Frauds and bad loans make public sector banks bleed

RBI data shows 13,643 cases of fraud, involving an aggregate amount of Rs 52,717 crore were reported over the last five financial years.

Reuters file image used for representational purpose only.

NEW DELHI: Public sector banks, which showed net profits of Rs 45,743 crore in 2014-15, reported a net loss of Rs 17,993 crore in 2015-16. By end December 2017, this loss rose to Rs 23,984 crore.
This steep drop into the red zone is attributed to a sharp rise in frauds, massive bad loans and non-performing assets.Private banks, however, continued to post profits.

As per Reserve Bank of India data, all 27 public sector banks reported profits in 2014-15, except Indian Overseas Bank which reported a loss of Rs 454 crore. State Bank of India, the largest public sector bank, registered the highest net profit of Rs 13,102 crore, followed by Central Bank at Rs 6,950 crore. Even Punjab National Bank, which has been mired in controversy over the past month, registered a net profit of Rs 3,062 crore that year.

But in 2015-16, almost all these profit-making banks posted losses, with a net loss of Rs 17,993 crore. Bank of India topped the list with a loss of Rs 6,089 crore, followed by Bank of Baroda which reported loss of Rs 5,396 crore. State Bank of India was among the few PSBs which remained in the green zone with net profit of Rs 9,951 crore during that year. There was some improvement in 2016-17, with net losses pegged Rs 11,389 crore. But 2017-18 broke all records, with losses pegged at Rs 23,984 crore till December-end.In contrast, private banks remained unaffected, showing profits of Rs 38,721 in 2014-15, and Rs 34,308 crore till December 2017.

Financial 2017-18 was a huge blow for PSBs with bad loans —amounts for which banks don’t earn any profit — touching a record high. As per RBI data, gross NPAs (GNPAs) of PSBs saw a sharp rise from Rs 2,79,016 crore as of March 2015 to Rs 7,87,120 crore as of December 2017.

The rising number of frauds added to the financial woes of these banks. RBI data shows 13,643 cases of fraud, involving an aggregate amount of Rs 52,717 crore were reported over the last five financial years, (Between 1.4.2013 to 22.2.2018).

A rattled government has launched several initiatives to stop the PSBs from bleeding further. In August 2015, the “Indradhanush Plan” introduced measures to improve operational and capital efficiency of PSBs, while Rs 70,000 crore was earmarked for infusion in these banks till FY 2019. In October 2017, in order to help these PSBs meet regulatory capital norms and augment growth capital, the government announced recapitalisation of PSBs to the tune of Rs 2,11,000 crore over that year and the next.