Are PSU banks set to become profitable this year after four years of losses?

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March 2, 2020 3:30 PM

All PSU banks recorded a net profit of Rs 507 crore in the first three quarters of FY2019-20.

PSU bank, PSB, public sector banks, state lenders, psb profit, psu bank profits, psu bank profit q3In the last two years, the PSU banks had to suffer aggregate net losses of Rs 85,370 crore and Rs 80,084 crore respectively. (Bloomberg image)

India’s PSU banks may end the current fiscal year 2019-20 with flying colours as the state lenders have recorded a profit in the three quarters so far. All PSU banks recorded a net profit of Rs 507 crore in the first three quarters, Anurag Singh Thakur, MoS, Ministry of Finance, said in a reply to a question in Lok Sabha today. In the last two years, the PSU banks had to suffer aggregate net losses of Rs 85,370 crore and Rs 80,084 crore respectively. The losses were reported due to higher provisioning amount as the banks earned more than Rs 1.5 lakh crore as operating profits in both years.

To curb the burden of NPAs, the government has rolled out 4R’s strategy that included r recognition, resolution, recapitalisation, and reforms after which the gross NPAs have declined from Rs 8.95 lakh crore as on 31.3.2018 to Rs 7.89 lakh crore as on 31.3.2019, according to the data provided in Lok Sabha.

Also Read: GST collection falls even as govt raises monthly target; doubts over ambitious March goal

In an earlier note, rating agency ICRA had said that the PSBs are expected to report net profits of Rs 23,000-37,000 crore during FY20, after four consecutive years of losses, even though overall profitability will remain weak with return on net worth of 4 – 6.3 per cent.

Meanwhile, the removal of IDBI Bank from the list of PSU banks has also contributed to the gain of the state lenders. IDBI Bank has registered a standalone net loss of over Rs 13,000 crore so far in the current fiscal. In 2019, insurance behemoth LIC completed the acquisition IDBI Bank, earning 51 per cent controlling stake in the bank. The Cabinet had approved the acquisition of controlling stake by Life Insurance Corporation (LIC) as a promoter in the bank through a combination of preferential allotment and open offer of equity in August 2018.

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