NPA Due to decline in non-performing assets and double digit credit growth, the profit of public sector banks is expected to be more than Rs 1.5 lakh crore in the current financial year. The total net profit of public sector banks (PSBs) increased by 25 percent to Rs 85,520 crore in the first half of the financial year 2024-25, while it was Rs 68,500 crore in the first half of the financial year 2023-24. The trend of increase in net profit of banks is expected to continue in the second half also. Public sector banks recorded their highest-ever total net profit of Rs 1.41 lakh crore in 2023-24 on the back of asset quality, credit growth, healthy capital adequacy ratio and rising return on assets.
Tremendous improvement seen in gross NPA ratio of government banks
The gross NPA ratio of public sector banks has seen a tremendous improvement, improving from a high of 14.58 per cent in March 2018 to 3.12 per cent in September 2024. This reduction in NPAs reflects the success of the steps taken with the aim of removing stress in the banking system. Another indicator of the strength of PSBs is their capital to risk weighted assets ratio (CRAR) which increased from 11.45 per cent in March 2015 to 15.43 per cent in September 2024. These reforms not only reflect the stability and strength of the banking sector, but also position PSBs to better support economic growth.
CRAR of banks is much higher than RBI’s minimum condition of 11.5 percent.
This level of CRAR of public sector banks is much higher than the RBI’s minimum requirement of 11.5 percent, which shows the excellent financial health of the banks. The result is that India has recovered from the deficit situation in 2014-15 and is close to twin balance sheet advantage. RBI had made transparent identification of NPAs mandatory by introducing Asset Quality Review (AQR) in 2015. It also reclassified already restructured loans as NPAs, leading to a sharp increase in reported NPAs. During this period, increasing provisioning requirements for bad loans impacted the financial parameters of banks. This limited their ability to lend and support productive sectors of the economy.
With PTI inputs
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