The Finance Ministry announced on Saturday that the gross non-performing assets (NPA) ratio for scheduled commercial banks (SCBs) dropped significantly to 2.67% in June 2024. This is a marked decrease from 11.18% in March 2018.
The ministry also highlighted that asset quality has improved substantially. The provisional coverage ratio (PCR) increased from 49.31% in March 2015 to 92.52% in June 2024, showing enhanced resilience.
An NPA refers to a loan that has not generated income or interest for the bank for a specified period, typically 90 days. If the borrower fails to make payments during this period, the loan is categorized as NPA.
PCR, on the other hand, represents the percentage of funds a bank sets aside to cover losses from bad debts.
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The ministry also pointed out that public sector banks (PSBs) saw their NPA ratio decline to 3.32% in June 2024. This was down from 4.97% in March 2015 and 14.58% in March 2018.
In terms of profits, SCBs recorded their highest-ever aggregate net profit of Rs 3.50 lakh crore in FY 2023-24, up from Rs 2.63 lakh crore in FY 2022-23.
The government emphasized its proactive support for the banking sector, focusing on business needs and employee welfare. This support aims to ensure stability, transparency, and growth.
The Reserve Bank of India (RBI) launched the Asset Quality Review (AQR) in 2015 to address stress within the banking system. This led to more transparent recognition of NPAs and the withdrawal of special treatment for restructured loans. As a result, NPAs peaked in 2018 but have steadily decreased since.
For public sector banks (PSBs), FY 2023-24 marked the highest-ever net profit of Rs 1.41 lakh crore, compared to Rs 1.05 lakh crore in 2022-23. In the first half of FY 2024-25, PSBs reported a net profit of Rs 0.86 lakh crore.
In the last three years, PSBs have paid a total dividend of Rs 61,964 crore.
The number of bank branches also increased significantly. From 117,990 branches in March 2014, the total reached 160,501 branches by September 2024. Of these, 100,686 branches are in rural and semi-urban areas.