A robust growth in interest income, coupled with tight control on interest expenses, helped State Bank of India report a 14 per cent increase in net profit in the third quarter ended December 31, 2010. Net profit rose to Rs 2,828 crore, from Rs 2,479 crore in the corresponding quarter last year.
It recorded an interest income — comprising mainly of interest on advances, income from investments and other income — of Rs 21,413 crore, up 20 per cent over the corresponding quarter last year (Rs 17,780 crore). Interest expended was contained at Rs 12,363 crore (Rs 11,463 crore).
But for what he considered an arbitrary regulatory stipulation on the provision coverage ratio (PCR), the bank's net profit would have been Rs 3,280 crore, a 32 per cent growth.
In the reporting quarter, loan loss provisions shot up 217 per cent to Rs 1,632 crore (Rs 515 crore). Following the increase in provisioning, the bank's PCR rose to 64.07 per cent (56.19 per cent), against the regulatory requirement of 70 per cent.
The bank has written to the RBI to allow it to reach the stipulated provisioning coverage ratio of 70 per cent by March 2012 instead of September 2011. This will put less strain on the bank and enable it to systematically make a provisioning of about Rs 500 crore each quarter for the next few quarters.
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