Top 10 Worst Banks in India in 2022
According to the data sourced from the S&P Global Market Intelligence, it was listed out that India dominated the list of the worst banks in the Asia Pacific region. 10 out of 15 worst-performing banks were located in India.
The issue of the worst banks is a trouble for the customers because as the bank fails to satisfy the needs of the customers. This results in the RBI taking the lead to protect its customers. The RBI takes on the approach of handing in the responsibility of the ailing bank to a stronger bank.
The statement is evident by the instance when ICICI Bank took over Bank of Rajasthan in the year 2010.
When investors should be critical about what banks they are opting for depositing their hard-earned money. As the idiom goes, “There is no fire without smoke”.
Similarly, you should watch out for the following signs if your bank is going through financial troubles.
If the bank undergoes problems releasing earnings and the auditor has made any adverse comment or resigned could be taken as a red flag. Any rating downgrades should be closely monitored which is indicative that the bank is in pickles.
Apart from that one can access the bank’s website where the financial statements are uploaded showcasing the break up of various performance metrics.
Asset quality is also a key factor. One must ensure that his bank’s net NPA does not cross the mark of 5%. The credit-Deposit ratio is an aspect that determines how much the bank is giving off its core fund for lending, and the net interest margin should be taken into consideration.
In addition, other factors including the credit adequacy ratio should be taken into account to draw out the conclusion of the bank’s net worth is deteriorating. This helps to draw a list of the worst banks in the country.
Since banking plays a backbone in managing the finances of the customers; one must beware of the top worst banks in the country.
Top Worst Banks of India
In the previous year, Yes Bank has made it to the news because of facing financial stress amidst the Covid-19 situation. In November 2021, Yes Bank’s auditor made a fresh audit when someone from the team opened up about the irregularities in the bank. It has also been brought into account that the bank did not release the earnings for December month even though the deadline has already passed.
The total returns of Yes Bank which was recorded for July to September saw a fallout of -49.63%. The fallout is significant which made Yes Bank take the number one position in the worst-performing banks throughout the country.
2. Punjab and Sind Bank:
In August 2021, Punjab and Sind Bank has opened up about its status. They have revealed that they have accumulated a loss of Rs 3,557 crore against the share premium account of the bank.
Share Premium account is a factor that demonstrates the difference between the face value and the subscription prices of the shares.
On calculating the balance sheet, the Company recorded a loss against the security premium amount of Rs 4835.11 crore and even has recorded a plummeting value of -28.54% in terms of total returns in 2020.
When the NPA values were taken into consideration, the bank has recorded a value of 8.7% in comparison that is indicative of poor bank health.
3. Indian Overseas Bank:
Indian Overseas Bank performed poorly when it was placed under RBI’s prompt corrective action (PCA) scheme. However, the bank has undergone new heights as it was removed from the shadow of RBI.
The bank has lost six and half years of its business to clear up the losses. As of 2020, the total returns were recorded at the value of -24.57%.
The bank is recovering from the losses as it gained a net NPA score of 2.77%, which is considered to be a pretty fair score as directed by RBI guidelines.
Moreover, the bank has also recorded a lower net interest margin of 2.43%.
4. Union Bank of India:
Union Bank falls among the public sector banks of India. Moreover, about 83.5% of the Government’s capital is held by the industry, and thus, it is categorized as a listed entity.
However, the sector has made its name in the top worst banks of the country due to the following reason:
In 2020, the Union Bank of India has accumulated a sum of Rs 26,072 crore bad loans throughout eight years which is indicative of its poor recovery status, and health. The bank has however kept the information confidential regarding the amount of money that has been recovered from the defaulters.
The total returns of the bank in 2020 have aggregated to a total of -23.39%. In addition, the bank’s net NPA has accumulated a score of 8.6%, which should be less than 6% according to RBI’s guidelines.
As a result, the Union Bank of India makes up among the list of top 10 worst banks of India.
5. IDBI Bank:
IDBI is a private sector bank. The bank was grouped in the category of ‘Private Sector Bank’ by the Reserve Bank of India from January 2019. The consequence was due to the acquisition of 51% of the share capital of the bank by the Life Insurance Corporation of India.
IDBI was first put under the PCA scheme in the year 2017 when the financial branch’s net bad loan ratio was estimated at around 15%.In addition, it was followed by breaching of the capital at a significant rate. Moreover, the industry witnessed a third quarterly loss which forced the RBI to take a drastic step.
The IDBI bank was freed from the shackles of the Reserve Bank of India in the year 2021 from the prompt corrective action plan. Later, IDBI bank has decided to recover its bad loaning status to reduce the loan ratio to 15% of advances by the end of 2021. This objective was to be met by promoting loan growth and transferring the toxic assets to the bad banks.
In 2020, the gross NPA was measured to be 28.7% for IDBI bank which is considered to be significantly high. It implies that the bank’s asset quality is in a poor status.
In contrast, the bank obtained a high provisioning coverage ratio of 92.4% , which means that the bank is not vulnerable. The CASA ratio was recorded to be low i.e. it is valued up to 24.1%.
