Bank of Maharashtra on Wednesday reported a net loss of Rs 3,764 crore during the quarter ended December 2018, a more-than-six-fold increase year-on-year, due to spike in provisions due to higher non-performing assets (NPA) ratio.
The bank had set aside Rs 4,422 crore for provisions and contingencies during the October-December quarter. There was a 199.95% rise in provisioning over the same quarter in the previous year. The bank had posted a loss of `597 crore in the corresponding quarter of the previous fiscal, while provisioning stood at Rs 1,474 crore.
AS Rajeev, MD & chief executive, said the bank increased the provisioning voluntarily as it was working towards meeting guidelines and getting out of the PCA fold. BoM has been under PCA for a year now. This move improved provisioning coverage ratio on all impaired assets from 58.71% to 81.08%, Rajeev said.
As and when the recoveries will be made these will reflect in the bank’s future profitability, he said. He expected the bank to return to profitability and get out of PCA framework soon.
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As per RBI requirement for the NCLT list one and list two, the provisioning was 50% but the bank took decision to go to 100% with seven of their cases in list one and 10 in list two with 71 more cases in NCLT. The bank has taken a similar approach for cases at the DRT and SARFESI. Instead of time and again provisioning we decided to take one time hit and focus on recoveries,” AC Rout, ED, BoM said. This loss was because of front loading all the provisions, he said.
Around `10,000 crore of the bank is locked in NCLT and it would take time to reduce the NPA and by provisioning we are taking care of the NPA, Rout said.
The bank’s NPA has to be below 6%, which is one of the criteria of getting out of NPA, he said. When you go for provisioning it dents profit but funds remain in the balance sheet and as and when the money is recovered it will go straight into profits, Rout explained.
Gross NPAs as on December 2018 stood at `15,509 crore compared to `18,128 core in December 2017. The net NPA as on Dec ’18 was `4,647 crore compared to Rs 10,670 crore in Dec ’17. Net NPA was at 5.91% in Dec ’18 against 12.17% in December ’17.
Total income went up 2.05% to `3,056 crore y-o-y, while operating profit rose 2.96% to `432 crore. Net interest margin growth shows robust the bank’s earnings, Rout said.
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Source: Financial Express