India’s banking sector witnessed a remarkable milestone in FY24, with the combined net profit of listed public and private sector banks surpassing Rs 3 lakh crore for the first time. This figure, representing a 39% surge from FY23’s Rs 2.2 lakh crore (TOI), reflects a significant turnaround in the industry’s health.
Prime Minister Narendra Modi lauded this achievement, highlighting it as a testament to the sector’s resilience. Notably, the Rs 3 lakh crore in net profit surpasses the cumulative quarterly profits of all listed companies in the initial three quarters of FY24.
Traditionally the most profitable sector, Indian IT services were eclipsed by banking in FY24. Listed IT companies reported a net profit of nearly Rs 1.1 lakh crore, considerably lower than the banking sector’s robust performance.
Both public sector banks (PSBs) and private sector banks experienced significant growth. PSBs achieved a record net profit of Rs 1.4 lakh crore, marking a 34% increase year-on-year. Meanwhile, private sector banks witnessed a 42% rise, reaching nearly Rs 1.7 lakh crore from Rs 1.2 lakh crore in FY23.
This growth has widened the earnings gap between the two sectors. However, it’s noteworthy that PSBs have been steadily closing this disparity in recent years through improved balance sheets and increased earnings. In fact, their net profit has more than quadrupled over the past three years.
While PSBs achieved significant profit, a one-time pension provision by several banks slightly limited their potential. However, lower-than-anticipated pension provisions ultimately led to a rise in their stock value.
This stellar performance marks a dramatic turnaround for PSBs, which faced record losses of Rs 85,390 crore in FY18. In FY24, India’s 12 PSBs collectively earned a net profit of a staggering Rs 1,04,649 crore.
Several banks, including Bank of India (57% growth), Bank of Maharashtra (56% growth), and India Bank (53% growth), witnessed impressive net profit jumps exceeding 50%.
The government’s comprehensive 4R strategy – Recognizing NPAs transparently, Resolution and recovery, Recapitalizing PSBs, and Reforms in the financial ecosystem – is widely credited with playing a key role in the revival of PSBs.
This robust performance by India’s banking sector signifies a period of positive growth and stability, contributing significantly to the country’s overall economic well-being.
