PM Modi praises Indian Banking Sector, Net Profit of Banks crossed Rs.3 lakh crore for first time

Indian Prime Minister Narendra Modi has highlighted the significant progress made by the banking sector in the past decade. In a recent statement, he noted that India’s banking sector has experienced a remarkable turnaround, with the net profit surpassing Rs 3 lakh crore for the first time ever. This achievement marks a significant milestone in the sector’s growth and highlights the positive impact of government policies.

In a remarkable turnaround in the last 10 years, India's banking sector net profit crosses Rs 3 lakh crore for the first time ever.

When we came to power, our banks were reeling with losses and high NPAs due to the phone-banking policy of UPA. The doors of the banks were closed…

— Narendra Modi (@narendramodi) May 20, 2024

“For the first time,…banking sector's net profit crossed Rs 3 lakh crore in FY24.” ⁦@timesofindia⁩

Our government under ⁦@PMOIndia⁩ ⁦@narendramodi⁩ ensured a decade of professionalism and no political interference. Results can be seen. https://t.co/wKyTB6ugJ2

— Nirmala Sitharaman (@nsitharaman) May 20, 2024

Addressing Past Challenges

Prime Minister Modi acknowledged that when the Bharatiya Janata Party (BJP)-led government came to power, banks were facing substantial losses and high levels of Non-Performing Assets (NPAs). These challenges were largely attributed to the policies implemented by the previous government. PM Modi emphasized that the banking sector’s turnaround is a result of the government’s efforts to address these issues and promote financial inclusion.

Improved Profitability and Credit Availability

The banking sector’s net profit for the fiscal year 2023-24 crossed Rs 3 lakh crore, representing a 39% increase compared to the previous fiscal year. Public sector banks generated a record net profit of Rs 1.4 lakh crore, a 34% increase from the previous year. Meanwhile, private sector banks increased their net profit by 42% to nearly Rs 1.7 lakh crore. This significant improvement in profitability is expected to enhance credit availability for marginalized sections of society, including the poor, farmers, and Micro, Small, and Medium Enterprises (MSMEs).

Widening Gap Between Public and Private Sector Banks

The earnings gap between public and private sector banks has widened as a result of their divergent performance. However, public sector banks have made substantial progress in recent years by cleaning up their balance sheets and increasing their earnings. In fact, the net profit of public sector banks has more than quadrupled over the past three years. It is worth noting that several public sector banks had to make one-time provisions for pensions, which affected their net profit in the fiscal year 2023-24. Nevertheless, the overall positive trajectory of public sector banks’ profitability is indicative of their strengthening financial position.

Banking Sector Profits Compared to Other Industries

The banking sector’s net profit of Rs 3 lakh crore is noteworthy when compared to the profits of other industries. It is approximately equivalent to the total quarterly profits of all listed companies in the first three quarters of the fiscal year. In fact, the banking sector’s profits even surpass the profits of the Information Technology (IT) services industry, which has been the most profitable group in recent years. Listed IT services companies reported a net profit of nearly Rs 1.1 lakh crore for the fiscal year 2023-24. This highlights the significant contribution of the banking sector to the Indian economy.

Conclusion

Prime Minister Narendra Modi’s remarks underscore the remarkable turnaround in India’s banking sector over the past decade. The sector has witnessed substantial improvements in profitability, with the net profit crossing Rs 3 lakh crore for the first time ever. This positive development is expected to enhance credit availability and support the economic growth of the country.