18 Public sector banks report losses of Rs. 56,970 Crore in Q4, 2018.  

Balance sheets of public sector banks are bleeding in Q4, 2018. According to publically available data 18 listed public sector banks have reported losses to the tune of Rs. 56,970 Cr during Q4 of FY 2017-18 as against Rs. 5347 Cr in the same quarter during last year.  

Last year, the government had announced a recap package of Rs 2.11 lakh crore and , about Rs 90,000 crore was infused in FY18. The jump in provisions and the net losses  thereby indicate that  that major portion of funds infused into public sector banks is used up without leaving much as capital for growth. 
For nearly two years, public sector banks have been recognizing and providing for non-performing assets at a better pace compared to previous years. But, this quarter these banks were forced to clean up their balance sheets due to tougher stressed asset framework implemented by Reserve Bank of India.

As expected, Punjab National Bank is the leader of the group with a loss of Rs. 13,417 crore. State Bank of India and IDBI Bank stood at second and third position with losses to the tune of Rs 7,718 crore and Rs 5,663 crore respectively. Bank of India recorded loss of Rs.3970 Cr. At the same time, two small public sector banks, Indian Bank and Vijaya Bank succeeded in registering profits. Results of three small public sector banks are not covered in the report. 

Public sector banks have recorded huge losses despite majority of them opting the route of tax write- backs to reduce losses. Further, RBI extended two relaxations too. Banks were allowed to spread mark-to-market losses on the bond portfolio over four quarters. Also lenders were allowed to mainatain a lower provision of 40 percent as against 50 percent earlier, as provisioning amount against cases in the NCLT.

Major reason for the increase in non-performing assets is the poor performance of infrastructure segment, especially power sector. Banks had delayed NPA classification in this segment. But RBI vide circular dated February 12, 2018 introduced new host of rules and withdrew all existing stressed asset schemes and directed banks to classify the accounts where these schemes were in the stages of implementation as NPA. With increase in NPA, banks are required to set apart more amount towards provisions and this has led to recording huge losses. Provisions on account of increase in bad assets have doubled in many banks

Compared to public sector counter parts, performance of private sector banks have been better. Total net profit of  private sector lenders stood at Rs.7203 crores. They too registered dip in aggregate net profit. Among private sector lenders, Axis Bank reported net loss of Rs. 2189 cr. Lakshmi Vilas Bank and Dhanlaxmi Bank too joined group of private seconds banks with losses, their losses being small.

High NPA provision can be reversed to profit and loss account if banks succeed in recovering the bad loans. Also to reduce the burden on banks for one year, RBI extended implementation date of Ind-AS accounting norms by one year. 

Another likely impact of the huge losses is that the salary revision of employees may get prolonged. Employee unions and associations have already announced strike on May 30 and 31 as no progress has been achieved in negotiations. The Indian Banks Association, representing the managements of banks have offered a meagre increase of 2% as against the demand of 15% by employees. The wage revision is due from November 1, 2017.