MUMBAI India's IDBI Bank expects bad loans will rise in the coming quarters and it may have to go slow new lending to conserve capital, a senior executive said, as the state-run lender reported a $335 million third-quarter loss.
India's banks, predominantly the dominant state-run lenders, have been saddled with $133 billion of stressed loans to businesses, such as those in metals and power. IDBI, which is more exposed to business loans than consumer lending, has one of the highest bad loan ratios in the sector.
The bank reported on Tuesday that its net loss in the three months to Dec. 31 widened to 22.55 billion rupees from 21.84 billion rupees a year earlier.
The state-run bank, in which the government wants to cede majority control in a test case for reform, said gross bad loans as a percentage of total loans rose to 15.16 percent at the end of December from 13.05 percent in September, and 8.94 percent a year earlier.
P. Sitaram, an executive director at the bank, told Reuters the bank expects bad loans to continue to rise for the next two to three quarters and that provisions could rise with the ageing of bad loans.
IDBI Bank's provisions for bad loans jumped to 23.57 billion rupees ($349.78 million) for the three months to Dec. 31, 2016, from 17.15 billion rupees a year earlier.
The bank will need to raise capital to meet Basel III banking rules that will be fully implemented by March 2019.
That could mean a slowdown in lending growth, Sitaram said.
"We are just on the margin. We need to ensure that we meet the regulatory capital norms," he said in a phone interview. "The bank will not be in a position to expand its advance book in any aggressive way, maybe marginal growth will be there."
Shares in IDBI Bank closed 2.2 percent lower in a Mumbai market that fell 0.4 percent.
United Bank of India, a smaller state-run lender which also reported third-quarter results on Tuesday, saw its net profit rising.
($1 = 67.3900 Indian rupees)
(Reporting by Devidutta Tripathy, editing by Louise Heavens)