Banking sector this week: Joy for public sector banks, dark clouds over some private ones – Money Perception

Recapitisation and divergences were the only words that mattered in the banking sector this week.

Even as the government announced big-bang reforms regarding recapitalisation of public sector banks, major private banks also reported their financial results adding colour on the asset quality this season.

Government announces big-bang PSU Bank recapitalisation plan

On Tuesday, the Finance Ministry announced a Rs 2.11 lakh crore capitalisation plan for public sector banks, including Rs 1.35 lakh crore worth of recapitalisation bonds and Rs 76,000 crore through market fund-raising and budgetary support.

RBI Governor Urjit Patel praised the move, calling it a monumental step forward to improve the economy.

The capital infusion plan was also well received by the markets and bankers as well. However, it is left to be seen whether the plan will improve banks’ balance sheets for good or stop at giving them temporary relief.

The government and RBI could also look at tweaking provisioning norms for loan accounts undergoing the insolvency proceedings.

ICICI Bank reports drop in Q2 net profit but asset quality improves

Despite a 34 percent year-on-year drop in its net profit to Rs 2,058 crore, ICICI Bank saw its gross non-performing assets (GNPAs) in the quarter ended September decrease from the previous quarter, even as it showed a marked increase from the corresponding year-ago period.

HDFC Bank reports strong Q2 results and adds more employees

HDFC Bank, country’s second largest private lender, also declared its results earlier this week. The bank reported a 20 percent jump in its September quarter net profit at Rs 4,151 crore and a day later, declared one large loan account as NPA on RBI’s directions.

Further, even as job cuts and a slowing economy prevailed this season, HDFC Bank added a total of 2,700 new employees during the July-September period, citing higher business growth.

After Axis Bank, now Yes Bank reports divergences

After Axis Bank reported divergvences of Rs 5,633 crore in gross bad loans last week, it was YES Bank’s turnto face the heat this week. The mid-size private sector lender’s strong and robust asset base lost its lustre after it reported a divergence in gross bad loans of Rs 6,355 crore for FY17.

Global brokerages raised concerns about the bank’s balance sheet, with Macquarie downgrading the bank’s stock from ‘outperform’ to ‘sell’, citing “a growing trust deficit”.

RBI penalises YES Bank and IDFC Bank for flouting rules

RBI penalised Yes Bank and IDFC Bank this week for violating reporting rules. YES Bank was pulled up for delayed reporting of asset quality numbers, as well as for not reporting a security breach that happened a year ago, while IDFC Bank was penalised for flouting lending norms.

RBI releases

In other news, RBI has extended deadline for submission of comments from the public on linking of lending rates to external benchmark rates.

It also set up its committee along with a 10-member task force to decide the contours of a public credit registry to utilise information and data in order to improve efficiency among borrowers and help reduce defaults in large corporate loans.