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Bank of India (BoI) slipped into the red, reporting a net loss of ₹3,571 crore in the fourth quarter ended March 31, 2020, due to a sharp rise in loan-loss provisions.
The public sector bank had reported a net profit of ₹252 crore in the year-ago period and ₹106 crore in the preceding quarter.
Atanu Kumar Das, MD and CEO, attributed the loss to his bank making aggregate provisions over and above what is required as per IRAC (income recognition and asset classification) norms. The bank would have posted a profit but for this provisioning, he added.
Loan-loss provisions in the reporting quarter soared to ₹7,316 crore against ₹1,503 crore in the year-ago quarter.
Additional provisioning
In the current quarter, due to uncertainty regarding recovery, the bank made additional provisioning of ₹3,941 crore in respect in six non-performing asset (NPA) accounts.
Das expects BoI to return to profit in the April-June quarter. He projected a credit growth of 8-9 per cent in FY21.
While net interest income was down 6 per cent year-on-year at ₹3,793 crore (₹4,044 crore in the year-ago quarter), total non-interest income was up 14 per cent at ₹1,688 crore (₹1,479 crore).
The bank extended Covid-19-related moratorium in the case of borrower accounts aggregating ₹74,445 crore. It extended asset classification benefits to accounts aggregating ₹4,145 crore and made a provision of ₹414 crore thereon.
Das said 41 per cent of the bank’s customers, accounting for 47 per cent of its loan exposure, opted for the moratorium. Realising that they will have to pay interest later on, 61 per cent of these customers paid at least one instalment.
In the MSME segment, BoI has about 5 lakh eligible accounts, which can get the benefit of the guaranteed emergency credit line (GECL).
“Till yesterday, we were able to reach out to about 2.3 lakh customers. We have sanctioned about ₹2,300 crore to these customers. And disbursal is almost about 75-80 per cent,” said Das.
Capital raise
Expecting strong financial performance in the first and second quarters, BoI plans to raise minimum ₹2,000 crore in the third quarter (October-December) via qualified institutions placement.
The bank has put its proposed disinvestment in joint venture Star Union Dai-ichi Life Insurance Company on hold.
Das observed that of the gross NPAs of ₹61,550 crore, many accounts (aggregating about ₹37,000 crore) are awaiting resolution.
“So, that is a major challenge….Many of our potential one-time settlement (OTS) proposals (which were decided prior to the Covid-19 outbreak) have not been able to meet the terms and conditions and the timelines because of lockdown and cashflow issues.
“We have decided to extend the timeline and not charge interest on the compromise amount. So, from Q2 onwards, we are going to reinvigorate that (OTS),” said Das.
Further, the bank plans to take up the board-approved non-discretionary and non-disciminatory OTS policy very aggressively to address the remaining accounts.
“We are expecting recovery of ₹700-800 crore from our written-off accounts. For that we are devising specific strategies. If not in Q2, then Q3 onwards recoveries should be back to normal,” Das emphasised.
As of March-end 2020, gross NPAs declined to 14.78 per cent of gross advances against 16.30 per cent as of December-end 2019. Further, net NPAs position improved to 3.88 per cent of net advances against 5.97 per cent.
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