Taking a strong note of State Bank of India's (SBI) huge profit erosion for March quarter due to a rise in provisions, the Institute of Chartered Accountants of India (ICAI) today said it will ask the country's largest bank to explain the reasons for earmarking higher provisions for bad loans.
"We have decided to send a letter to SBI to enquire about the reasons which led to an increase in provisions, to explain a rise in provisions in the March quarter over that in December [2010] quarter," ICAI President G Ramaswamy told reporters here.
The letter seeking explanation from SBI will be sent within a week and further action on the issue will depend on SBI's response, Ramaswamy said.
The ICAI will also be writing to Reserve Bank of India and capital market regulator Sebi with regard to the issue, he added.
Such a move by ICAI will compound the worries of the nation's largest lender as RBI Deputy Governor KC Chakrabarty had also recently questioned the practice of banks reporting fall in profits after a change of guard at the helm.
SBI's Q4 profits plunged by nearly 99% to Rs 20.88 crore for the quarter ended March 31, 2011 as against Rs 1,866.60 crore it had posted for the same period last year. One of the major denting factors was a 82% jump in its total provisioning which increased to Rs 6,059 crore.