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Private sector lender Federal Bank's shares were down 6.72 per cent on the BSE on Monday and closed at Rs 70.75 apiece after the bank reported a 36 per cent drop in net profit on Saturday.
In the April-June quarter, net profit fell to Rs 141 crore from Rs 220 crore in the same period a year ago. The drop in profit was on account of higher net provisioning, which increased seven-folds to Rs 153 crore compared with Rs 22 crore in the first quarter of FY15.
Shyam Srinivasan, managing director and CEO of Federal Bank, said the increase in provisioning and consequent decline in net profit was on account of a loan of Rs 134 crore to a metal company slipping into non-performing asset (NPA).
Several other banks are grappling with bad loans from the steel sector. According to Reserve Bank of India (RBI) data published in June, five of the top 10 private steel producing companies are under severe stress on delayed implementation of projects due to many factors including land and environmental clearances.
