State-run lender Bank of India posted a ₹4,737.56 crore loss in the October-December quarter on higher provisioning. The move to provide a higher sum for bad loans could help the lender exit the prompt corrective action (PCA) framework of the Reserve Bank of India (RBI) as the net non-performing asset ratio has fallen below 6%.
The PCA framework gets triggered when a bank breaches one of the three risk thresholds, and crossing 6% net NPA is one of them. The bank is comfortable on the capital front with a capital adequacy ratio of 12.47%.
The other risk threshold is negative return on assets for two consecutive years, and Bank of India has breached that parameter. “We have complied on two parameters out of three. Our provision coverage ratio is also the highest in the industry, at 76.76%,” said A.K. Das, executive director, Bank of India, at the post-earnings media interaction. He said it is up to the regulator to decide if the bank would come out of PCA.
Bank of Maharashtra, which also announced its third quarter results, also reported a net NPA ratio below 6% and is also a contender for coming out of the PCA framework. For the reporting period, Bank of India made a provision of ₹9,197 crore for non-performing assets, compared to ₹4,373 crore a year earlier.
As a result of the higher provision, net NPA ratio fell to 5.87% from 10.29% a year ago, and 7.64% sequentially. The gross NPA ratio also improved to 16.31% from 16.93% a year ago. “We have made 100% provision for the accounts that are in NCLT.
“Any recovery from these accounts will be added to profit,” said Dinabandhu Mohapatra, MD & CEO, Bank of India. He expects resolution of at least two more such accounts by the end of March. The bank is also planning to sell about ₹12,000 crore of bad loans by then.
The lender also said its exposure to IL&FS is ₹3,400 crore which has been classified as non-performing.