Stung by a severe fall in its Q4 net profit due to higher provisioning for bad loans, the country's largest lender State Bank has sought more time from the Reserve Bank to meet the new requirement of setting aside funds to the tune of 70 per cent of the bad loans.
The SBI request assumes importance as its profit dropped by a whopping 32 per cent to Rs 1,867 crore in the fourth quarter of 2009-10 even when it raised provisioning only marginally from 56.19 per cent to 59.23 per cent of its total non-performing assets on quarter-on-quarter basis.
SBI's competitor ICICI Bank has already got six months relaxation to meet the new norms beyond the RBI stipulated September 2010.
"The RBI has allowed us time till March 31 next to reach a provisioning coverage ratio of 70 per cent. And we should be able to achieve it in the normal course and we are on track having now got the two additional quarters," an ICICI Bank official said.
The bank is in dialogue with the Reserve Bank to stagger the provisioning coverage ratio (PCR) further to avoid a sharp fall in net profit, SBI chairman OP Bhatt said while announcing the results on Friday. PCR is essentially the extent of funds a bank sets aside to cover losses from loans.
Currently, the PCR varies in between 10 and 100 per cent in the banking sector. As of this March, SBI's the provision against gross NPAs stood at 59.23 per cent while the PCR for its competitor ICICI Bank was 59.5 per cent.
In absolute terms, its NPA was to the tune of Rs 26,662 crore and the bank made a provisioning of Rs 15,792 crore.
The Reserve Bank last year had asked banks to maintain PCR not less than 70 per cent by September, 2010. However, last month, while interacting with analysts, RBI deputy governor Shyamala Gopinath had said some banks might take longer time than the others as they had different levels of provisioning coverage and so RBI would look at these issues.
"Various banks have different levels of provisioning coverage and in certain cases it might take them a little longer. We are looking at a few cases of these type," she had said.
