IOB loss up five-fold at ₹2,254 cr in Q2

Our Bureau Chennai | Updated on June 25, 2020

Indian Overseas Bank’s (IOB) net loss for the second quarter shot up five times to ₹2,254 crore due to higher provisioning for bad loans. The bank had posted a net loss of ₹487 crore in the same quarter last year.

Provisions (other than tax) and contingencies increased by 49 per cent to ₹2,996 crore during the second quarter, against ₹2,017 crore recorded in the previous year.

“Taking provisions is always painful but if we take this temporary pain in September and December quarters, we will be able to come out very comfortably in March,” said Karnam Sekar, MD and CEO, Indian Overseas Bank. He also said the bank may not have to make more provisions during the March quarter since it has already been providing for migratory provisions, shortfall in security provision, and various other required provisions until December 2019.

The bank, which is currently under the RBI’s prompt corrective action (PCA) norms, is hopeful to exit it by March 2020. To achieve that, the bank seems to have adopted a dual strategy of frontloading bad debts provisions and increasing the pace of recovery.

Operating profit of the bank also fell by 43 per cent to ₹746 during Q2 FY20, against ₹1,304 crore registered in Q2 FY19.

“Our target is to bring the Net NPA (NNPA) to 6 per cent by December 2019 and, to do that, we need to reduce NNPAs by almost ₹4,500 crore in a single quarter,” said Sekar. NNPA, as on September 30, 2019, currently stands at 9.84 per cent.

“In the whole of last year we recovered about ₹800-900 crore through one-time settlement (OTS) scheme, but in the first half of current financial year itself, we settled about ₹1,500 crore, of which, 20 per cent was received and the remaining 80 per cent (₹1,200 crore) will come in the next three months,” said Sekar, adding that the bank is hopeful of recovering at least ₹3,000 crore in the third quarter.

He also added that bank will run a campaign for the next three months with a special OTS of up to ₹25 crore.

IOB’s total income dropped by 6 per cent to ₹5,024 crore (₹5,348 crore), while interest income of the bank ₹4,276 crore (₹4,284 crore) during the comparable period.

Published on November 04, 2019

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