banks-see-sixth-straight-year-of-profit-growth-in-fy24-rbi

Profitability of banks improved for the sixth consecutive year in 2023-24, with their gross bad debts or non-performing assets (NPAs) declining to a 13-year low of 2.7 per cent, according to data released by the Reserve Bank of India (RBI) on Thursday.

India's strong macroeconomic fundamentals have enhanced the performance and soundness of the domestic banking and non-banking financial sectors.

 

“Banks’ profitability rose for the sixth consecutive year in 2023-24 and continued to increase in H1:2024-25, with the return on assets (RoA) at 1.4 per cent and return on equity (RoE) at 14.6 per cent,” stated the Report on Trend and Progress of Banking in India 2023-24.

 

Asset quality improved, with the gross non-performing assets (GNPA) ratio dropping to its lowest in 13 years at 2.7 per cent by the end of March 2024 and further to 2.5 per cent by the end of September 2024, the report noted.

 

The capital position of banks remained satisfactory, as reflected in key metrics such as the leverage ratio and capital to risk-weighted assets ratio (CRAR).

 

Moreover, strong credit expansion by non-banking financial companies (NBFCs) was accompanied by strengthened balance sheets, improved credit quality and profitability, and adequate capital buffers.

 

The net profit of scheduled commercial banks surged by 32.8 per cent to ₹3,49,603 crore during the last fiscal year.

 

As of end-March 2024, India’s commercial banking sector comprised 12 public sector banks (PSBs), 21 private sector banks (PVBs), 45 foreign banks (FBs), 12 small finance banks (SFBs), six payments banks (PBs), 43 regional rural banks (RRBs), and two local area banks (LABs).

 

Of these 141 commercial banks, 137 were classified as scheduled banks, while four were non-scheduled.

 

The report highlighted that the consolidated balance sheet of scheduled commercial banks, excluding RRBs, grew by 15.5 per cent during 2023-24, compared with 12.2 per cent in 2022-23.

 

The non-banking financial company (NBFC) sector also recorded double-digit credit growth, with unsecured lending contracting and asset quality further improving.

 

The GNPA ratio of NBFCs fell to 3.4 per cent by the end of September 2024, while strong capital buffers ensured that the CRAR remained well above the stipulated norm at the same period.