THE HINDU Editorial Vocabulary- February 13, 2018 - Topic 1

Unending pain: On SBI’s Q3 loss

If the financial performance of India’s largest lender is anything to go by, an end to the severe bad loans crisis may be much farther beyond the horizon than previously anticipated. For the first time in almost 19 years, the State Bank of India reported a quarterly loss of Rs.2,416 crore for the three months ended December, compared with a net profit of Rs.2,610 crore in the year-earlier period.

 While the figures are not strictly comparable after SBI completed merger with its associates, the loss was the result of both a massive increase in provisions to account for bad loans and a substantial amount of mark-to-market losses on its holding of government bonds. Provisions for non-performing assets (NPAs) more than doubled to about Rs.17,760 crore, from about Rs.7,200 crore in the third quarter of 2016-17. On treasury operations, SBI recorded a loss of about Rs.3,255 crore, versus a profit of about Rs.4,776 crore in the comparable period. The bank revealed that an audit by the Reserve Bank of India showed a divergence of Rs.23,239 crore in the way it classified assets at the end of the last financial year, which led to increase in provisions in the last quarter. Most of these reclassified assets are linked to troubled projects in sectors including power and telecom. SBI, of course, is not the only lender to have had its assets forcibly reclassified by the RBI. Private sector lenders have also been found guilty of pushing troubled assets under the carpet until the RBI called their bluff.

It may be tempting to believe that last year’s bankruptcy law reforms will soon begin to ease the pain at banks by encouraging the quick sale of assets of troubled borrowers. The proceeds from such sales, however, would likely amount to very little in comparison with the mammoth scale of troubled assets. According to a joint study by Assocham and Crisil, gross NPAs in the banking system are estimated to increase to Rs.9.5 lakh crore by March 2018, from Rs.8 lakh crore a year earlier. In that case, write-offs recognising losses may be the most honest and practical way to deal with the bad loans problem. So the RBI in the coming months should continue to push banks, both public and private, to promptly recognise the stressed loans on their portfolios. Incidentally, Prime Minister Narendra Modi last week laid the blame for bad loans on the previous government. While it is quite true that the present bad loans crisis has been a long time in the making, the problem of lax corporate governance, which has plagued public sector banks and contributed in no small measure to the present crisis, still remains largely unaddressed by the government. Even the latest plan to recapitalise public sector banks may achieve little more than giving some temporary relief to lenders for the sake of reviving credit growth. The bad loans problem is likely to remain a festering sore and risks undermining the health of the economy until meaningful structural reforms to the banking system are undertaken.

Vocabulary

Performance: an act of staging or presenting a play, concert, or other form of entertainment.

Example: Don Giovanni had its first performance in 1787

Synonyms: show, production, showing, presentation, staging, concert

Antonyms: cessation, deliberation, endurance, immobility

Anticipate: regard as probable; expect or predict.

Example: She anticipated scorn on her return to the theater

Synonyms: expect, foresee, predict, be prepared for, bargain on

Antonyms: despair of, distrust, doubt, doubt, dread, fear

Comparable: able to be likened to another; similar.

Example: Flaked stone and bone tools comparable to Neanderthal man's tools

Synonyms: similar, close, near, approximate, akin, equivalent

Antonyms: unequaled, different, unrivaled, unmatched, matchless

Massive: large and heavy or solid.

Example: A massive rampart of stone

Synonyms: huge, enormous, vast, immense, large, big, mighty

Antonyms: little, small, hollow, light

Substantial: of considerable importance, size, or worth.

Example: A substantial amount of cash

Synonyms: considerable, real, significant, important, notable

Antonyms: aeriform, unreal, insubstantial, unwholesome

Audit: conduct an official financial examination of an individual's or organization's accounts.

Example: Companies must have their accounts audited

Synonyms: inspect, examine, survey, go through, scrutinize

Divergence: the process or state of diverging.

Example: The divergence between primates and other groups

Synonyms: separation, dividing, parting, forking, bifurcation

Antonyms: convergency, convergence

Bluff: an attempt to deceive someone into believing that one can or will do something.

Example: The offer was denounced as a bluff

Synonyms: deception, front, subterfuge, pretense, posturing, sham

Antonyms: indirect, gradual

Mammoth: huge.

Example: A mammoth corporation

Synonyms: huge, enormous, gigantic, giant, colossal, massive

Antonyms: little, small

Recognise: acknowledge the existence, validity, or legality of.

Example: The defense is recognized in Mexican law

Synonyms: acknowledge, accept, admit, realize, be aware of, be conscious of

Plague: cause continual trouble or distress to.

Example: The problems that plagued the company

Synonyms: afflict, bedevil, torment, trouble, beset, dog, curse

Antonyms: affection, appreciation, approval, benefit, blessing

Festering:  become septic

Example: I developed a tropical sore that festered badly

Synonyms: suppurate, become septic, become infected, form pus