• Indian Scheduled Commercial Banks (SCBs) recorded their highest-ever net profit of Rs 23.50 lakh crore in 2023-24.
• The gross non-performing asset (NPA) ratio of SCBs fell to 2.67% in June 2024, a significant decrease from 11.18% in March 2018.
• Public Sector Banks (PSBs) also showed improvement, with their gross NPA ratio declining to 3.12% in September 2024.
• The banking sector's performance has facilitated greater financial inclusion, with the number of bank branches increasing and the number of operative Kisan Credit Card (KCC) accounts growing.

In a significant development for the Indian banking sector, the Scheduled Commercial Banks (SCBs) have recorded their highest-ever aggregate net profit of Rs 23.50 lakh crore in the fiscal year 2023-24. This is a substantial increase from the net profit of Rs 22.63 lakh crore in the previous fiscal year 2022-23. The Ministry of Finance has attributed this remarkable achievement to the significant improvement in the asset quality of SCBs.

The gross non-performing asset (NPA) ratio of SCBs has seen a drastic reduction, falling to 2.67 per cent in June 2024 from a peak of 11.18 per cent in March 2018. This translates to a decrease in gross NPAs from Rs 10.36 lakh crore in March 2018 to Rs 4.75 lakh crore in June 2024. The Ministry further highlighted the increased resilience of the banking sector, as evidenced by the Provision Coverage Ratio (PCR).

Strengthening Balance Sheets and Enhanced Resilience

The PCR has risen from 49.31 per cent in March 2015 to a robust 92.52 per cent in June 2024. This indicates that banks have set aside sufficient provisions to cover potential losses from NPAs, thereby strengthening their balance sheets and enhancing their ability to withstand economic shocks. Public Sector Banks (PSBs) have also shown significant improvement in their asset quality.

The gross NPA ratio of PSBs has declined to 3.12 per cent in September 2024, from 4.97 per cent in March 2015 and from a peak of 14.58 per cent in March 2018. This improvement in asset quality has contributed to PSBs recording their highest ever aggregate net profit of Rs 1.41 lakh crore in FY2023-24, up from Rs 1.05 lakh crore in FY2022-23. In the first half of FY2024-25 alone, PSBs have already recorded a net profit of Rs 0.86 lakh crore.

Robust Banking Sector and Financial Inclusion

The Reserve Bank of India's recent stress test results have further reinforced the strength of the Indian banking sector. The results revealed that SCBs are well-capitalised and capable of absorbing macroeconomic shocks, even without any further capital infusion by stakeholders. The test showed that all banks would be able to meet the minimum regulatory common equity tier 1 (CET1) ratio of 5.5 per cent, even under a severe stress scenario.

The banking sector's performance is not just limited to improved asset quality and profitability. The Ministry of Finance informed that the gross advances of SCBs stood at Rs 175 lakh crore in March 2024. The number of bank branches has increased from 1,17,990 in March 2014 to 1,60,501 in September 2024, with 1,00,686 branches located in rural and semi-urban areas. This expansion in the banking network has facilitated greater financial inclusion.

The Ministry also highlighted the growth in the number of operative Kisan Credit Card (KCC) accounts, which stood at 7.71 crore as of September 2024, with a total outstanding of Rs 9.88 lakh crore. The Micro, Small and Medium Enterprises (MSME) sector has also seen robust growth, with MSME advances registering a Compound Annual Growth Rate (CAGR) of 15 per cent over the last three years. As of March 31, 2024, total MSME advances stood at Rs 28.04 lakh crore, posting an annual growth of 17.2 per cent.