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Profit of Government Banks may cross Rs 1.3 lakh crore in 2024: DFS Secretary


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According to Vivek Joshi, Secretary of the Department of Financial Services (DFS), the financial outlook for public sector banks (PSBs) is optimistic. He projects that PSB profits could potentially exceed ₹1.30 lakh crore in the current fiscal year (FY24). It is also expected that profit may touch Rs 1.50 lakh crore amid higher credit demand driven by a strong economic growth.

During the first six months of the current financial year, public sector banks earned about Rs 68,500 crore and the trajectory is likely to continue unchanged in the second half as well.

Going by the present trend, public sector banks are expected to earn a net profit of around Rs 1.50 lakh crore in FY2024 up from Rs 1.04 lakh crore recorded in FY2023.

NPA and other Details

Aggregate deposits with banks increased 12.2 per cent during the 2023 April-November period as against 9.3 per cent a year ago.

Credit growth moderated to 16.4 per cent as on December 1, 2023 from 17.5 per cent a year ago, as per the latest RBI Bulletin. According to RBI data, Gross NPAs or GNPAs of the Scheduled Commercial Banks (SCBs) have declined in the last three years.

It declined from Rs 8,35,051 crore (GNPA ratio of 7.33 per cent) as on March 31, 2021 to Rs 7,42,397 crore (GNPA ratio of 5.82 per cent) as on March 31, 2022. Further, the amount dropped to Rs 5,71,544 crore (GNPA ratio of 3.87 per cent) as on March 31, 2023.

Similarly, these banks’ GNPAs pertaining to corporates declined from Rs 5,15,150 crore as on March 31, 2021 to Rs 4,33,749 crore as on March 31, 2022. It stood at Rs 2,75,298 crore as on March 31, 2023.

What DFS secretary said?

Joshi considers the estimated profits for FY24 as “conservative” and expects a continuation of this trend in FY25, with figures likely to mirror the preceding fiscal year. However, he acknowledges potential challenges on the horizon for banks in FY25, citing geopolitical factors that may impact the sector.

Concerns about Current Account Savings Account (CASA) Growth

One of the concerns highlighted by Joshi is the slower growth in current account savings account (CASA) for PSBs. There has been a noticeable decline from 41.9% to 40.1% compared to the previous fiscal year, indicating a potential loss of market share to private banks.

Fundraising and Market Shareholding Norms

In terms of fundraising, Joshi expects PSBs to secure ₹65,000 crore in FY24. The government has been actively seeking exemptions for PSBs from the 75% market shareholding norm, and they are currently exempted until August 2025.

Key Focus Areas for PSBs

Financial inclusion, non-performing asset (NPA) recovery, and cybersecurity have been identified as key focus areas for PSBs.

Joshi highlighted that PSBs achieved loan recoveries of ₹61,000 crore in FY24, contributing significantly to their bottom lines. In FY23, PSBs recovered ₹1 lakh crore. He also mentioned that PSBs had written off ₹10 lakh crore of bad loans, underscoring the importance of aggressive measures in recovering NPAs.

Conclusion

Vivek Joshi, Secretary of the Department of Financial Services, is optimistic about the financial outlook for public sector banks. He projects potential profits exceeding ₹1.30 lakh crore in FY24 and expects a continuation of this trend in FY25. However, concerns about slower growth in CASA and potential challenges in the future have been highlighted. PSBs are focusing on financial inclusion, NPA recovery, and cybersecurity as key areas. Loan recoveries and aggressive measures in recovering NPAs have contributed significantly to PSB’s bottom lines

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