Private banks hid substantial bad debts, reveals RBI-mandated disclosure

RBI had assessed that yes Bank had Rs 4,930 crore of bad loans against actual reported Rs 750 crore

Even after asset quality review of the Reserve Bank of India (RBI), private sector banks probably continued to hide a large chunk of their bad assets.

But now those assets are all scheduled to come up in public glare as the central bank recently brought out a rule that mandated banks to disclose RBI assessed bad debt numbers, if the divergence between the central bank’s assessment and the bank’s actual assessment was more than 15 per cent.

Yes Bank Ltd., which raised capital through qualified institutional placement route in the end of March, reported in its annual report that RBI has pegged its total gross NPA at 5 per cent for fiscal year 2015-16, against the bank’s own assessment of only 0.76 per cent for that financial year.

According to Credit Suisse, Axis Bank’s NPAs were higher at 4.5 per cent of loans (vs 1.78 per cent reported) and at ICICI Bank, the NPA numbers were at 7 per cent, against 5.85 per cent reported. These two banks are yet to come with their annual reports.

Read this: SBI to allow ATM withdrawals via e-wallet, denies ATM service charge hike

RBI’s asset quality review last year had shown that banks under-reported about half of their bad loans.

In case of Yes Bank, Credit Suisse wrote, “the management has indicated that during the course of FY17 these accounts have seen repayments and improvements” and therefore, the NPA outstanding for March 17 is now lower at Rs 1,000 crore, or 1 per cent of FY17 loans.

RBI had assessed that the bank had Rs 4,930 crore of bad loans, against the actual reported Rs 750 crore.(read more)