Commercial banks in India reported a sixth consecutive year of rise in their net profits in 2023-24 while bad loans continued to fall, according to the Reserve Bank of India's (RBI's) annual publication "Trends and Progress of Banking in India", released on Thursday. "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," the report said.
RBI has identified about 50 cases for NPA resolution after it was empowered by the government to ask banks to initiate insolvency proceedings.
Union Finance Minister Nirmala Sitharaman will review the performance of regional rural banks (RRBs) after the Budget session of Parliament, according to two people familiar with the matter. The finance minister will review the performance of RRBs after August 13. The review will include discussions on enhancing the digital capabilities of RRBs, said a senior government official.
In absolute terms, the outstanding book value of NPAs of LIC in the debt portfolio across life, pension and unit-linked funds is to the tune of Rs 32,685.39 crore at the end of December 2019.
'Probably revised guidelines will come, and then the real picture will emerge.'
State Bank of India (SBI) on Saturday reported an almost flat standalone net profit at Rs 17,035 crore for the first quarter of the current financial year. The country's biggest lender had posted a net profit of Rs 16,884 crore in the April-June quarter of 2023-24. The bank's total income increased to Rs 122,688 crore in the first quarter against Rs 108,039 crore a year ago, SBI said in a regulatory filing.
The Reserve Bank on Thursday asked banks to improve their ability to manage stressed assets, but said there was nothing alarming about an unexpected rise in the non-performing assets (NPA) levels this fiscal.
SBI Chairman Pratip Chaudhuri told reporters in New Delhi on Thursday the Kingfisher Airlines (KFA) account had turned into a non-performing asset (NPA). "The account became an NPA on December 31, 2011. They are in default," Chaudhuri said.
A Rs 525-crore contingency provision during the July-September period led to a 19 per cent fall in IndusInd Bank's share price on Friday (October 25). Contingency provisions are generally made when a lender expects more bad loans in the coming quarters. Shares of the bank on Tuesday (October 29) declined 1.53 per cent to settle at Rs 1,038.2 apiece on the BSE.
The bad assets or gross NPAs of commercial banks fell to a 12-year low of 2.8 per cent in March 2024 and may go down further to 2.5 per cent by the end of the current fiscal, said the RBI's Financial Stability Report (FSR) released on Thursday. Scheduled Commercial Banks' (SCBs) gross non-performing assets (GNPA) ratio fell to 2.8 per cent, and the net non-performing assets (NNPA) ratio to 0.6 per cent at the end of March 2024. "The asset quality of SCBs recorded sustained improvement, and their GNPA ratio moderated to a 12-year low in March 2024. Their NNPA ratio too improved to a record low," said the June FSR.
Net NPA ratio for private banks declining for last three years.
The Reserve Bank of India (RBI) on Monday directed banks and non-banking financial companies (NBFCs) offering gold loans to thoroughly review their policies, processes, and practices to identify any gaps. The central bank also told them to closely monitoring their gold loan portfolios amid significant growth observed in this segment vis--vis some lenders. Additionally, the RBI, through a circular, instructed these lenders to ensure adequate controls over outsourced activities and third-party service providers.
At Rs 547.64 crore (Rs 5.47 billion), Ahmedabad district has topped the chart for highest number of non-performing asset (NPA) properties in Gujarat for a period of 12 months from February 2011 to February 2012.
ICICI Bank reported good results for the October-December 2023 quarter (Q3), with 24 per cent year-on-year (Y-o-Y) growth in profit after tax (PAT). Net interest margin (NIM) dropped 10 bps quarter-on-quarter (Q-o-Q) to 4.43 per cent. Credit growth was at 19 per cent Y-o-Y (4 per cent Q-o-Q), while deposit growth was at 19 per cent Y-o-Y (3 per cent Q-o-Q).
Bankers have demanded several changes in the NPA laws including a minimum deposit of 25 per cent of the outstanding loan amount by the defaulter for contesting a bank's claim over its assets.
Only NIIF has stayed the course as a viable infrastructure financing institution.
State-owned Indian Renewable Energy Development Agency's (Ireda's) chairman and managing director Pradip Kumar Das has announced that the company has requested the government to allow it to carry out a follow-on public offer (FPO) as it will need further equity infusion to maintain the pace of growth. The FPO would aim to raise between Rs 4,000 crore and Rs 5,000 crore. Ireda, which provides funding assistance and other services to renewable energy and energy efficiency/conservation projects and is 75 per cent owned by the government of India, has requested the Union Finance Ministry to be included under Section 54EC of the Income Tax Act, which will help reduce borrowing costs.
