Bad loans: Why NPA should now stand for No Procrastination Anymore
Indian State Bank reported a profit of Rs 2800 crore for the fourth quarter and Rs 10,484 crore for the full year. But what has gone unnoticed is that the management of all its subsidiaries (ie Bank of the State of Travancore, Mysore, Bikaner and Jaipur and Hyderabad), the bank recorded a loss of Rs 390 crore for the whole year .
Deducting the Bank’s new consolidated financial statements, it appears that subsidiaries have reported losses of around Rs 6,000 crore for the fourth quarter and almost Rs 11,000 crore for full fiscal year 2010.
This is a big drop in the kitchen that the bank has prepared the merger. It is only by participating in the profits of the associated companies that consolidate OSE 17 has closed the year with a profit of Rs 241 crore.
In other words, the powerful State Bank of India after consolidation will start its scholarship sleeves with ROE and ROA close to zero. It is an unpleasant thought for a government that is trying to consolidate its weakest banks.
The SBI is by far the best of its kind among banks in India. Investment bankers, industry captains and analysts recognize that OSE speakers are sometimes a bit higher than their private sector counterparts. And yet their combined benefit for last year is almost nothing.
The consolidated stock should reflect this weakness, even if the market in its myopia ignored the numbers Friday. If this is the state of the most powerful power supply group that already had synergies with all executives in the same group, one can imagine what the impact could be if weak banks are combined with one of PSA’s largest supply banks.
Seven banks – Dena Bank, Maharashtra Bank, Central Bank, IDBI Bank, Indian banks overseas, Oriental Bank and UCO Bank – posted losses in the fourth quarter. Their gross NPA (non-productive assets) are between 14% and 22%.
What are the options with regard to major banks not so weak that they can be buyers? Punjab National Bank, with a gross NPA of 12.5%; Union Bank with a gross ANP of 11.19% and Banco de Baroda with a gross ANP of 10.46%.
Obviously, none of these three big banks have the means to pay their siblings even weaker siblings. Consolidation, such as OSE absorption of their babies, is not an option considering the current state of the USP’s bank balance sheets.
The government and Reserve Bank of India have two difficult tasks. First, the government should simply spend more money, much more capital. Although this is going to continue a way to curb the growth of small banks, they should simply provide more capital for existing losses and APM.
Maybe you should consider merging the seven weaker banks into one bad bank that at least reduce the number of “yes” it takes to solve a bad loan.
That said, the core nuclear task of resolution is now in the hands of RBI. The central bank should simply accelerate its resolution plan as expected, either to adjust and combine different debt resolution systems or the creation of monitoring committees.
Delay is costly and inexcusable. During a CNBC-TV18 event on March 23, Finance Minister Arun Jaitley had promised a resolution plan in “hours.” However, the order authorizing the RBI took place only six weeks later, on May 5
The RBI was aware of the order and could have a great impact if it had prepared with its resolution plan the day the president signed the order.