Do really the Banks are in Loss?.
Many public sector Banks has declared loss in their Balance sheet. They set aside a part of their profit as NPA provision which has affected the performance and net profit for the current FY. Mind you it's provision and NOT ACTUAL Loss. It is an accounting adjustment and not a real loss. Hence, there is no outflow of funds from the Books. The fact is that due to this provisions bank is forced to set aside these funds as cushion funds with RBI, and may not be able to put it into trade for sometime, as in case the account actually becomes a loss asset, the same will be used to meet the loss. But if the account become standard or getting some recovery, the funds so parked with RBI will be reversed (in part or full, depend on recovery)and will soon come into system and will directly reckon as profit. It will straight away go to the Bottom-line. Hence there is not panic situation as it is spread. In otherwords, the provisions are deferred profits. Once the amount is releases from it...