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State-owned IDBI Bank Ltd reported a record third-quarter profit on Monday, boosted by lower bad loan provisions and improved asset quality.

IDBI Bank, which had some of the worst asset quality among lenders during India's bad loan crisis, has seen soured loans drop dramatically over the past few quarters on strong recoveries, and is now the focus of a government move to monetise a majority stake.

Gross bad loans as a measure of total loans -- a key measure of asset quality -- improved to 13.82% in the quarter ended Dec. 31, from 16.51% in the previous quarter. The lender said last quarter it expected the figure to come down to 12% by the end of this fiscal year.

Most Indian banks have managed to improve their asset quality helped by a clean-up of balance sheet, write-offs and recoveries, and by ensuring that new slippages remained in check. 

IDBI Bank's profit rose 60% to 9.27 billion rupees ($113.84 million) for the reported quarter, from 5.78 billion rupees a year earlier, helped by a 75% drop in bad loan provisions and a 2% dip in overall provisions.

The company's net interest margin, a measure of its profitability, climbed to 4.59% from 3.88% a year ago, while net advances jumped 17% to 1.5 trillion rupees.

IDBI's shares jumped nearly 2% after the results, before paring gains.

($1 = 81.4300 Indian rupees)