The new corporate debt recast (CDR) norms issued by the Reserve Bank last week will have a massive impact on the profitability of State-run banks to the tune of 18 per cent, says a report by Standard Chartered Securities.
However, the report says, the impact on private sector banks will be minimal, up to 2 per cent in profit terms.
State-run banks together had a CDR book of Rs 1,17,100 crore as of FY12, according to the report. In FY12 alone, they added Rs 62,800 crore in restructured assets.
The new provisions, under which banks will have to provide additional 3 per cent in the first year and 5 per cent in the second year, will see this increasing by Rs 3,500 crore.
SBI will have to make Rs 930 crore additional provisioning at 3 per cent incremental coverage, which will bring down EPS growth (FY12) to 34 per cent from 42 per cent. As of March 12, SBI had a restructured loan book of Rs 31,160 crore with the FY12 CDR book totalling Rs 8,400 crore.
The new guidelines proposes 5 per cent provision on restructured loans up from the current 2-5 per cent in a phased manner over two years.