Taking a strong note of State Bank of India’s huge profit erosion for March quarter due to higher provisions, accounting regulator ICAI on Friday said it would send a letter asking the country’s largest lender to explain the reasons for higher provisions for bad loans.
“We have decided to send a letter to SBI to enquire about the reasons, which led to an increase in provisions, to explain a rise in provisions in the March quarter over that in December (2010) quarter,” The Institute of Chartered Accountants of India’s (ICAI) President, G Ramaswamy, said.
The letter seeking explanation from SBI will be sent within a week and further action on the issue will depend on SBI’s response, Ramaswamy said.
The ICAI will also communicate with banking watchdog Reserve Bank and capital market regulator Sebi with regard to the issue, he added.
Such a move by ICAI will only compound the worries of the nation’s largest lender as RBI Deputy Governor K C Chakrabarty had also recently questioned the practice of banks reporting fall in profits after a change of guard.
SBI’s Q4 profits plunged by nearly 99 per cent to Rs. 20.88-crore for the quarter ended March 31, 2011 versus Rs. 1,866.60-crore it had posted for the same period last year.
One of the major denting factors was a 82 per cent jump in its total provisioning, which increased to Rs. 6,059 crore.