Banking sector during the week saw more of disappointing news of job cuts, bad loans and NPA divergences raising questions on bank auditors. Further public sector banks reported losses due to rise in bad loans
Banking sector during the week saw more of disappointing news of job cuts, bad loans and NPA divergences raising questions on bank auditors.
But starting with some positive news for the weekend, loan borrowers would be happy to note that State Bank of India (SBI) cut its interest rates on home and auto loans. This was announced a day after it cut marginal cost-based lending rates (MCLR), its first lending rate cut in 10 months and also slashed retail term deposit rates by 25 basis points.
Additionally, it also tied-up with World Bank to finance more of solar and renewable energy.
NPA divergences raise questions on auditors
On to some less happy news, non-performing asset (NPA) divergences in private sector banks raised questions on the accountability of the banks’ auditors. This comes at a time when doing business in India is getting easier while banks disclose divergences in NPA classification for the second time in a row in FY17.
Private sector banks including HDFC Bank, Axis Bank and Yes Bank reported cumulative divergences of Rs 12,000 crore after the Reserve Bank of India asked to make disclosures in classifying select accounts as NPAs as per its inspection, which earlier were not classified by the bank.
ICICI Bank reduces 1,000 employees
As per the latest numbers, the bank had 83,058 employees as of September 30. This number as on June 2017 stood at 84,140 employees.
IDFC-Shriram break up
A USD 12-billion mega merger deal that could have created a financial conglomerate with a universal bank with an ability to provide a range of financial products from insurance to vehicle finance.
Nevertheless, Shriram Group's Founder R Thyagarajan said that the company will continue its talks with IDFC even when the exclusivity agreement ends on November 8.
Ujjivan Financial Services, promoter of Ujjivan small finance bank and erstwhile microfinance institution, which suffered due to demonetisation on cash collections from its borrowers, narrowed its losses to Rs 11.95 crore and aims to turn around by the end of the year. This would be with the help of diversification of its loan products by offering personal loans and being more aggressive on the affordable housing and small and medium enterprise funding.
Posting second quarter financial results, public sector banks such as IDBI Bank, Union Bank of India and UCO bank posted weak profitability and poor asset quality numbers. On the other hand, Punjab National Bank reported strong numbers with improvement in non-performing assets.
IDBI Bank posted a loss of Rs 197.8 crore, Union Bank of India’s turned to losses of Rs 1,530.72 crore on upfront provisions in the second quarter while UCO Bank’s existing losses widened in July to September to Rs 623 crore. All on account of rise in bad loans.On the other hand, second largest public sector bank, Punjab National Bank reported a 2 percent growth in net profit at Rs 560.6 crore with lower slippages of standard loans into NPAs from the previous quarter thereby keeping asset quality under control.