Fresh lending dries up at Dena Bank; Q4 net loss widens to Rs 12.25 bn

Public sector lender Dena Bank will virtually stop lending to new borrowers, after the Reserve Bank of India (RBI) put further restrictions on providing fresh credit exposure and staff recruitment.

The Mumbai-based lender is without a managing director and chief executive officer after Ashwani Kumar demitted office last year. Currently, Senior Executive Director Ramesh Singh is in charge.

The bank is under RBI-mandated prompt corrective action (PCA) since May 2017 due to high net non-performing assets and negative return on assets (ROA). It has posted losses for two financial years in a row.

Dena Bank, in a filing with the BSE, said the RBI had restricted it from assuming a fresh credit exposure and recruiting. This was forwarded to its board in a meeting on May 11, 2018, according to the RBI's advice.

Singh did not answer phone calls. 

A senior executive said there was a virtual freeze on lending to new borrowers. The existing customers would not face problems, he added.  When under PCA, a bank can recruit only technical experts. Facing these fresh curbs, even that will stop. It is already facing restrictions on lending, expenditure and recruitment.

Dena Bank's net loss widened to Rs 12.25 billion in the fourth quarter ended March 2018 due to increasing bad loans and higher provisioning. 

The net loss was Rs 5.75 billion in the January-March quarter of 2016-17. Sequentially, the loss widened to Rs 3.8 billion in the December quarter of 2017-18.

In 2017-18, the bank posted a net loss of Rs 19.23 billion. In 2016-17, it had reported a net loss of Rs 8.63 billion. 

Its gross non-performing assets (NPAs) rose to 22.4 per cent of gross advances, as of March 31, 2018, from 16.27 per cent in March 2017. Net NPAs were up at 11.95 per cent from 10.66 per cent over a year ago.