PSU banks to be hit hard by new loan recast norms: Merrill

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26 Aug, 2025 12:21

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Brokerage house Merrill Lynch has said that state-owned banks, especially Punjab National Bank, Indian Bank and Oriental Bank of Commerce could be hit the hardest by the revised loan recast norms (explained here) proposed by the RBI. The brokerage is of the view that private banks would be least hit.

An extract from the Merrill report

"The biggest impact may be for PNB, Indian and OBC having around 10% of loans in restructured category; in contrast, SBI followed by Union Bank may be less impacted. While, the impact on earnings may be somewhat less as some of these loans could get upgraded, we est. at least 3-8% of earnings hit for the banks through FY14-15. Banks with higher provision cover (like BOB, Union) may have some cushion to offset the earnings hit. Private banks would be least impacted, with impact estimated at less than 1/2%."

Standard Restructured Loans (%)

Restructured	(%)  FY12e	3QFY13e
BOB	6.00%	6.7%*
BOI	5.40%	6.60%
Canara	3.20%	6.9%*
IDBI	4.30%	7.30%
Indian	9.90%	10.9%*
OBC	8.50%	9.50%
PNB	7.90%	9.60%
SBI	3.70%	3.5%*
UBI	5.10%	5.60%
Axis Bank	1.80%	2.40%
Federal	6.40%	5.50%
HDFCB	0.30%	0.30%
ICICI	1.70%	1.50%
Kotak (Standalone)	0.10%	0.00%
Yes bank	0.50%	0.40%
IndusInd	0.3%	0.30%

Source: BofA Merrill Lynch Global Research Estimates; * As on 2QFY13