The bank’s assets have also been recorded to yield negative returns accounting for up to -7.63%.
But, after the eradication of strict lending laws of RBI to the bank, IDBI bank has decided to transfer some of its assets to the National Asset Reconstruction Company Ltd to subsequently reduce the net gross percent by 5 to 6%.
The bank has also been anticipating loan growth in the year 2022 by a significant value of 8 to 10%.
6. Central Bank of India:
Central Bank of India has also shared its part of shortcomings as it wrote off a huge amount of loans to big defaulters summing up to an expanding number of Rs17,239.34 crore. To worsen the situation, the bank has recovered only 7 percent of the loan amount that it has supplied to the big defaulters during the past eight years.
To depict an accurate representation, the bank has recovered a total of Rs 1922.69 crores from its defaulters as revealed by the RTI sources.
The total returns were recorded to be -20.14% from July to September. Moreover, the Bank was ranked in the position of Top 7 worst performing banks in the Asia Pacific Region for the year 2020.
However, the bank has recorded a value of 0.54 percent in terms of credit-deposit ratio, which ticks off the bank from capital adequacy issues. A higher value of credit-deposit percentage depicts an over-stretched balance sheet. In contrast, the net NPA represents the poor health status of the bank contributing to a total of 9.3%. The value is estimated to be high in comparison to the value of 6% as prescribed by the RBI guidelines.
7. Punjab National bank:
Based on the data obtained from available sources, Punjab National Bank reported a loss of Rs5,367 crore, which was predicted to be the biggest loss reported by an Indian lender in 2016. The main reason for such a devastating loss can be pointed out by the surge of bad loans. PNB’s bad loans exceeded 12.9%.
PNB has been struggling to recover from the bad loan losses by the rationalization of the expenses with a speedy recovery for the year 2021 to 2022.
The banking sector has planned to rationalize a total of 1000 branches by the end of March 2022. The rationalization will help in cutting up the costs of operational expenditure. The bank is paving the way to head for a strong recovery.
Punjab National bank has a total return of -17.84% as it was recorded from July to September 2020.
The Nirav Modi scam has also resulted in a massive loss for the Punjab National Bank.
As a result, it is considered to be one of the worst-performing banks in India.
8. Jammu and Kashmir Bank:
The records obtained by the Reserve Bank of India found that Jammu and Kashmir Bank suffered from bad loans, which accumulated up to Rs 884 crore on 31st March 2019. Sources stated that the bank was able to recover an aggregate of Rs 54 crore. The latter data were reported in June 2019.
The total returns measured to be -17.82% making the Jammu and Kashmir Bank ranked as the 10th worst performing in India. Moreover, the bank has also recorded a net interest margin of about 0.00% in 2020. The NIM is a factor that determines the difference between the interest earned by the bank and the interest it pays on deposits.
In addition, the capital adequacy ratio was estimated to be around 11.1% for the industry in the year 2020. This implies the reduced ability of the bank to cope up with the losses keeping the capital untouched.
9. UCO Bank:
The UCO Bank has recently been freed from the PCA framework imposed by the RBI. The bank was placed under the scheme in the year 2017 because of its worsening financial health. The UCO bank was able to undo the damages by the year 2021.
The PCA is imposed on the banks when their NPA crosses a value of 6% or their capital is breached.
UCO Bank is ranked in the position of 11 among the 15 worst banks of India with the total returns estimated to be around a plummeting value of -17.76%. The bank has also visualized a declination in the capital.
The Gross NPA was estimated to be around 19.5% which is indicative of the fact that the bank’s assets are poor in status.
The capital adequacy ratio for UCO Bank is estimated to be 10.3% along with NIM cost to be around 0.00%.
10. Bank of India:
Bank of India is an Indian state-owned commercial bank. The headquarters are located in Mumbai, Maharashtra. The total returns were calculated to be around -16.77% making it one of the worst-performing banks in the Asia-Pacific region. It has gained the position of Number 15.
The Bank of India has gained a sum of 189.39 crores in the previous five years that is considered to below. This has made the industry one of the worst banks in India.
Along with it, the provisions for bad loans resulted in 72% of the losses based on the NPA ratio.
Apart from the operating metrics, other factors help in identifying the worst banks in our country.
Bad loaning factors result in the worsening of the status of banks. This can be evident from the data aggregated by comparing the five-year average profits in the Banking sector of India. According to the data, the Indian Overseas Bank performed the worst followed by IDBI and Central Bank of India. As a result, they are among the top worst banks in the country.
The loss in IDBI is because of the provisions of bad loans in the region.
Punjab National Bank has also experienced a massive loss due to the massive fraud by the two jeweler groups, which made it to the list. This has also resulted in PNB being mentioned in the list of worst banks in the country.
Apart from that, the State Bank of India is also considered to be as worst bank despite its high revenues. The customers have complained about the worst services offered in the bank branches, and the occurrence of frequent technical issues in the mobile applications.
Edited and proofread by Ashlyn