Indian two thousand and five hundred rupee banknotes are arranged for a photograph in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Bank Of India Joins The Under-Reporting Club: Logs In Rs 2,341 Crore Loss

State-run Bank of India today reported a loss in the quarter ended December as it had to make up for under-reporting of bad loans worth Rs 14,057 crore even as it was run down by by treasury losses.

The lender reported a net loss of Rs 2,341.23 crore in the quarter versus a profit of Rs 102 crore in the same period last year.

For fiscal 2016-17, the Reserve Bank found that the bank under-reported gross non performing assets worth Rs 14,057 crore for the current year and of Rs 9,707 crore in net NPAs. Last week SBI had also reported a massive underreporting of bad loans worth Rs 23,330 crore for the previous fiscal.

Of the Rs 14,057-crore, Rs 9,405 crore were on account of the standby letter of credit issued by other banks in which BoI was not required to make any additional provisions during the quarter, the bank said today, adding that for the balance amount, it made an additional provision of Rs 900.23 crore.

We’ve discounted these SBLCs and we’ve already paid money. We are subject to claim back the money from another bank that has issued these SBLCs. In the past 20 days, we’ve already recovered around Rs 5,000 crore of Rs 9,405 crore and for the rest of the amount we have issued notice and may recover in a month’s time.
Dinabandhu Mohapatra, MD & CEO, Bank of India

The bank’s asset quality worsened in the quarter. Gross non-performing assets jumped to 16.93 percent from 13.38 percent in the previous quarter, while net NPAs rose to 10.29 percent from 7.09 percent in the same period.

"This is a special situation and these numbers should not be the benchmark for taking the right idea about the function of the bank. In view of the last quarters' good performances and excluding this special situation, we are quite hopeful that things are in the right track," Mohapatra said.

Recoveries stood at Rs 1,178 crore, up from Rs 898 crore in the year-ago period, while upgrades came down to a trickle at Rs 165 crore from Rs 1,510 crore. Of the fresh slippages of Rs 18,329 crore, Rs 13,645 crore were due to divergences found by the RBI for the previous fiscal.

Its provisions for bad loans almost doubled to Rs 4,373 crore from Rs 2,546 crore, while total provisions were at Rs 4,899 crore as against Rs 2,302 crore in the same period last year.

Its treasury profit declined to a paltry Rs 81 crore from Rs 1,001 crore in the year ago period as the bond yields rallied throughout the quarter.

Gross advances declined to Rs 3,79,538 crore from Rs 3,87,028 crore, as the bank is in the process of rebalancing its exposure in overseas operations. It has closed three overseas subsidiaries in New Zealand, Botswana and Uganda as part of rationalisation of its nine foreign branches and subsidiaries.

As part of cost-rationalisation, the bank is also looking at closing down 200 ATMs. In the current financial year, the bank is getting Rs 9,232 crore capital from the government.

Ahead of the earnings announcement, shares rose 1.62 percent to Rs 144.85 on the BSE which rallied 0.87 percent.