As the SBI chairman said, banks also have to live with a high level of loan recasts in this environment—SBI restructured R4,384 crore of debt in Q1FY14 and while this may be lower than the R8,669 crore in Q4FY14, the management indicated there was more to come—some R10,000 more could be by the end of FY14. As FE recently reported, a clutch of seven banks is expected to recast R15,000 crore in Q2FY14 itself. However most banks are setting aside capital to take care of potential NPAs—for a sample of 24 state-owned banks, provisions have risen 38% yoy, most of it presumably for loan losses. In SBI’s case, however, total provisions fell 15% yoy and those for loan losses came off to R2,266 crore a yoy fall of 19%; indeed SBI’s provision coverage ratio has actually dropped off to 60.6% from 66.6% at the end of March 2013. Had the provisions been higher, SBI’s bottom line which fell 13.6% yoy in Q1FY14, might have been even smaller because the bank also benefited by paying lower taxes. All in all, it was a poor set of numbers because while the growth in the net interest income was an anaemic 3.5% yoy, there was a sharp jump in expenses—a fair part of it on pension provisions. Add to that a mark-to-market hit on the foreign investment book. With an economic recovery nowhere in sight, the worst might not be over for India’s banks—the 7% rise in the net interest income for the same sample of 24 banks might shrink given how the cost of funds is quickly going up.