Finance Ministry Reports Strong Performance of India's Banking Sector as NPAs Decline and Profits Surge

New Delhi, Dec 26 (NationPress) Thanks to the government's extensive strategies for addressing distressed accounts, recapitalisation, and banking reforms, the financial stability and strength of India’s banking sector have seen a remarkable enhancement, highlighted by a substantial reduction in NPA (non-performing assets) ratios and record profits in 2024, as detailed in the year-end assessment released by the Finance Ministry.

The Gross NPA ratio for scheduled commercial banks fell to 2.67 percent (Rs 4.75 lakh crore) in June 2024, down from 4.28 percent and a peak of 11.18 percent (Rs 10.36 lakh crore) in March 2018.

Moreover, public sector banks reported a Gross NPA ratio of 3.32 percent (Rs 3.29 lakh crore) in June 2024, down from a peak of 14.58 percent (Rs 8.96 lakh crore) in March 2018.

The NPA ratio indicates the ratio of bad loans compared to the total loans disbursed by banks.

Additionally, the Net NPA figures for scheduled commercial banks (SCBs), which encompass both public and private sector banks, decreased to Rs 1.05 lakh crore (0.6 percent) in June 2024, significantly lower than the peak of Rs 5.2 lakh crore (5.94 percent) recorded in March 2018.

Public sector banks also witnessed a decline in Net NPAs, which fell to Rs 0.68 lakh crore (0.71 percent) in June 2024 from Rs 2.15 lakh crore (3.92 percent) in March 2015, down from a high of Rs 4.54 lakh crore (7.97 percent) in March 2018.

The Finance Ministry noted that the resilience of the banking sector has been bolstered, with the provision coverage ratio (PCR) of SCBs rising from 49.31 percent in March 2015 to a healthy 92.52 percent in June 2024.

Similarly, the provision coverage ratio for PSBs has increased from 46.04 percent in March 2015 to a robust 93.36 percent by June 2024.

Furthermore, there has been a significant enhancement in the capital adequacy of banks, with the capital to risk-weighted assets ratio (CRAR) of SCBs improving by 185 basis points to reach 14.79 percent in June 2024, up from 12.94 percent in March 2015.

PSBs also reported an increase in their CRAR, which improved by 173 basis points to reach 13.18 percent in June 2024, compared to 11.45 percent in March 2015.

During the fiscal year 2023-24, SCBs achieved a record aggregate net profit of Rs 3.50 lakh crore, compared to Rs 2.63 lakh crore in FY 2022-23.

In FY 2023-24, PSBs recorded their highest ever aggregate net profit of Rs 1.41 lakh crore, surpassing the Rs 1.05 lakh crore net profit from FY 2022-23, with Rs 0.40 lakh crore earned in the first quarter of FY 2024-25.

PSBs distributed dividends amounting to Rs 27,830 crore to shareholders, of which the Government of India's share was Rs 18,013 crore in FY 2023-24, compared to a total dividend of Rs 20,964 crore in FY 2022-23 (GoI share Rs 13,804 crore).

"The implementation of comprehensive reforms has significantly enhanced the financial health of PSBs, improving their capacity to attract capital (in both equity and bonds) from the market. PSBs have raised Rs 4.34 lakh crore from the market from FY 2014-15 to FY 2023-24," the report further stated.

Banks that were previously under the Prompt Corrective Action (PCA) framework by the Reserve Bank of India (RBI) have shown significant advancements, leading to the removal of all PCA restrictions, as highlighted in the statement.

Through addressing NPA issues and recapitalisation, the government’s reforms have aided in enhancing the overall credit flow within the economy. As a result, PSBs have emerged more robust and are well-positioned to support growth in the productive sectors of the economy, according to the statement.