- The banking regulator imposed a fine on the three banks for non-compliance with directions issued by RBI.
- Bank of India will have to pay up ₹5 crore, Karnataka Bank ₹1.2 crore, and Saraswat Bank ₹30 lakh.
- The penalties have been imposed after an inspection conducted by the
Reserve Bank of India (RBI).
Bank | Penalty |
Bank of India | ₹5 crore |
Karnataka Bank | ₹1.2 crore |
Saraswat Bank | ₹30 lakh |
The penalties have been imposed "for non-compliance with directions issued by RBI on ‘Income Recognition and Asset Classification (IRAC) norms." When the old loans are classified as non-performing assets, the profits posted earlier get reduced.
For Karnataka Bank, this is not the first time that RBI has seen a divergence in the way the NPA was calculated and the way it ought to be. The regulator found that loans worth ₹1,115 crore turned out to be
Once the change in unpaid loans was accounted for, and a provision was made, Karnataka Bank had to change its bottomline for FY17 to a loss of ₹95 crore from a reported profit of ₹452 crore. The reported gross NPA for the year ended March 2018 was ₹2,376 crore, about 4.92% of all loans.
Nearly 5% of all loans made by Karnataka Bank were classified as gross NPA at the end of December 2019. The stocks has already lost 16% in the last one month due to the market's risk aversion to banking stocks.
For the state-owned Bank of India, with a market capitalisation of over ₹10,400 crore, the bad loans are already at a whopping 16.3% at the December. The stock is down over 7% for the month of May.
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Indian lenders like SBI, Axis Bank and others need $20 billion in capital— most of it will go into filling up NPA holes