Govt's fisc under strain as PSBs add Rs 87,000 cr loss in FY18

Public sector banks have become a big drag on the government’s finances with the 19 government-run banks collectively posting a net loss of Rs87,357 crore during the fiscal ended 31 March 2018.

Of the 21 state-run banks only two —  Indian Bank and Vijaya Bank — posted profits during the 2017-18 financial year. Indian Bank posted the highest profit of Rs1,258.99 crore and Vijaya Bank reported a net profit of Rs727.02 crore during the fiscal.
With PSBs’ losses getting out of control, the government has appointed a committee to make recommendations on setting up an asset reconstruction company that will manage the Rs8,30,000-odd crore of losses amassed by state-run banks.
The committee will weigh the pros and cons of such an arrangement on the banking sector, interim finance minister Piyush Goyal said while announcing the plan.
The losses at public sector banks also brought down India Inc’s performance in the 2017-18 fiscal as nine of the top 10 loss-making companies in the S&P BSE 500 index were PSBs — the only exception being debt-laden Reliance Communications.
Aggregate net profit of companies in the S&P BSE 500 index declined 1.78 per cent in FY18 against a 17.4 per cent increase in FY17, according to ACE Equity.
The 19 government-run banks collectively posted a net loss of Rs87,357 crore during the fiscal, against a net profit of Rs473.72 crore in the previous fiscal, according to the latest quarterly results published by these lenders.
Scam-tainted Punjab National Bank took a hit of nearly Rs12,283 crore thanks to the Rs14,000-crore fraud perpetrated by Nirav Modi and his associates.
The bank had reported a net profit of Rs1,324.8 crore in the previous fiscal.
Another state run lender IDBI Bank reported a net loss of Rs8,237.93 crore in the fiscal ended March 2018 against a net loss of from Rs 5,158.14 crore in the previous year.
State Bank of India, the country’s largest lender, reported a net loss of Rs6,547.45 crore in FY18 against a net profit of Rs10,484.1 crore in 2016-17.
The NPA in the banking sector rose to Rs8,31,000 crore as of December 2017 amidst mounting bad loans and weak financials.
The looses have come to the fore under Prompt Corrective Action (PCA) framework of the Reserve Bank and the tightening of prudential norms by the RBI on 12 February.