Provision Coverage RatioPCR
The share of a bank's bad loans it has already set aside provisions against.
Why you care
PCR is the shock-absorber gauge. A high PCR means the pain's been taken; a low one means more losses are still coming. Analysts read a rising PCR as prudence and a falling one as a red flag, even if NPAs look stable. It's the one second-order number to know beyond gross NPA.
Run the numbers
₹60 cr provided against ₹100 cr of bad loans = 60% PCR (illustrative). RBI and analysts generally like ~70%+. Push provisions to ₹75 cr and PCR rises to 75% — safer, but at the cost of ₹15 cr more off this quarter's profit.
Where this goes
PCR is built from provisioning over gross NPAs. It tells you how much of the loss implied by the asset-classification ladder is already absorbed versus how much is still to come — a key line on the results scorecard.
Why you care
The Provision Coverage Ratio (PCR) is the share of a bank's gross bad loans that it has already set aside provisions against. That's a measure of how braced the bank is for losses it has already recognised.
PCR is the "shock absorber" gauge. A bank with a high PCR has already taken the pain on its bad loans, so future write-offs hold few surprises. A bank with a low PCR is exposed — more losses are still waiting to flow through its P&L. Analysts treat a rising PCR as a sign of prudence and a falling one as a red flag, even if NPAs look stable. If you only learn one "second-order" asset-quality number beyond gross NPA, make it PCR — it tells you whether the bank is being honest with itself.
Run the numbers
From the gross/net NPA example:
- Gross NPAs: ₹100 cr
- Provisions held: ₹60 cr
- PCR = 60 / 100 = 60%
This bank has braced for 60% of its known bad loans; the other 40% (₹40 cr net) is still exposed. RBI and analysts generally like to see PCR around 70% or higher. If this bank pushed provisions to ₹75 cr, PCR would rise to 75% — safer, but at the cost of ₹15 cr more off this quarter's profit. That trade-off — safety now versus reported profit now — is the judgement call behind every PCR number.
Where this goes
PCR is built directly from provisioning and gross NPAs — it's the ratio of one to the other. It tells you how much of the loss implied by the asset-classification ladder has already been absorbed versus how much is still to come. It's one of the numbers you scan when you read a bank's results.