NEW DELHI: Two of India’s big state banks saw the pace of bad loan growth slow in the second-quarter, but steep provisions for defaulters in bankruptcy proceedings mean profits will stay under pressure until at least March.

Punjab National Bank (PNB), the second-biggest state lender, reported a better-than-expected second quarter profit on Friday of 5.61 billion rupees, with additions to bad loans 42pc less than the first quarter.

Union Bank of India, the sixth-biggest state lender, reported a surprise 15.31 billion-rupee loss in the three months to Sept 30, mainly due to front-loading of provisions for bankruptcy cases but additional bad loans dropped 40pc on the previous quarter. Uco Bank, a smaller state-run lender that also reported second-quarter results, saw its net loss widening to 6.23bn rupees.

State-run lenders account for the bulk of India’s 9.5 trillion rupees in soured bank loans as of June. The surge in bad loans has choked new lending in an economy which needs more investment to help spur growth. The central bank has ordered commercial lenders to take 12 of the biggest loan defaulters, accounting for about a quarter of the sector’s non-performing loans, to bankruptcy proceedings.

Published in Dawn, November 4th, 2017