Chennai, July 28 (IANS) Lack of conducive scenario for credit growth, slippages in the restructured loan accounts and a huge exposure to iron and steel sector are a drag on public sector banks, said a sectoral analyst.
Despite an increase in their total income and reducing cost of funds, public sector banks have been posting lower net profit owing to higher provisions.
“Slippages in the restructured loan account are a major problem for the banking sector. Further the government banks have a total exposure of around $50 billion to the iron and steel sector. However the commodity prices are not moving up,” a banking sector analyst, who did not want to be identified, told IANS.
According to him, there is not much of a conducive element for banks to grow their credit portfolio and as a result, credit growth is slow.
Incidentally, the Union Bank of India has called retail, agriculture and MSME (micro, small, medium enterprises) as productive sectors.
Most of the government-owned banks that have declared their first quarter results have posted lower net profit due to higher provisions.
Punjab National Bank on Tuesday said it has posted a net profit of Rs.720.71 crore for the first quarter of 2015-16, down from Rs.1,405.12 crore for the same period last year.
According to the bank, its total income for the period stood at Rs.13,432 crore, up from Rs.12,825.13 crore posted for the quarter ending June 30, 2014.
During the quarter, the bank’s provisions went up to Rs.1,811.39 crore up from Rs.927.61 crore provided during the corresponding quarter of previous year.
According to reports, it has identified and reported to Reserve Bank of India a list of 400 wilful defaulters and it is working on restructuring some loan accounts.
Bank of India said it has posted a net profit of Rs.129.72 crore during the first quarter down from Rs.805.69 crore posted for the quarter ended June 30, 2014.
The bank’s provisions went up to Rs.1,514.73 crore up last quarter up from Rs.893.03 crore for the corresponding period of the previous quarter.
Bank of India earned a total income of Rs.11,659.16 crore during the period under review up from Rs.11,328.73 crore earned in the corresponding quarter of the previous year.
Similarly government-owned Union Bank of India a net profit of Rs.518.78 crore for the quarter ended on June 30 as compared to Rs.664.11 crore for the quarter that ended on June 30, 2014.
The bank had provided a sum of Rs.642.41 crore during the first quarter of current fiscal under the head provisions as against Rs.392.82 crore provided during the corresponding period of the previous year.
Its total income increased from Rs.8,547.56 crore to Rs. 9,043.17 crore.
Syndicate Bank posted a net profit of Rs.301.98 crore for this quarter as compared to Rs. 485. 42 crore for the quarter ended June 30, 2014.
Total income increased from Rs.5,523 crore to Rs.6,323.42 crore.