Public sector lender Bank of India has reported 29% decline in its net profits for the first quarter of this fiscal. The drop in profits has been said to be caused by increased cost of deposits and higher provisions.

The net profit of the bank for Q1 stood at Rs 517.50 crore as compared to Rs 725 crore for the same period in the last fiscal.

"The elevated cost of deposits adversely affected the net interest margin, resulting in lower profitability. Further, with the bank moving to the system driven recognition of non-performing assets, bad loans increased and impacted profits," said Mr Alok K Misra, CMD of the bank.

The cost of deposits for the bank have shot up by 122 bps in this quarter.

Gross NPAs of the bank rose by 21% figuring to Rs 5791 crore.