Provision coverage ratio

The proportion of bad loans already provided for. A bank with ₹1,260 crore of gross bad loans and ₹882 crore of provisions has 70% coverage.

Above 70% is generally considered adequate for an Indian bank.

The signal to watch is coverage falling while gross bad loans rise. That combination means new problem loans are arriving faster than the bank is providing for them, and the reported profit in that period is being supported by under-provisioning. The charge does not disappear; it is deferred into the next few years.

Two ratios moving in opposite directions is worth more than either one.

Coverage falling while bad loans rise is the signal.

The ratio is also quoted in two forms, and the difference is large enough to matter. Coverage excluding technical write-offs measures provisions against loans still on the books. Coverage including them counts accounts already fully written off, which inflates the figure without any additional provisioning. Indian banks disclose both, and a bank whose headline coverage looks strong only on the inclusive basis is reporting a number that says less about its cushion than it appears to. Read the excluding-write-offs figure, and read it beside the gross bad-loan trend.