YES Bank stock slumped 6% to Rs 1,485.20 on the BSE as the bank reported divergences in gross non-performing assets (NPAs) to the tune of Rs 4,176 crore. Yes Bank had reported gross bad loans of Rs 748.98 crore at the end of March 2016 compared to Rs 4,925 crore assessed by the central bank. In the same period, net NPAs declared by the bank stood at Rs 284.5 crore while the RBI assessment showed a substantially high number of Rs 3603.1 crore.
A higher bad loan classification would have necessitated higher provisions. The bank’s actual provisions of Rs 464.5 crore fell short of the RBI’s calculation of Rs 1,322. 5 crore. Adjusted for provisions, Yes Bank’s net profit for the fiscal year 2016 would have been Rs 1,978.3 crore instead of Rs 2,539.4 crore.
For the fiscal year 2017, the bank reported a net profit of Rs 3,330.1 crore and said that the number “duly incorporates the current impact of divergences observed recently by RBI”. This includes a Rs 911 crore exposure to a cement company which the bank didn’t name but is reported to be Jaypee Cements, which is all set to be acquired by UltraTech in a Rs 16,200-crore deal.
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“With ongoing remedial actions undertaken by the bank during FY 16-17, there have been several reductions/exits/improvement in account conduct,” and the impact of the divergence is Rs 1,040 crore, said the annual report.
RBI had asked banks to make a disclosure in the “notes to accounts” if the additional provisioning requirement assessed by the regulator exceeds 15% of their net profit. Banks also had to make additional disclosures if the additional gross NPAs identified by RBI under its asset quality review were greater than 15% of the incremental gross NPAs reported.
Yes Bank is the first bank to report this divergence after the central bank increased disclosure norms for banks since it noted instances of divergences in banks’ asset classification and the provisioning required as per RBI norms.