Gross bad assets of government banks fell from 14.58% in Mar 2018 to 3.12% in Sep 2024: Finance ministry | Mint

The government said on Thursday that policy reforms in the financial sector have restored the health of the banking sector, with the gross non-performing asset (NPA) ratio of public sector banks (PSBs) falling to 3.12% in September 2024 from a peak of 14.58% in March 2018 and 4.97% in March 2015.

The reforms also increased the capital adequacy ratio of PSBs by 396 basis points (bps) to 15.43% in September 2024 from 11.45% in March 2015. The marked improvement also saw PSBs record their highest-ever aggregate net profit of ₹1.41 trillion in FY24 against ₹1.05 trillion in FY23, the finance ministry said in a statement. The figure for the first half of FY25 was ₹0.86 trillion, it said.

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“PSBs continue to expand their reach to every nook and corner of the country to deepen financial inclusion. Their capital base has strengthened and their asset quality has improved. Now they are able to go to market and access capital instead of depending upon the government for recapitalisation,” the ministry added.

Gandhi vs Sitharaman

The development comes a day after leader of the Opposition Rahul Gandhi met a delegation from the All India Banking Officers Confederation on Wednesday. After the meeting he wrote on X (formerly Twitter), “The Modi government has turned these lifelines of the masses (PSBs) into private financiers for only the rich and powerful corporations.”

The comment drew an immediate reaction from finance minister Nirmala Sitharaman, who in a series of social media posts termed Gandhi’s claims baseless, saying PSBs were seeing a remarkable turnaround under the current government unlike the previous UPA government, under which “PSBs were treated as ‘ATMs’ for their cronies and shady businessmen”.

In its assessment of the banking sector, the finance ministry said Indian banks were on the growth path, with the number of branches increasing from 1,17,990 in March 2014 to 1,60,501 in September 2024 . Of the 1,60,501 branches, 1,00,686 were in rural and semi-urban areas, the ministry said.

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Another indicator of the good health of PSBs was the ₹61,964 crore of dividends they paid over the past three years, it added. Gross advances of scheduled commercial banks grew from ₹8.5 trillion to ₹61 trillion during 2004-2014, and to ₹175 trillion in March 2024, the ministry added.

“The government of India has consistently supported the MSME (micro, small and medium enterprises) sector in terms of flow of credit at affordable rates through various initiatives. The MSME advances registered a CAGR of 15% during the last three years. Total MSME advances as on 31 March 2024 stood at Rs. 28.04 trillion, posting annual growth of 17.2%,” it said.

Financial inclusion

To deepen financial inclusion in the country, 54 crore Jan Dhan accounts have been created and more than 52 crore collateral-free loans have been sanctioned under various financial inclusion schemes (PM Mudra, Stand-Up India, PM-SVANidhi, PM Vishwakarma). Under the PM Mudra scheme, 68% of beneficiaries are women and under the PM-SVANidhi scheme, 44% of beneficiaries are women, the ministry added. The KCC Scheme, which aims to provide short-term crop loans to farmers, had 7.71 crore operative accounts as of September 2024, with a total outstanding of Rs. 9.88 lakh crore.

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“The government has been proactively supporting the banking ecosystem and taking care of both business and employee welfare to maintain stability, transparency and growth. Over the past decade, multiple citizen-and-staff-centric reformative initiatives have been taken by the government in this direction,” the ministry said.

The government had also reformed human resources policies and welfare measures of banks with the aim of facilitating women employees and enduring fair and remunerative pay for all grades of employees, it added.