Mumbai: Kerala-based Federal Bank reported a 44% fall in net profit in the quarter ended March 2018 mainly due to a sharp rise in provisions for bad loans as the bank had to recognise Rs 872 crore of slippages mainly as it had to comply with the RBI’s circular in February which tightened norms for bad loan resolution.

The profit was lower than a Bloomberg poll of 14 brokers which had expected net profit to rise 12% to Rs 287 crore. “We decided to implement the RBI circular at one go. These loans were standard and were being paid and not 90 days overdue. This accelerated recognition has meant our profit has been hit,” said Shyam Srinivasan, CEO at Federal Bank.

Out of the Rs 872 crore of slippages, Rs 492 crore were from the restructured loan portfolio. As a result the bank’s total restructured book fell to Rs 792 crore. Provisions of the tripled to Rs 372 crore from Rs 123 crore a year ago. Out of the total provisions the bank had to make Rs 180 crore provisions for bad loans.

Gross NPA of the bank increased to 3% of its loan book, up from 2.33% a year earlier and 2.52% in the quarter ended December 2017. However, Srinivasan said that the bank is confident of growing its loan book at 25% or more in the current fiscal year.

“We are seeing demand for loans from all sectors, corporate, SMEs and retail. We think that growth will only continue to improve,” Srinivasan said. The bank recorded a 25% growth in advances during the quarter led by a 36% growth in corporate loans which are loans to companies with a turnover of Rs 25 crore and above.

The strong loan growth resulted in a 17% rise in net interest income which increased to Rs 3,053 crore from Rs 3,583 crore a year earlier. However, both the treasury and corporate segments of the bank suffered a loss due to losses on bond investments and higher NPAs.