Asset quality of PSBs has improved significantly with the gross NPA ratio of PSBs declining from the peak of 14.6% in March 2018 to 5.53% in December 2022. The capital adequacy ratio of PSBs has improved significantly from 11.5% in March 2015 to 14.5% in December 2022. All PSBs are in profit with aggregate profit being Rs 66,543 crore in FY2021-22, and profit continued with PSBs earning an aggregate profit of Rs 70,167 crore in the first nine months of FY2022-23, according to the reply to a question in Lok Sabha by Dr Bhagwat Karad, Union Minister of State for Finance, during the ongoing budget session.
Asset Quality Review (AQR) initiated by RBI in 2015 revealed high incidence of non-performing assets (NPAs) in banks. Following the AQR results, banks initiated transparent recognition, reclassifying standard restructured advances as NPAs and providing for expected losses on such advances. Thus, primarily as a result of the transparent recognition of advances with stress as NPAs, the proportion of standard restructured advances reduced progressively from 7% to 0.8% from March 2015 to March 2018. An increase in NPAs led to additional provisioning.
Karad stated that the government implemented a comprehensive 4R strategy of Recognising NPAs transparently, Resolution and recovery, Recapitalising PSBs, and Reforms in the financial ecosystem. Major banking reforms undertaken by the government over the last 8 years addressed credit discipline, responsible lending and improved governance, besides the adoption of technology, amalgamation of banks, and maintaining general confidence of bankers. Resilience has increased with the provision coverage ratio of PSBs rising from 46% to 89.9% in December 2022. Banks, earlier placed under Prompt Corrective Action (PCA) framework by RBI, have made significant improvements resulting in the removal of each one of them from the PCA restrictions, Karad stated in the reply.
