Before, during and after the corona pandemic, the government implemented many schemes and initiatives to strengthen the economy and the banking system, due to which today Indian banks and the country’s economy are in a very strong position. Now the NDA government has been formed again. Therefore, it is expected that the government will stick to its old policies, which will make the Indian economy and Indian banks stronger.
According to the data released by the Ministry of Statistics, GDP growth of 7.8 percent was recorded in the March quarter of FY 2023-24 and the overall growth rate in FY 2023-24 was 8.2 percent, while it was 7 percent in FY 2022-23. The sharp increase in GDP has been possible mainly due to the increase of 9.9 percent in the manufacturing sector in FY 2023-24, which is much higher than the minus 2.2 percent in FY 2022-23. Similarly, the mining sector registered a growth of 7.1 percent during this period, which was 1.9 percent in the financial year 2022-23. It is noteworthy that the manufacturing sector plays an important role in providing quality employment to the youth coming out of the engineering institutes and colleges of the country.
In view of the continued improvement in the Indian economy, S&P recently changed India’s rating from Outlook Stable to Positive after 14 years. According to S&P, if economic reforms are taken forward along with reducing the increased debt pressure on the government and reducing the interest burden, then India’s rating can be improved further in the next 24 months. Meanwhile, keeping in view the boom in economic activities, the Monetary Policy Committee (MPC) kept the policy rates unchanged in its latest monetary review, so that the pace of development can be accelerated even more.
The central government has collected Rs 1.73 lakh crore from Goods and Services Tax (GST) in May 2024. This is the fourth highest GST collection ever collected in any month and the second highest GST collection of FY-2024-25. Earlier, the government had collected the highest amount of Rs 2.10 lakh crore from GST in April 2024. The overall GST collection has increased by 10 percent on an annual basis. With the increase in revenue collection, the government can implement the works that accelerate development.
Retail inflation in May is 4.75 percent which stood at 4.83 percent in April 2024 & in the month of March, it was 4.85 percent. The Reserve Bank of India has projected the average retail inflation to be 4.5 percent in the financial year 2024-25 due to the possibility of good monsoon and reduction in factors disrupting the supply chain. The overall inflation rate has come down by 1.3 percent to 5.4 percent in the financial year 2023-24.
The inflation outlook is expected to remain positive due to easing pressure on the supply chain, macro-level moderation in core (non-food-non-energy) inflation and the possibility of above-normal rainfall in FY2024-25.
In recent months, Indian banks have performed the best compared to their counterparts in Asia. The country’s 3 big banks, namely State Bank of India, HDFC Bank and ICICI Bank, have made it to the list of top 50 banks in the world in 2023, while in 2022 only 2 banks of the country made it to the top 50 banks in the world. According to the S&P Global report, Indian banks have strengthened due to improved strong economic condition, rapid growth in loans, reduction in NPAs and increase in profits. According to this report, the assets of banks have increased by 50.5 percent to $ 1.51 trillion in 2023. In July 2022, HDFC Bank’s assets grew by 51.3 percent to $ 466.35 billion. This helped the bank jump 13 places to 33rd position in the top 50 list. According to S&P Global, the loan given by Indian banks has increased rapidly in recent months. As of 29 December 2023, it had reached the level of 15.6 percent, which was 14.9 percent a year ago.
In the financial year 2023-24, Bank of Baroda and Canara Bank have earned a profit of more than Rs 10,000 crore. State Bank of India has earned a profit of Rs 61,077 crore during this period, which is more than 40 percent of the total earnings of public sector banks. In the last financial year, State Bank of India had earned a profit of Rs 50,232 crore. Out of 12 public sector banks, only Punjab & Sind Bank has registered a decline in profit. On March 31, 2024, the cumulative profit of public sector banks crossed the level of Rs.1.4 lakh crore, which is 35 percent more than last year.
In the financial year 2022-23, public sector banks had earned a net profit of Rs. 1,04,649 crore. During this period, the net profit of Punjab National Bank was Rs 8,245 crore, which is 228 percent more than last year, while Union Bank of India earned a profit of Rs.13,649 crore, which is 62 percent more than last year. Other public sector banks like Central Bank of India earned 61 percent, Bank of India 57 percent, Bank of Maharashtra 56 percent and Indian Bank 53 percent more profit than the previous financial year. Thus, after the loss of Rs.85,390 crore of public sector banks in the financial year 2018, this is the story of the journey of recording record profits in 2024.
The NDA government stood with the public sector banks at every step from the financial year 2016-17 to the financial year 2020-21 and recapitalized the public sector banks by Rs.3,10,997 crore. The Reserve Bank of India also took appropriate steps in this matter during this period. Due to these combined efforts, the net non-performing assets (NPA) of all banks came down to below 1.70 percent in the financial year 2023-24.
The NDA government has been formed again and the work of the Finance Ministry is also in the hands of Nirmala Sitharaman. Therefore, the policies and steps taken by the government and the Reserve Bank of India will remain favourable for Indian banks in the future as well. At present, the net profit of public sector banks is continuously increasing and NPA is decreasing. Apart from this, Indian banks are also performing well on other important parameters.
Satish Singh, Ahmedabad based Senior Columnist, Views are personal.
