A week after Axis Bank announced its results, mid-sized private lender Yes Bank today reported a divergence in gross bad loans of Rs 6,355 crore for FY17.
Divergence refers to the difference between the RBI's inspection report and the bank's own report.
This is the second time that the RBI, in its annual risk-based supervision, has observed divergences in both the banks’ NPA reporting.
As on March end, 2017, Yes Bank had reported gross NPAs of Rs 2,018.6 crore as against RBI’s assessment of Rs 8,373.8 crore in the same period.
Similarly, for net NPAs, the difference in divergences was to the tune of Rs 4,819.4 crore, when RBI’s report suggested net NPA figure of Rs 5,891.6 crore.
Last week, Axis Bank reported Rs 5,633 crore worth of divergences in its gross NPAs after the RBI inspection. For FY16, three banks had reported divergences -- ICICI Bank (divergence of Rs 5,105 crore), Axis Bank (Rs 9,478 crore) and Yes Bank (Rs 4,176.70 crore).
ICICI bank will report its financial results on Friday.
Yes Bank asset quality for Q2
During the second quarter of FY17, Yes Bank’s gross NPAs more than doubled and stood at 1.82 percent of its total loan book at the end of the September quarter. This compares to 0.92 percent at the end of the June quarter and 0.39 percent in the year-ago quarter.
Rana Kapoor, MD and CEO of the bank, called it a “temporary setback on asset quality” and said that banks had absorbed the full impact of the divergence in the second quarter itself.
Kapoor also pointed out that of the total divergences constituting 19 corporate loan accounts of seven group companies, 47 percent of the amount, amounting to 12 loan accounts, were upgraded; 27 percent of the loans were repaid; 7 percent (three accounts) were sold to asset reconstruction companies and rest 19 percent (four accounts) worth Rs 1,219.4 crore were classified as NPAs.
In FY16, Yes Bank had reported just a sixth of the bad loans assessed by the banking regulator.
During the year, it had reported gross NPAs worth Rs 748.9 crore as on March 31, 2016, while the RBI had asked the lender to classify gross NPAs worth Rs 4,925.6 crore.
With this not being enough, on Tuesday, the RBI also penalised Yes Bank for “violations of various regulations issued by RBI in the assessment of NPAs.” A penalty of Rs 6 crore was imposed on account of asset classification issues and a delay in reporting a security incident across its ATM network last year.
The Mumbai-based private announced a 25 percent rise in net profit backed by growth in net interest income growth of 33.5 percent, non-interest income growth of 35.4 percent, robust advances that grew by 34.9 percent and healthy net interest margins at 3.7 percent, up from 3.4 percent a year ago.
Kapoor said the bank expects recoveries in the year going forward and its credit costs may remain elevated at around 70 basis points (bps) for the full year with the half year costs at 48 bps.
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