Moneycontrol
Feb 13, 2018 09:43 AM IST | Source: Moneycontrol.com

Bank of India hopes to tide over 'special situation' NPA trouble in FY19

The state-run lender reported divergences worth Rs 14,057 crore in gross non-performing assets (NPAs) and Rs 9,707 crore in net NPAs.

Beena Parmar @BeenaParmar
 
 
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Bank of India expects a 'muted' fourth quarter, as it waits to get over with the “special situation” impacted by the treasury losses, and NPA divergences.

The state-run lender had to report divergences worth Rs 14,057 crore in gross non-performing assets (NPAs) and Rs 9,707 crore in net NPAs as classification of NPAs as against Reserve Bank of India’s risk-based assessment.

This led the bank to post a loss of Rs 2,341 crore of loss in the October to December period in 2017.

Dinabandhu Mohapatra, CEO and Managing Director, Bank of India, said, “This is a special situation…hence, all ratios are not reflecting the bank’s real strength. And once this special situation is taken care of, or if we exclude that, bank has performed well in the first two quarters. Hence, the ratios declared in this quarter are not comparable.”

Mohapatra said, “We have discounted these Standby Letters of Credit (SBLCs) and we have paid the money. We are subject to claim back the money from another bank that has issued these SBLCs. We have recovered around Rs 4,750 crore (out of Rs 9,405.crore) in 20 days’ time and for the rest of the amount we have already issued notice and may recover in a month’s time.”

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.

Bank of India’s treasury profit plunged to Rs 81 crore from Rs 1,001 crore in the year ago period as the bond yields rallied throughout the quarter.

On the positive side, the bank made recoveries of Rs 1,178 crore, up from Rs 898 crore in the year-ago period, while upgrades substantially reduced to Rs 165 crore from Rs 1,510 crore.

The bank is also expecting 2-3 accounts amounting to around Rs 2,500 crore will be upgraded in this quarter.

During the quarter, 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.

Fixing the rot

Bank of India is already among the 11 public sector banks under the Prompt Corrective Action or the PCA framework for poor performance based on its weak NPA position and capital ratios.

According to Mohapatra, the fourth quarter growth will be muted. “We have targeted that without growing the topline, we are planning to rebalance the asset book so that the revenues will increase. SO that bank’s profit is increased.  So, we are selectively growing in the right direction such as Retail, Agri and MSMEs (RAM).”

He added that the bank has reduced its international book by about Rs 10,000 crore and increased on the domestic front by around Rs 14,000 crore “giving good margins and spreads”. “That is how we have rebalanced our asset book. Our RAM (Retails, Agri and MSME) has gone up from 47 percent to 52 percent,” he said.

The government has already infused RS 2,257 crore in its first tranche of recapitalisation plans and the second tranche of Rs 6,795 crore will be received by the bank soon.

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 rationalising its nine foreign branches and subsidiaries.

As part of cost-rationalisation, the bank is also looking at closing down 200 ATMs. Further, 12 loss-making domestic branches have been identified, of which seven have turned profitable and the bank is in a drive to make the rest five profitable, Mohapatra assured.
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