Additional provisioning by Public Sector Banks resulting into Losses

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Most of the PSBs have registered either slippage in profits or losses for the quarter ended 31st December 2015. While SBI, PNB and Canara Bank have managed to declare profits, although greatly reduced as compared to December 2014 quarter, 11 PSBs have declared losses. BOB with a loss of Rs 3,342 crores tops the list, which incidentally also marks the biggest ever quarterly loss declared by any Bank in Indian History. BOB is followed by IDBI Bank (Rs 2,184 cr), BOI ( Rs 1,505 cr),UCO Bank (Rs 1,497 cr), IOB (Rs 1,425 cr), Central bank (Rs 837 cr), Dena Bnak (Rs 663 cr) , Allahabad Bank (Rs 486 cr), OBC (Rs 425 cr), Corporation Bank (Rs 383 cr) and Syndicate Bank (Rs 120 cr). Only two Banks namely Bank of Maharshtra and Vijaya Bank have regstered a rise in profits vis-a-vis comparable quarter. The main issue to understand here, is that these losses are not due to write offs of bad or unrecoverable loans, but due to additional provision for sticky loans. As RBI Governor Raghuram Rajan has stated, these sticky loans do not necessarily imply malfeasance on the part of either the promoter or Banker, but the loans are required to be classified as a Non Performing Asset as the project may have sufferred due to erroneous evaluation or implementation bottlenecks or similar issues. Once the balance sheets of Banks get cleaned and sanitised, a future recovery of these loans may turn into profits for the Bank. This may also explain that why BOB's shares rose on the stock exchange eventhough the Bank declared a huge loss, because the market is expecting future profits. Thos entire exercise was a result of an extensive Asset Quality Review (AQR) underatken by RBI , whereby Banks have been asked to clean up their Balance sheets by March 2017. This shall ensure greater transperancy and increase investor confidence over a period of time.  

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