Money & Banking
State-run bank credit profiles at risk sans more capital: Fitch
Mumbai : With the profitability of Indian public sector banks (PSBs) severely dented as seen from recent third-quarter results, their credit profile will come under pressure unless they are adequately capitalised, Fitch Ratings said on Friday.
"Fitch's estimated capital need for the system of $140 billion may need to be reassessed, given some of the losses," the US agency said in a research note.
"The stand-alone credit profile of many Indian public sector banks should come under pressure unless there is meaningful action to restore capital adequacy," it said.
Significant quarterly losses reported at several large public banks last week, including Bank of Baroda and Bank of India, underscored long-standing balance-sheet and capital risks stemming from legacy issues pertaining to poor asset quality and weak provisioning," Fitch added.
The ratings firm said the sudden drop in profitability of PSBs for the third quarter of the current fiscal was triggered mainly by higher provisioning following a Reserve Bank of India (RBI) order on reclassification of distressed loans.
The RBI, in line with its target for banks to clean up their balance-sheets by March 2017, has nudged both public and private banks to identify stressed accounts and significantly raise provisioning over two quarters through to the end of the current fiscal.
Fitch said that RBI's intent to clean up bank balance sheets by next year could help revive investor confidence in PSBs.
"But the suddenness and speed of the provisioning in the second half of FY16 highlights how long it has taken to address poor balance-sheets," it said.
It also raises questions over the pace and implementation of bank recapitalisation and reforms, especially when central bank intervention is required in identification of bad assets," it added.
The trend of state-run banks declaring low profits or losses and the ever-ballooning provisioning for non-performing assets (NPAs) has continued through the past year. 
The banking index of Bombay Stock Exchange (BSE) has taken a 67 percent hit. In the case of Punjab National Bank, for example, the stock is down 58 percent, while for State Bank, it is down 52 percent.
Reacting to the bank stocks' decline last week, RBI Governor Raghuram Rajan said: "The decline in bank share prices caused investors to panic. Bank share prices are being hit by the global markets turmoil.
"We're looking at banks having clean and fully provisioned balance sheets by March 2017. Banks are using tools devised to clean up their balance sheets."
"Change in attitude in the banking system takes time as banks try to unlock the value of their NPAs. But the end-game is in sight. We don't envisage a further set of AQRs (asset quality review) and new loans that require to be dealt with," he added.
"Such reporting of losses by the Indian banks is unprecedented. The trend is clear -- unfortunate that several public sector banks are posting negative results and wiping out the equity," said Saswata Guha, director of financial institutions at Fitch Ratings.
The earnings outlook is also more daunting and the pain may continue during the next year," she added.
Guha expects the Indian banking sector to close this fiscal with a NPA of around a whopping Rs.4 trillion and total stressed assets of around Rs.9 trillion.
According to the finance ministry, the NPA ratio of banks -- net exposure versus bad loans -- rose from 3.42 percent as on March 2013 to 4.62 percent as on the same month of last year.
In absolute terms, the ministry pegs it at Rs.1,83,854 crore versus Rs.3,09,409 crore.
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.



Nikhil S Girme

1 year ago

Well Well...So called safe public sector banks are indeed worser of than many Cooperative Banks too

Best part is that figures being shared are also dressed up and goes without saying that the actual rot is much deeper in banks

What is sad is that the salaries given to PSU employees plus fantastic pensions and perks and less of accountability they enjoy in comparison to other banks or similar sectors is unfair.

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A Slice of Recent History
Memoirs of Bhisham Sahni, creator of Tamas, translated into English, at last
He may not be able to avoid being called Balraj Sahni’s younger brother, but Bhisham Sahni was a writer, playwright and actor of considerable repute. Best known for his novel Tamas, his memoirs, titled Today’s Pasts, has, at long last, been translated into English by Snehal Shingavi. Born in Rawalpindi, in 1915, Sahni witnessed at age 32, the searing division of India— the largest displacement of humanity in world history. Only the cinders of such poignant experience could have given birth to Tamas. In 1988, the tale was adapted into a televised mini-series and aired on Doordarshan. I was barely nine at that time, but its very mention evokes an eeriness that, even today, sends shudders down my spine. 
The memoir unfolds like a Dickensian story. It begins at Rawalpindi with friends and family where death touches Sahni’s life for the first time when he loses his sister. Without any tears or melodrama, he brings to fore a feeling of vacuum and loss. It is a young, arrogant lad we meet in the second chapter, doing his Master’s in English literature at the Government College in Lahore. There are lessons in this chapter that we all can learn from. Here’s an insight from the haughty 20-something: “When institutions become obsolete, they praise their own cultural values.”
Soon, we read about finding Ms Right, keeping a job, raising a family and his involvement with Indian People’s Theatre Association (IPTA) and communism. Meanwhile, Sahni earned a PhD from Punjab University. After Partition, he and his family settled in Delhi, where he was a lecturer at a Delhi University college and took to writing earnestly. His first collection of short-stories, Bhagya Rekha (Line of Fate), was published in 1953. In 1957, Sahni moved to Moscow. His long stint in Moscow, as a translator of Russian literary works into Hindi, gives us glimpses of life in the then Soviet Union.  
Sahni also had the distinction of becoming the editor of the literary magazine Nai Kahaniyan by which time he was already a published writer and novelist. He expresses his displeasure with labelling of works as ‘new story’, ‘sensitive story’, ‘non-story’ or ‘contemporary story’. Of his journal, and its selection of stories, he writes: “My journal would be an independent journal. Its only mission would be to publish the best stories. It was not going to be the mouthpiece of any literary trend.” 
To hear Sahni talk about his art is like listening to a maestro play his music. He emerges as a literary figure talking about styles, inspiration, his craft and his love. In his plain speak lies his sagacity. Here are some pearls of wisdom:
“It was true that a novel isn’t composed by a writer’s pen, or by his brain, but by the sensitivity of his heart.”
“No writer remains untouched by the pulse of his times, but the manner in which that pulse takes form in his work depends on his sensibility and his point of view. Style is a medium, not a goal.”
“… The reality of the novel does not depend on whether an event really happened, but rather on the fact that the action can seem real from the perspective of all reality in life.”
The simmering tension of the Partition is an undercurrent that runs across Sahni life. In Tamas, it found a voice and, so, to Tamas, he devotes an entire chapter. Albert Camus had once said that an author is not in one character; he may be in all his characters, simultaneously. Thus, Sahni informs us how much of fiction and fact his various characters in Tamas were. 
Tamas won the Sahitya Akademi Award in 1975 and was subsequently adapted into a National Award-winning film by Govind Nihalani. Sahni’s body of work encompasses novels, plays, short-stories and essays for which he was awarded the Padma Bhushan in 1998, and the Shalaka Samman, the Delhi government’s highest literary prize, in 1999.
Sahni passed away in 2003. His memoirs in Hindi, Aaj Ke Ateet, was posthumously published in 2004 and had to wait for over a decade to be translated by Snehal and published in English. Snehal is an assistant professor at the University of Texas, Austin, where he specialises in teaching South Asian literature in English, Hindi and Urdu. He does justice to his subject. Most importantly, he convinces us to go to the nearest bookshop and buy Aaj Ke Ateet.


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