A day after the State Bank of India reported a record loss, the Government on Wednesday said one or two quarters of “pain upfront is okay” when the lenders are cleaning up books, but the worst for state-run banks is over.
Financial Services Secretary Rajiv Kumar said the Government will provide capital support to public sector banks (PSBs) and not allow any one of them to default.
“Banks books are getting cleaned up and NPAs are also being recognised in a transparent manner. In the process, even if there is a (higher) provisioning requirement or even if there is a loss for one or two quarters, it is okay... We are ready to take this,” Kumar told reporters on the sidelines of an event here.
The worst, he said, is over. “Whenever you do the cleaning part, a bit of dust, a bit of pain upfront is okay. One or two quarters is not a problem. The future and the road map (for state-run banks) is only that worst is over and it is only the positive which can take place now,” he said.
Most public sector banks reported losses in the quarter ended March 31 after making higher provisions for non-performing assets (NPA) or bad loans. State Bank of India, the country’s largest lender, yesterday reported a net loss of Rs 7,718 crore due to doubling in provisions for NPAs. SBI predicted earnings will start to improve this financial year, buoyed by loan recoveries under a revamped bankruptcy law.Scam-hit Punjab National Bank had posted a net loss of Rs 13,416.91 crore for the March quarter. In private sector, ICICI Bank last month reported halving of income in the quarter, while Axis Bank posted its first-ever loss.