With the public sector bank being put prompt corrective action (PCA) by the Reserve Bank of India, along with other PSBs that have reported net losses for two consecutive financial years, it seems like the path towards stability seems steep for Allahabad Bank following their Q2 report. As per the Q2 report of Allahabad Bank, due to bad loans, the net losses have risen to Rs.18.2 billion at the end of September. The bank posted a net profit of Rs.702 million, during the same period the previous financial year. However, the CEO and managing director of Allahabad Bank, S S Mallikarjuna Rao, said that the bank is looking to come out of PCA (prompt corrective action) by June 2019.
In order to stabilise their current situation, the PSB (public sector bank) is banking on capital infusion from the Government of India, their LIC subscriptions, and QIP to meet their capital requirement for lending. The CEO pointed at bad loans from the agricultural sector amounting to Rs.8 billion as one of the prime reason behind their Q2 net loss. In addition, the bank foresees bad loans or NPAs (Non-Performing Assets) from the corporate sector amounting to Rs.8 billion to Rs.10 billion in the coming months.
That said, the CEO of Allahabad Bank confidently said that the bank is looking to reduce its net NPAs to below the 6% margin by the end of the financial year, March 2019. Currently, the gross NPAs of the total lending of the bank stands at 17.53% against 14.10% the same period last financial year.