Money & Banking

Bank of India Q1 profit surges 3.5 times to ₹844 crore

Our Bureau Mumbai | Updated on August 03, 2020 Published on August 03, 2020

Bank of India (BoI) reported close to 3.5 times jump in standalone net profit at ₹844 crore in the first quarter ended June 30, 2020 against ₹243 crore in the year-ago period.

The public sector bank’s bottomline was supported by lower loan loss provisions of ₹767 crore (₹1,873 crore) and a 43 per cent increase in other income at ₹1,707 crore (₹1,195 crore).

Net interest income (difference between interest earned and interest expended) was almost flat at ₹3,481 crore (₹3,485 crore).

Simultaneously, domestic net interest margin (NIM), which is a function of NII, edged down to 2.73 per cent from 3.03 per cent in the year ago quarter.

On the decline in NIM, AK Das, MD & CEO, reasoned that there was a transmission of 120 basis points (bps) in the marginal cost of funds based lending rate (MCLR). The transmission to the liabilities side was 213 bps. One basis point is equal to one-hundredth of a percentage point.

The lower NIM is due to the fact that deposits get re-priced with a lag whereas transmission of new rates to advances is faster. Das expects NIM to be more aligned to the 3 per cent benchmark from second quarter onwards.

About 54 per cent of the other income was contributed by profit from sale of investments (₹914 crore vs ₹173 crore in the year ago quarter). Operating profit was up 25 per cent at ₹2,845 crore (₹2,271 crore).


About 41 per cent of the bank’s borrower accounts by number and 52 per cent by value are under moratorium.

Das emphasised that overall about 90 per cent of the accounts under moratorium are on safe ground. Of the remaining, 4 per cent have not paid three instalments and 6 per cent have not paid two instalments.

Per the COVID-19 related stress-test conducted by the bank, in a mild scenario and in a moderate scenario, accounts with an exposure of ₹3,200 crore and ₹5,000 crore, respectively, could slip.

Das observed that BoI has built adequate buffers to take care of COVID-19 related slippages.


The bank is eyeing a recovery of ₹2,500 crore in the current quarter (against recovery and upgradation of ₹659 crore in the first quarter). The recovery will be via the IBC (Insolvency and Bankruptcy Code) route, sale to asset reconstruction companies (₹700-800 crore) and one-time settlement (OTS).

Das said the Bank is planning to tweak rules relating to OTS and recovery from written-off accounts to effect recoveries in NPA accounts, which have not been referred to the National Company Law Tribunal (NCLT). Of the total NPAs of ₹58,000 crore, exposure aggregating ₹38,000 crore has been referred to NCLT.

In its notes to accounts, the bank said as on June 30, 2020, it holds additional provision of ₹271.72 crore (for Current quarter: nil) in respect of four borrower accounts, where the viable Resolution Plan has not been implemented within 180 days of review period. These accounts are — Sintex Industries, and three non-banking finance companies (NBFCs) — Religare, Reliance Commercial and Reliance Home Finance.

Das said these three NBFC accounts could be referred to the NCLT for resolution with RBI concurrence.

Capital raising

BoI is planning to shortly take a capital raising proposal aggregating ₹7,000-8,000 crore to the board for approval. It will seek to raise these resources via qualified institutions placement or additional tier-I capital to boost its core capital and fund credit growth of 7 per cent in FY21.

Of its commitment to disburse ₹6,500 crore under the guaranteed emergency credit line (GECL) to micro, small and medium enterprises and businesses by October-end 2020, BoI has so far sanctioned loans aggregating ₹5,400 crore and already disbursed 61 per cent of the amount, Das said.

With the government expanding the scope of GECL to include certain individual loans given to professionals, the BoI chief expects the reach the commitment target by this month end.

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Published on August 03, 2020
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