PSBs in a fix

Your editorial “The NPA Denouement” (June 29) has rightly highlighted the impact of additional provisioning to be made for the 12 large non-performing assets (NPAs) accounts where the Insolvency and Bankruptcy Code is to be invoked. Many PSBs already mired with the spiraling pool of NPAs had to bring down the provision coverage ratio below 50 per cent, against the desired level of 70 per cent. Many banks had to record a negative return on assets in FY16 due to additional provisions made after the asset quality review was introduced. In such depleted state of profitability, how many PSBs will be in a position to meet the burden of additional provision is to be seen. Allowing them to stagger the additional provisioning need can be a solution but such banks will have to revive their lending appetite to restore their profitability.  Except Indian overseas Bank (9.67 per cent), UCO (9.63 per cent) and United Bank (10.08 per cent), all other banks are having capital adequacy ratio beyond the stipulated minimum of 10.25 per cent as on March  31, 2016. Moreover, some capital infusion during FY17 will be able to supplement the capital position of many of the PSBs. Hence, there seems to be no crisis in lending to small and medium entrepreneurs and retail sector, which will be able to restore the revenue stream of some of the PSBs that are fence sitters as far as creating room for additional provisions are concerned.  

                                                K Srinivasa Rao  Noida

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