loan is considered to be a non-performing asset.
Why?
Loss due to higher provisioning for bad loans (NPAs)
The higher losses are on account of the Banks's provisioning for NPAs, which grew almost threefold to Rs.10,485.23 crore in the fourth quarter compared with Rs.3,834.19 crore in the previous fiscal. Gross Non-Performing Assets (NPAs) rose to 12.90 per at the end of March, from 6.55 percent a year ago. Net NPAs too jumped to 8.61 per cent as against 4.06 per cent.
Past
PNB's last year's fiscal performance
PNB had posted a net profit of Rs.306.56 crore in the corresponding period last year. For the full fiscal, the lender reported a net loss of Rs.3,974.39 crore compared with a net profit of Rs.3,061.58 crore in corresponding last fiscal. Total income during the year rose to Rs.54,301.37 crore as against Rs.52,206.09 crore in the previous fiscal.
Personal
PNB shares rise despite heavy Q4 losses
PNB shares were trading at Rs.74.25 on the BSE, up 0.61%, while the benchmark Sensex index was down 0.54% and Bankex was down 0.32%.
Others
PNB mirrors the trend of other PSBs
PNB is among other public sector banks (PSBs) to have reported huge losses. Syndicate Bank reported a net loss of Rs.2,158.17 crore for the quarter ending March 2016 due to more than three-fold rise in provisions for bad loans and contingencies. Bank of Baroda, UCO Bank, Central Bank of India, Allahabad Bank and Dena Bank had earlier reported losses due to bad loans.