An increased level of 'stressed assets' in the banking system could push up the NPA levels of banks, State Bank of India's chairman O P Bhatt, told reporters on the sidelines of a Ficci-IBA organised banking seminar on Thursday.
'As these segments are growing at 25 per cent for the last three years, credit quality has been extremely good.'
Concerned over banks hiding their actual NPA numbers, RBI Governor Raghuram Rajan on Tuesday said the central bank is "increasingly turning towards taking action" on such divergences.
Despite steady loan growth, the banking sector is expected to report subdued margins in the quarter ending June 2024 (Q1FY25), driven by high demand for deposits amidst tight liquidity conditions. However, according to Bloomberg analysts, listed banks are forecasted to see a 14.5 per cent year-on-year (Y-o-Y) increase in net profit. Estimates showed that banks' net interest income (NII), and revenues from interest minus interest expenses might grow 11.9 per cent Y-o-Y.
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Net NPA of the 26 public sector banks, including State Bank of India, rose to 2.02 during the year as compared to 1.53 in the previous fiscal. SBI and its five associates recorded a net NPA of 2.04 per cent against 1.76 per cent in the comparable period.
India's aggregate NPA as a percentage of GDP is far lower than that in Italy, Greece.
Most lenders to the airline have already classified the account as an NPA.
The framework also envisages amendments to the Prevention of Corruption Act to exempt commercial decisions by PSBs from scrutiny by investigating agencies. Both the amendments are likely in the monsoon session of Parliament.
Public sector banks (PSBs) have delivered significant outperformance over the past three years and the sector has been re-rated. Given the growth and profitability expectations of an 18 per cent return on equity (RoE) over FY24-26, there is still a case for buying at the current levels. While the net interest margins or NIMs may remain range-bound or have a downward bias, there's optimism about possibly better opex ratios and lower non-performing assets (NPAs), plus scope for further credit cost reduction, and healthy treasury performances as interest rates trend down.
Canara Bank has put on hold its plan to sell non-performing assets with realisation value of around Rs 250 crore (Rs 2.5 billion) after lukewarm response from asset reconstruction companies (ARCs).
If companies get into trouble, the loan becomes a non-performing asset and "we very much want these assets to be back on track," Raghuram Rajan said.
Resolution to the bad loans problem has to be incremental, and the RBI has to ensure NPAs are not swept under the carpet, HDFC chairman Deepak Parekh tells Joydeep Ghosh.
Experts said the new framework has ensured that the focus has moved to creditor protection from debtor protection.
'The demand for housing is always increasing, and so is housing shortage.'
India Inc on Thursday pitched for lowering income tax burden on common man, increase in capital expenditure, and firm steps to contain food inflation in their nearly two-hour long interaction with finance minister Nirmala Shitharaman ahead of the Union Budget. During pre-Budget consultation with Sitharaman, the industry leaders and associations also urged the government to focus more on infrastructure development with a view to maintaining the economic growth momentum. The industry leaders also laid stress on boosting the MSME (micro, small, and medium enterprises) sector, considered a backbone of the Indian economy and main employment generator.
Every defaulter is not a wilful defaulter who has the capability of paying back and is yet not servicing the bank loan, observes Tamal Bandyopadhyay.
Following the footsteps of State Bank of India and ICICI Bank, Canara Bank has classified its loan to Dabhol Power Company as a non-performing asset.
After showing a consistent rise in the previous 4 quarters, gross NPAs of 40 listed bank declined to Rs 10.03 trillion at the end of June 2018, from Rs 10.25 trillion in the previous quarter.
LIC Housing Finance (LICHF) delivered a healthy FY24 with improvements in net interest margin (NIM) and credit costs and an improved return on assets of 1.7 per cent compared to an average of 1.3 per cent between FY14-FY23. Loan growth was low due to technology upgrades to the platform in H1FY24, though momentum improved in H2FY24. In Q4FY24, the net interest income (NII) came in at Rs 2,250 crore.
India's largest PSU bank, State Bank of India, delivered excellent results, once the impact of a big jump in employee expenses was adjusted for. The net interest income (NII) beat the Street due to a better net interest margin (NIM) and good loan growth. The credit growth at 5.2 per cent quarter-on-quarter (Q-o-Q) (15 per cent year on year) was excellent for a large bank.
Raghuram Rajan, said, the scourge of loan losses "had a tendency to increase, get too big to ignore, too late to manage, and push the system into crisis".
It is 10 years since Bandhan Financial Services became the first microfinance institution (MFI) to receive the universal bank licence. A year later, in 2015, it started operations. Bandhan's entry into banking was seen as a vote of confidence by the Reserve Bank of India (RBI) for the country's microfinance sector. Subsequently, the RBI awarded small finance bank licences to nine MFIs.
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