New Delhi, Dec 15 (UNI) State owned lenders, including State Bank of India, Punjab National Bank and others have recorded their highest-ever aggregate net profit of Rs 1.41 lakh crore in the financial year 2023-24, reflecting the sector’s robust turnaround, underpinned by a significant improvement in asset quality.
The Gross Non-Performing Assets (GNPA) ratio steeply declined, dropping to 3.12% in September 2024, the Ministry of Finance said in a statement.
Demonstrating continued momentum, the Public Sector Banks registered a net profit of Rs 85,520 crore in the first half of 2024-25. In addition to their stellar performance, PSBs have contributed significantly to shareholder returns, paying a total dividend of Rs 61,964 crore over the past three years. This remarkable financial growth underscores the sector’s operational efficiency, improved asset quality, and stronger capital base.
Beyond their financial achievements, these banks have played a key role in promoting financial inclusion. They have implemented crucial government schemes like the Atal Pension Yojana and Pradhan Mantri Jeevan Jyoti Bima Yojana, to name a few. These efforts have ensured that vital benefits reach underserved sections of society. The government of India has actively supported the sector with reforms, welfare measures, and strong policies. This has strengthened the banking system, fostering greater transparency, stability, and inclusivity.
The Gross NPA ratio of Public Sector Banks (PSBs) has witnessed a remarkable improvement, declining to 3.12% in September 2024 from a peak of 14.58% in March 2018. This significant reduction reflects the success of targeted interventions aimed at addressing stress within the banking system.
A turning point came in 2015 when the Reserve Bank of India (RBI) initiated the Asset Quality Review (AQR). This exercise aimed to identify and address hidden stress in banks by mandating the transparent recognition of NPAs. It also reclassified previously restructured loans as NPAs, resulting in a sharp increase in reported NPAs. The heightened provisioning requirements during this period impacted the financial parameters of banks, restricting their ability to lend and support productive sectors of the economy, the government said in a release.
To address these challenges, the Government introduced a comprehensive 4R’s strategy – Recognizing NPAs transparently to ensure accurate identification of stressed assets; Resolution and Recovery of NPAs through targeted measures and legal framework; Recapitalizing PSBs to strengthen their financial position and lending capacity; and finally Reforms in governance and operational practices to enhance efficiency and resilience.
Another indicator of the improved resilience of Public Sector Banks (PSBs) is their Capital to Risk (Weighted) Assets Ratio (CRAR), which rose by 39 basis points to 15.43% in September 2024, up from 11.45% in March 2015. This substantial improvement not only highlights the renewed stability and robustness of India’s banking sector but also positions PSBs to better support economic growth.
Notably, this CRAR far exceeds the Reserve Bank of India’s (RBI) minimum requirement of 11.5%, underscoring the strengthened financial health of these institutions.
PSBs continue to expand their reach across the nation, deepening financial inclusion. Their strengthened capital base and improved asset quality have enabled them to access markets independently, reducing reliance on government recapitalization, the Ministry stated.
