Indian Public Sector Banks (PSBs) have reported their highest-ever aggregate net profit of Rs 1.41 lakh crore for the financial year 2023-24, according to a release from the Ministry of Finance on Sunday. The Gross Non-Performing Assets (GNPA) ratio has also seen a significant decline, dropping to 3.12% as of September 2024.
In a demonstration of continued momentum, PSBs recorded a net profit of Rs 85,520 crore in the first half of the 2024-25 financial year. This remarkable financial growth highlights the sector’s operational efficiency, improved asset quality, and stronger capital base, reflecting a robust turnaround in the banking sector.
Significant Contributions to Shareholder Returns and Financial Inclusion
Over the past three years, PSBs have contributed significantly to shareholder returns, paying a total dividend of Rs 61,964 crore. Beyond their financial achievements, these banks have played a crucial role in promoting financial inclusion by implementing key government schemes such as the Atal Pension Yojana and Pradhan Mantri Jeevan Jyoti Bima Yojana, ensuring that vital benefits reach underserved sections of society.
The government of India has actively supported the sector through reforms, welfare measures, and strong policies, which have strengthened the banking system and fostered greater transparency, stability, and inclusivity.
Remarkable Improvement in NPA Ratios and Capital Adequacy
The Gross NPA ratio of PSBs has improved significantly, declining to 3.12% in September 2024 from a peak of 14.58% in March 2018. This reduction reflects the success of targeted interventions aimed at addressing stress within the banking system. A pivotal moment came in 2015 when the Reserve Bank of India (RBI) initiated the Asset Quality Review (AQR) to identify and address hidden stress in banks, leading to a transparent recognition of NPAs.
The heightened provisioning requirements during this period impacted banks’ financial parameters, restricting their ability to lend and support productive sectors of the economy. However, another indicator of the improved resilience of PSBs is their Capital to Risk (Weighted) Assets Ratio (CRAR), which rose by 398 basis points to 15.43% in September 2024, up from 11.45% in March 2015. This substantial improvement underscores the renewed stability and robustness of India’s banking sector, positioning PSBs to better support economic growth.
Notably, this CRAR exceeds the Reserve Bank of India’s minimum requirement of 11.5%, highlighting the strengthened financial health of these institutions.
