yes bank beneath-stated FY16 dangerous loan, finds RBI audit

RBI had asked banks to behavior an asset quality assessment in Q3 and this fall of FY16

though the Reserve financial institution of India (RBI) has mandated banks to reveal the whole extent of asset high quality stress in their books, some personal banks, it appears, proceed to below-report their unhealthy loan data.1492602326-7694

On Friday, sure financial institution’s stock price fell 6 per cent to Rs 1,483.85 on the BSE after a disclosure in its 2016-17 annual document, which stated the RBI audit had pegged its complete gross non-performing property (NPAs) at 5 per cent for monetary year 2015-16 (FY16), against the bank’s personal evaluate of only 0.76 per cent for a similar yr.

Analysts also say the underneath-reporting of numbers is not a phenomenon limited to yes financial institution. international brokerage agency credit score Suisse mentioned Axis financial institution’s NPAs, according to the RBI audit, had been greater at 4.5 per cent of loans versus 1.78 per cent pronounced by means of the financial institution in FY16, whereas ICICI financial institution’s suggested numbers at 5.85 per cent had been lower than the RBI’s determine of seven per cent.
These two banks are but to come up with their annual stories, however disclosed the numbers in a conference name with analysts after their March 2017 quarter results.

The RBI had requested banks to habits an asset high quality evaluation within the third (Q3) and fourth quarter (this fall) of FY16, which resulted in a 70 per cent leap in their gross NPAs between September 2015 and March 2016.

On April 18, the RBI introduced a rule that mandated banks to divulge the RBI-assessed dangerous debt numbers, if the divergence between the critical financial institution’s overview and the financial institution’s actual reporting was more than 15 per cent.

n a remark, sure bank mentioned, “The disclosure on divergence in asset classification and provisions in NPAs within the annual audited financial commentary is in conformity with the RBI circular issued on April 18, 2017.”

The divergence within the NPA knowledge is for FY16. The bank observation also delivered that with the continuing remedial actions undertaken by way of the bank in FY17, there had been a couple of savings, partial sale to asset reconstruction companies and growth in account habits, which considerably lowered the general gross NPA divergence.

consistent with analysts, the RBI’s audit of financial institution numbers typically occurs in Q3 or q4 of the subsequent financial year, and therefore, FY16 numbers got here up for scrutiny most effective within the second half of economic 12 months 2016-17 (FY17).

In a document, stockbroking agency Macquarie stated this raises questions about transparency. “whereas the financial institution managed to get better a considerable part and maintain profitability intact in FY17, the difficulty is that buyers will question the sanctity of the Rs 2,000 crore of gross non-performing loans (or 1.5 per cent of the mortgage guide) pronounced for FY17,” Macquarie mentioned, including, then again, that one of the vital loans were ‘present’ in yes bank’s books, in keeping with statutory auditors. but the RBI auditors judged these loans needs to be termed bad.

“The outstanding gross NPA as on March 31 includes one borrower with an exposure of Rs 911.5 crore, which is expected to be recovered in the close to time period. particular provision held on this account was once Rs 227.9 crore,” sure bank said.

“therefore, the financial institution reiterates that there is not any elevate-forward impression of the divergence observed through the RBI in FY18 (financial yr 2017-18),” the bank’s observation stated.

The RBI had assessed that the financial institution had Rs 4,930 crore of dangerous loans, towards the true stated Rs 750 crore.

“Given these massive divergences, the FY17 RBI audit outcomes shall be keenly awaited and the narrowing of these divergences will probably be key for contraction in their valuation gap to the personal client banks,” credit score Suisse said in a file.

whereas Axis financial institution misplaced 2.8 per cent, ICICI used to be down 1.2 per cent in Friday’s trades. ICICI financial institution did not offer to touch upon trade standard’s question on the issue of divergence within the NPA figures.

An Axis bank spokesperson mentioned the bank had made disclosure about the RBI’s overview of gross NPAs for FY16 in an interaction with the media and analysts after its announcement of results for FY17.

The Nifty bank index fell 0.64 per cent on Friday.

“yes bank’s numbers have come as a shock,” stated Pritesh Bumb, banking analyst with Prabhudas Lilladher.

“it is a brief phenomenon and that sure bank has taken a number of measures to unravel many NPA cases. additional, it has made sufficient provisions and is neatly-lined vis-à-vis dangers. We remain positive on the private banking house,” Bumb delivered.