Q1 FY18 results: What to expect from the banking sector

Impact of NCLT provisions may be seen marginally in Q1 and may largely flow to next few quarters

In Q1 FY18, a major event was the government passing an ordinance for stressed asset resolution and accordingly the Reserve Bank of India (RBI) has asked banks to refer 12 large accounts comprising 25% of GNPAs (mainly in steel/metal and infrastructure sector) to NCLT (National Company Law Tribunal) for initiating insolvency proceedings. 

While this is positive in the long run, it would entail heavy provisioning burden on banks as RBI has asked for 50% provision on secured and 100% provision on exposures referred to NCLT. The impact of NCLT provisions may be seen marginally in Q1 and may largely flow