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The markets went into a free fall last week amid global concerns. But the sharp deterioration in asset quality of Indian public sector banks in the December quarter left no room for respite on the home ground. The sharp fall in global commodity prices made matters worse for domestic metal producers, whose weak performance increased the stress in the banking system. That apart, the RBI’s asset quality review forced banks to identify certain accounts as bad this quarter — this aggravated the bad loan situation. It was no different for India’s largest lender, SBI.
In the December quarter, the addition to bad loans went up to about ₹20,000 crore, more than thrice that recorded in the September quarter. The bank’s earnings shrunk 62 per cent in the December quarter compared to the same period last year, due to the increase in provisioning for bad loans which went up 31 per cent during the period.
SBI’s muted core performance was also disappointing. While the bank witnessed loan growth of 12.8 per cent (year-on-year), higher than the overall bank credit growth of 8-9 per cent, it was way below the 20-25 per cent loan growth that private sector peers such as Axis Bank and HDFC Bank delivered in the December quarter.
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