There has been a huge loss to the banks as the economy is slowing down in every aspect. Lots of loans are turning into the NPAs. Recently, State-owned Bank of India and Indian Overseas Bank have reported that there are divergences in their bad loans for the fiscal ended March 2019. These are resulting into huge losses for the bank.
Chennai-headquartered Indian Overseas Bank has reported a net non-performing asset (NPA) divergence of Rs 358 crore for 2018-19. All because of this, there was a divergence in provisioning of Rs 2,208 crore, according to a regulatory filing by the bank.
Earlier Bank reported, Rs 3,737.88 crore loss, but in fiscal year ended March 2019, it adjusted loss of Rs 5,999.88 crore which is higher than the last one.
Banks are required to report the divergence in asset classification and provisioning for NPAs as per Risk Assessment Report of RBI subject to certain conditions, which is the gap between the bad loans as declared by the lenders and that assessed by the regulator.
However, Bank of India had a downward net NPA divergence by Rs 329 crore for 2018-19. This downfall was reported because the RBI had assessed it lower than the report of Bank.
However, the lender’s net loss for the year expanded to Rs 6,992.90 crore from Rs 5,546.90 crore reported by the bank due to divergence in provisioning requirement.
The Bank of India said in the regulatory filing, that the divergence of provisioning was at Rs 1,446 crore, in 2018-19.
Earlier this month, market regulator Sebi had put in place tighter disclosure norms, and directed all listed banks to disclose any divergence in bad loan provisioning within 24 hours of receiving RBI’s risk assessment report, rather than waiting to publish the details in their annual financial statements.
Some banks, including Indian Bank, Union Bank of India and Lakshmi Vilas Bank, have already reported their NPA divergences for last fiscal.
The banks are required to make these disclosures, if in case additional provisioning for non-performing assets (NPAs) assessed by the RBI exceeds 10 per cent of the reported profit before provisions and contingencies. With that, if if the additional gross NPAs identified by the RBI exceed 15 per cent of the published incremental gross NPAs.
All because of these NPAs, banks are not able to come up of their losses, which is effection our economy at a large extent. This year a big downward slid has been noticed in the economy. RBI, is thus taking many measures to deal with such losses and to boost the growth of banks and economy.
A major step in this matter has been taken by the consolidation of the Banks, which will lower down the total number of banks from 27 to 12 and to make them into big banks.