Tuesday, November 9, 2010
SBI provisions for non-performing assets by 96% to Rs 2,160 crore
Source :9 NOV, 2010, 01.37AM IST,ET BUREAU & AGENCIES
SBI profit flat at Rs 2,501 cr on bad loan provisioning
State Bank of India , the nation’s biggest lender, said quarterly net profit remained almost static belying expectations as it set aside more funds for bad loans and lost money trading bonds and currencies.
The bank said net profit for the quarter ended September 30, 2010, was Rs 2,501.37 crore, up from Rs 2,490.04 crore a year earlier.
The poor show was due to meeting higher provisioning norms.
Both the treasury and corporate banking faired poorly. Pre-tax treasury loss stood at Rs 410 crore as against a profit of Rs 1,341 crore a year earlier. Pre-tax earnings from corporate banking fell 12% to Rs 1,241 crore from Rs 1,408 crore a year earlier.
The lender increased provisions for non-performing assets by 96% to Rs 2,160 crore expanding the provision ratio to 62.8%, from 60.7.
The Reserve Bank of India, in October 2009, said it would require banks to increase the minimum provision ratio to 70% from 10%.
Gross bad loans rose 34% to Rs 23,200 crore accentuated by `854 crore bad loans of its associate, State Bank of Indore that merged with it.
“Most state-run banks reported accelerated growth in non-performing assets this quarter,” Sandeep Jain, an analyst at IDBI Capital Markets told Bloomberg.
“SBI’s doubled provisioning could indicate a similar spike,” he said. Retail banking was a saving grace for the bank that will soon be under pressure as the central bank is forcing banks to get rid of ‘teaser rate’ loans, especially in mortgages.
Loans to individuals led to a pre-tax profit of Rs 3,470 crore, that doubled from Rs 1,702 crore a year earlier. With RBI raising the rates for the sixth time this year, demand for loans may fall hurting the banks’ earnings further.
Tuesday, October 26, 2010
Microfinance institutions face NPAs, allegations of harassment of clients
Source : Businessline :G. Naga Sridhar:Hyderabad, Oct 13
The asset portfolios of microfinance institutions (MFIs) appear to be under stress with increasing reports about the alleged harassments by the recovery agents in the recent past.
The surge in allegations of harassment by recovery agents and fellow-group members are indications of growing non-performing assets in the industry in general, say experts.
During the last one month, names of many big MFIs were linked with such incidents. In Andhra Pradesh alone, 25 persons committed suicide in the last one month due to harassment from recovery agents/group members, according to a senior official in the Deparment of Rural Development.
When contacted, Mr Sajeev Viswanathan, Chief Executive Officer of Bhartiya Samruddhi Finance Ltd, the microfinance arm of Basix Group said: “It is true that asset portfolios in the microfinance industry in general are under little stress due to seasonal factors.”
Temporary
Adding that this could be only ‘temporary', Mr Viswanathan denied any harassment of clients by his company in the recent incidents.
According to Prof K. Venkata Narayana, Department of Economics, Kakatiya University, Warangal, the root cause of the problem is high rate of interest and the lack of proper bank credit to microfinance sector.
“Instead of directly providing credit to the self-help groups, commercial banks are lending to MFIs to be treated as priority sector.
“In my University Grants Commission – sponsored study of MFI impact in four districts of Andhra Pradesh, I came across many incidents of harassment of clients on the face of growing defaults,” he said.
The pressure of increasing friction in repayments, however, may not be uniform. “We don't see any pressure on our portfolios. The smaller, less professional MFI could be in some problem,” a senior functionary of SKS Microfinance said.
According to Mr Udai Kumar, Managing Director, Share Microfin, the interest rates are within reasonable limits.
“We are charging 24 per cent after borrowing at an average cost of 13 per cent. The operational costs are at nine per cent. So the margins are very reasonable,” he said.
He sees ‘little trouble' in the repayments because of the ‘talk on MFIs now-a-days' but not due to any problem from the client side.
There are about 2,500 MFIs in the country, out of which only 20 are large. The average interest rate in the industry still remains upward of 28 per cent while there are allegations that it goes over 36 per cent in some cases.
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