Your report “SBI result sours market mood”(May 18) says SBI’s disappointing results may lead to re-rating of the banking sector. This is incorrect when we note that the income statement for the March quarter coincided with a new chairman taking charge. Consider that the bank has:
- loaded upfront the gratuity expense instead of amortising it over five years (and has admitted that the impact over the next 16 quarters will only be Rs 25 crore);
- increased the provisions for future pension liability;
- fully met the provision coverage ratio of 70 per cent although it had time till September 30 to do so;
- covered standard assets massively through higher provisions.
The chairman clarified that the “clean-up act” was done to avoid legacy issues. This type of “undressing” of results is quite common when there is change of management. The new incumbent could also window-dress the results to showcase better performance in the future. But one wonders what the regulator (the Reserve Bank of India) is doing when the bank’s top management indulges in such practices.
K V Rao, Bangalore
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