Bank of Maharashtra net profit jumps ₹264 crore in Q2

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Bank of Maharashtra reported a 107 per cent year-on-year jump in second quarter net profit at ₹264 crore against ₹130 crore in the year ago quarter.

Net interest income in the reporting quarter rose 34 per cent yoy at ₹1499 crore. Other income was up 23 per cent yoy at ₹493 crore.

Loan loss provisions jumped to ₹583 crore, including towards increase in provisions on account of implementation of resolution plans under RBI’s “Resolution Framework for COVID-19 related stress” (August 6, 2020 circular) against a write back of ₹4.55 crore in the year ago quarter.

Gross non-performing assets (GNPAs) declined by ₹618 crore during the quarter to ₹6403 crore.

GNPAs declined to 5.56 per cent of gross advances as at September-end 2021 against 6.35 per cent as at June-end 2021.

Net NPAs position also improved to 1.73 per cent of net advances against 2.22 per cent.

Deposits increased by 14.46 per cent yoy to ₹1,81,572 crore. Advances rose by 13.55 per cent yoy to ₹1,10,728 crore.

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Bank NPAs may rise by Rs 2 lakh crore in March quarter, face Rs 30,000 cr provisioning, BFSI News, ET BFSI

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The Supreme Court‘s lifting of the stay on classifying overdue loans is not only set to add to a sizeable chunk to banks’ non-performing assets, but hit their balance-sheet substantially.

In absence of a standstill by the Supreme Court, the GNPAs for the banks would be higher by Rs 1.3 lakh crore (1.2%) and net NPAs would have been higher by Rs 1 lakh crore (1%), according to estimates by ICRA.

However, the Icra estimates exclude the stressed loans recommended by K V Kamath panel for restructuring. The Kamath panel has suggested certain norms for restructuring loans in 16 sectors most hit by the pandemic and banks are in the process of identifying such loans. While the restructuring of such loans has to be done June 2022, the RBI may ask banks to recognise these loans as NPAs in the March quarter itself, which may raise the bank NPAs to Rs 2 lakh crore.

Also, banks will need to provide about Rs 30,000 crore for the newly added soured loans as per the norms. They need to provide 15% in the first year and the rest over three years.

Interest booked

Banks follow the accrual method of accounting and in the absence of the NPA tag, they were booking interest on these loans, even though the money was not coming into their accounts. With these loans now classified as NPAs, banks have to reverse the interest they have booked, which may lead to Rs 10,000 crore hit for them.

Silver lining

However, most banks have made provisions on proforma NPAs, which they will be allowed to write back. This will not lead to any large impact on the balance-sheets of most lenders. Also, proforma NPAs are falling, while the provision coverage ratio has improved by an average of 300 basis points to over 70% for private banks and above 65% for public sector banks in the same period.

The proforma numbers

Following the Supreme Court (SC) stay order, banks have not tagged overdue loans as NPAs since August 2020. However, they have been listing such loans as portfolio-level proforma NPAs and making provisions for them.

Compound interest hit

Banks may have to take a hit of Rs 7,500 crore after the Supreme court extended the compound interest relief to loans above Rs 2 crore.

As per Icra, compound interest for six months of moratorium across all lenders is estimated at Rs 13,500-14,000 crore.

The government had already announced relief for borrowers having loan up to Rs 2 crore which was estimated to cost about Rs 6,500 crore to the exchequer. If the government takes the burden of Rs 7,500 crore on compound interest relief for large borrowers above Rs 2 crore, banks will be relieved to that extent.



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