Public sector banks in India have made a remarkable turnaround in the past few years. After reporting losses of over Rs 2 lakh crore in 2013-14, they have made profits of over Rs 1 lakh 70 thousand crore in the last two years.
This turnaround can be attributed to a number of factors, including:
- Recapitalization: The government injected over Rs 3 lakh crore into the public sector banks to help them clean up their balance sheets and improve their capital adequacy ratios.
- Mergers: Several weak public sector banks were merged with stronger ones to improve their efficiency and profitability.
- Insolvency and Bankruptcy Code: The Insolvency and Bankruptcy Code (IBC) has provided a legal framework for banks to recover bad loans from defaulters.
- Stricter lending norms: Banks have become more cautious in lending money, and are now doing more due diligence before approving loans.
As a result of these measures, the non-performing assets (NPAs) of public sector banks have fallen from a high of 15% in 2017-18 to around 5% in 2023. This has helped to improve the financial health of the banks and their ability to lend money to businesses and individuals.
However, there are still some challenges that public sector banks need to overcome. These include:
- Legacy issues: The NPA problem is not completely solved, and there are still some old bad loans that need to be recovered.
- Political interference: There have been allegations that political pressure has been used to influence lending decisions at public sector banks.
- Lack of transparency: Public sector banks are often opaque and lack transparency, which makes it difficult to track their performance and hold them accountable.
Despite these challenges, the turnaround of public sector banks in India is a major achievement. It has helped to improve the health of the banking sector and the overall economy.