Banks' profitability improves for 6th year in row in FY24: RBI report
With gross NPAs falling to a 13-year low of 2.7%, robust macroeconomic fundamentals enhanced the soundness of banking and NBFC sectors. Scheduled commercial banks' net profits rose 32.8% to Rs3.5 lakh crore, supported by improved RoA (1.4%) and RoE (14.6%). NBFCs achieved strong credit expansion and better asset quality, with GNPA dropping to 3.4%. Banks' consolidated balance sheets grew by 15.5%
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Mumbai: Profitability of banks improved for the sixth consecutive year in 2023-24 and their gross bad debts or NPAs declined to a 13-year low of 2.7 per cent, according to the RBI data released on Thursday. India's strong macroeconomic fundamentals have boosted the performance and soundness of the domestic banking and nonbanking financial sectors. "Banks' profitability rose for the sixth consecutive year in 2023-24 and continued to rise 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," said the Report on Trend and Progress of Banking in India 2023-24.
Asset quality improved, with the gross non-performing assets (GNPA) ratio falling to its lowest in 13 years at 2.7 per cent at end-March 2024 and 2.5 per cent at end-September 2024, it said. Banks' capital position remained satisfactory, as reflected in key parameters like leverage ratio and capital to risk weighted assets ratio (CRAR).
Further, strong credit expansion by NBFCs was accompanied by further strengthening of their balance sheets, improvement in credit quality and profitability, and satisfactory capital buffers. Net profit of the scheduled commercial banks increased by 32.8 per cent to Rs 3,49,603 crore during the last fiscal. At end-March 2024, India's commercial banking sector consisted of 12 public sector banks (PSBs), 21 private sector banks (PVBs), 45 foreign banks (FBs), 12 SFBs, six PBs, 43 RRBs, and two LABs. Out of these 141 commercial banks, 137 were classified as scheduled banks, while four were non-scheduled.
The report said the consolidated balance sheet of the scheduled commercial banks, excluding RRBs, increased by 15.5 per cent during 2023-24, as compared with 12.2 per cent during 2022-23. The non-banking financial companies (NBFC) sector exhibited double digit credit growth, while its unsecured lending contracted and asset quality improved further. The GNPA ratio of NBFCs dropped to 3.4 per cent at end-September 2024; strong capital buffers kept the CRAR well above the stipulated norm at end-September 2024.
