Coming years challenging for banks, need to look beyond NPAs: SBI

Coming years challenging for banks, need to look beyond NPAs: SBI

A man checks his mobile phones in front of State Bank of India (SBI) branch in Kolkata. REUTERS

The coming years will be very challenging for banks which will have to look beyond the bad loan resolution and address pressing issues such as frauds, cyber security and governance, SBI has said.

The operating environment has become increasingly complex, the state-owned bank said in its Annual Report 2017-18.

Resolution of stressed assets has progressed satisfactorily and the final outcome will take some more time to reflect in the profit and loss (P&L), it said, adding that this delay is mainly because new laws take some time to mature in practice, .

"The coming years will be very challenging for the banking system as a whole," said the country's largest lender.

"The structural transformation of banks must move beyond the non-performing asset (NPA) resolution and address other pressing issues, such as frauds, customer retention and servicing , human resource, cyber security and governance," it added.

Of all the 21 public sector banks (PSBs), 19 have registered a staggering loss of Rs 87,300 crore in 2017-18, topped by scam-hit Punjab National Bank (PNB) which posted a net loss of nearly Rs 12,283 crore during the year. Indian Bank and Vijaya Bank were the only two PSBs which made profits.

SBI said the policy initiatives over the last four years have gathered momentum with far reaching structural transformation in all sectors and banks are unlikely to remain untouched by these changes.

With capital infusion in PSBs, it will be up to them how they grab the opportunity and deploy technology to address some of these pressing issues, the SBI report said.

As on March 31, 2018, the gross NPAs of SBI increased to Rs 2,23,427 crore (10.91% of the gross advances), from Rs 1,77,866 crore (9.11%) by end-March 2017.

The net NPAs or bad loans grew to Rs 1,10,855 crore (5.73%) from Rs 96,978 crore (5.19%).

The largest lender of the country suffered a net loss of Rs 6,547.45 crore in 2017-18, as against a net profit of Rs 10,484.1 crore in the preceding fiscal.

"The year 2017-18 was a difficult year as far as net profits are concerned. The main contributing factors being increase in loan loss provisions, mark to market losses on government securities and provisions and payments to employees," Chairman Rajnish Kumar said in the report.

The banking environment remained eventful in 2017-18 as asset quality, resolution of stressed assets and muted credit growth in fist half continued as major challenges for most banks.

"Higher NPAs impacted interest income adversely and led to elevated provisions, thus putting pressure on the profitability of banks. Further, some PSBs have been put under the Prompt Corrective Action (PCA) framework of RBI, which puts restrictions on key areas viz. dividend payment, branch expansion..," the report said.