Yes Bank Reported Only A Sixth Of The Bad Loans RBI Pointed Out For FY16
Yes Bank’s annual report reveals divergence in bad loan disclosure.
Private sector lender Yes Bank Ltd.’s shares fell more than 4 percent on Friday afternoon after the bank disclosed that it had reported lower non-performing assets (NPAs) than what was judged by the banking regulator for the year ended March 31, 2016.
According to its annual report, the bank had reported gross NPAs worth Rs 748.9 crore as on March 31, 2016, while the Reserve Bank of India (RBI), as part of its annual supervisory action, had asked the lender to report gross NPAs worth Rs 4,925.6 crore.
Similarly, net NPAs reported by the bank stood at Rs 284.4 crore compared to Rs 3,603 crore as required by the regulator. In its report, Yes Bank clarified that much of the loans which were not disclosed in March 2016 were resolved in the year that followed.
“With ongoing remedial actions undertaken by the bank during FY16-17, there have been several reductions/exits/improvement in account conduct, which has reduced the overall gross NPA outstanding to Rs 10,399.76 million (Rs 1,039.9 crore) as on March 31, 2017,” the annual report said.
The bank released the divergence figure in compliance with the RBI’s directions on April 19, 2017, where the regulator asked lenders to disclose any significant divergence from the NPAs it had asked banks to report in March 2016.
In a separate media statement, Yes Bank reiterated that there is no carry-forward impact of the divergence observed by the RBI in FY17 and FY18. Broking house Morgan Stanley, however, advised caution, saying it expects investors to closely track this data at all banks. In a note issued on Friday, it also warned about potential divergence in FY17 results.
The RBI’s directions to report the divergence followed its action in October 2015, when the central bank conducted an asset quality review (AQR) of bank balance sheets. The review found that banks were not fully or adequately disclosing and provisioning against bad loans.
The AQR’s impact was seen on banks’ earnings between quarters ended September 2015 and December 2016. Gross NPAs of the 42 listed banks added up to just over Rs 7 lakh crore at the end of December 2016. That’s the double of gross bad loans of about Rs 3.4 lakh crore at the end of September 2015.
Results for the quarter ended March 31, 2017 are not yet in for all banks.
