The highest underestimation was made by Bank of Maharashtra, by Rs 3,034 crore, followed by Central Bank of India (Rs 2,097 crore), Corporation Bank (Rs 1,954 crore) and Oriental Bank of Commerce (Rs 1,350 crore).
The CAG said the primary responsibility in adequate provisioning for any diminution in the value of loan assets, investment or other assets is of the bank managements and the statutory auditors. The assessment made by the inspecting officer of RBI is given to assist the management and the auditors in taking a decision, in terms of prudential guidelines, it said.
"In conformity with the prudential norms, provisions should be made on NPAs on the basis of classification of assets into prescribed categories," it said.
CAG also observed that the criteria for infusing capital was changed by the government in between. It said,"PSBs signed (agreements) in the February-March period in 2012 with the department of financial services for performance-linked capital infusion during 2011-12 to 2014-15. However, achievement against the (agreed-on) targets was not linked to actual capital infusion."
The basis for parameters on capital infusion changed between actual and estimated values, both year to year and often within different tranches in the same year. "For FY15, there was a shift from need-based to performance-based capital infusion, with return on assets being employed as the basic criteria."
It recommended that the criteria for fund infusion, once finalised, be consistently applied across all PSBs. In cases of variation, the reasons should be well documented.
CAG also expressed doubt over the possibility of PSBs raising about Rs 1 lakh crore from the market by 2019, even as the finance ministry asserted that the large ones would succeed in tapping funds. The audit body said there were significant gaps between book value and market value of PSB shares, with most of these having a lower market value. This might come in their way for approaching the market.
The government's 'Indradhanush' plan (2015-19) envisages that PSBs would raise Rs 1.1 lakh crore over this period from the market, along with capital infusion of Rs 70,000 crore from the public treasury, to meet their assessed capital requirement of Rs 1.8 lakh crore under the Basel-III global risk norms. So far (January 2015-March 2017), PSBs have raised Rs 7,726 crore from the market. Which "raises doubts on the possibility of raising the balance by 2019", it said.