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Q4 Scorecard: PSBs continue downslide, pvt banks shine again

Source : PTI
Last Updated: Sun, May 26, 2013 11:11 hrs
​What type of crisis for India?

Private banks continued to outshine their public sector peers on both profitability and asset quality, highlighting yet again poor risk management and recovery of the government-owned lenders, analysts said.

Private lenders also fared much better during the January-March quarter when it came to growth in loans and deposits, as also asset recoveries despite weak economy and choking credit demand.

The number of restructured loans and defaulters have also hit record highs, but mostly for the public sector banks.

Balance-sheets of the banks throw up starkly contrasting results. Analysts and some senior public sector bankers blame the poor risk management skills, coupled with unnecessary political interferences in the functioning of state-run banks for the mess they are in.

Industry leader State Bank of India reported 19 per cent fall in profit for the fourth quarter, 2012-13, at Rs 3,299 crore- its first quarterly fall in two years. Others like BoB, PNB and BoI too have reported sharp fall in quarterly profits.

However, private sector rivals ICICI Bank and HDFC Bank continued to post higher profit growth on stable asset quality.

SBI's gross NPA rose to 4.75 per cent during the quarter from 4.44 per cent. Its net interest income declined 4.42 per cent to Rs 11,591 crore, while the net interest margin fell to 3.34 per cent, a decline of 13.2 per cent.

Other PSBs that reported sharp dips in profit include Allahabad Bank, United Bank, IOB, IDBI Bank.

When asked at an event here for his response to the drop in net profit of many public sector banks, Financial Services secretary Rajiv Takru said: "I am not in love with these poor numbers. It is akin to asking someone who got bashed up on the road how he feels about it."

An ex-state-run banker told PTI on condition of anonymity: "Public sector banks should be given more freedom in their day-to-day affairs. While incentivisation, which is absent at public sector banks has its negatives, it also helps bankers perform better and more responsibly. All we need is less political interference and more professional freedom."

A banking sector analyst concurred saying that while there are many levels of risk management mechanisms at private sector banks, this is in effect absent at most of the public sector ones as there is too much petty politics at the local as well as the national level.

"It is not that private banks are not into rural lending but they have better skills at recovery. And more than a third of the business comes from non-urban centres for most of private banks today," said a banking analyst at a brokerage.

Another analyst said: "Private banks have specific set of people looking after specific work. For instance, there are separate set of people for sales, disbursals, recovery and risk monitoring. But this is something that public sector banks don't have. So investing with specific tasks could be a big beginning for better bottomlines."


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