The Reserve Bank of India has asked the country’s largest lender State Bank of India to increase its provision coverage ratio for bad loans, considering the low provisions made by it when compared to the industry average.

Presently, the bank has made provisions at 38.72 percent for the current fiscal which is very low when compared with the industry average of 52 percent.

The regulator feels that the bank must maintain an average PCR of 50 percent, considering the increase in number of home loans defaults in recent past.

The PCR of its peer banks, Punjab National Bank and Bank of Baroda stood at 90 percent and 75 percent respectively.

The regulator has also indicated a drop in SBI PCR on y-o-y basis. In 2005-06, the PCR of the bank was 49 percent. The PCR was lowered to 38 percent in 2008-09.

However, the bank reasoned that the loan loss provisions made by it are in accordance with the regulator’ guidelines.

The bank also indicated that its PCR would work out to be 58.52 percent considering the revenue and general reserves, which amount to Rs 3,086 crore.

Explaining the lower provisioning, the bank said, “PCR reflects the quality of non-performing assets (NPA). Lower requirement of provisions indicates the quality of NPAs is better and there are chances of upgradation to a higher category, i.e., ‘standard’ from ‘sub-standard’ or ‘sub-standard’ from ‘doubtful’.”