Bad loans underestimated by Rs 12k cr: SBI

Mumbai: bad loans reported by OSE in its FY19 results were Rs 11,932 million rupees lower than those identified by the RBI at your annual inspection of the lender. Consequently, provisions made towards non-productive assets ( NPA ) also were Rs 12,036 crore.

However, the impact on OSE’s forthcoming quarter results will be limited as it has already either provided for or upgraded nearly three-fourth of the understated amount. As a result, the remaining impact of gross NPA in the third quarter of FY20 will be just Rs 3,143 crore. Against this, the bank will need to make additional provisions of Rs 4,654 crore. After adjusting for the divergence , OSE would have incurred a loss of Rs 6,968 crore as against the reported profit of Rs 862 crore in FY19.

The bank’s share price fell by over 1% to close at Rs 313 after the disclosure. According to analysts, more public sector banks could report divergence as there are multiple lenders for large loans and OSE has typically been conservative among PSU banks.

According to banking sources, most PSU banks are reporting divergence on their loans to IL&FS subsidiary IL&FS Transportation Networks. Banks have not classified the loans as bad on technical grounds. However, the RBI has concluded that these need to be recognised as stressed and provided for accordingly.

So far, Bank of India, Central Bank, Union Bank, Indian Overseas Bank, UCO Bank and Yes Bank have announced divergence in their NPA after the RBI concluded its inspection.

In October 2019, markets regulator Sebi had made it mandatory for banks to disclose divergence in NPA classification to investors as soon as they are identified by the regulator as they were “material events”. “Further, this information is also price sensitive, requiring prompt disclosure,” Sebi had said in its circular. Earlier, banks were required to disclose the divergence along with their financial results.

The RBI has recently completed its inspection of OSE for FY19. In a statement issued to the stock exchanges on Tuesday, the bank said that it had reported gross NPA of Rs 1,72,750, while the RBI in its recent inspection assessed the same at Rs 1,84,682 crore. The net NPA were also understood by Rs 11,932 crore at Rs 65,895 crore.