RBI releases Financial Stability Report: 5 Highlights from the banking sector's Report card

Reserve Bank Governor Shaktikanta Das on Wednesday said that the Indian economy has made a solid recovery and is among the fastest-growing large economies despite heightened uncertainties and formidable headwinds. In its Financial Stability Report, the Reserve Bank of India (RBI) also highlighted how the banking sector in India has performed considerably well while the advanced economies dealt with banking turmoil.

“The Indian financial system, led by a sound banking system, remains stable and supportive of the productive needs of the economy. Aided by robust earnings, adequate capital, liquidity buffers, and improving asset quality, Indian banks are well positioned to sustain the upturn in the credit cycle that has been underway since early 2022,” the report mentioned.

Here are key highlights from the banking sector in India :

1. Deposit growth crossed 10 per cent

In the past two years, the aggregate deposit growth had undergone a slight moderation during 2021-22. However, it picked up pace to reach 11.8 per cent as on June 02, 2023. RBI pointed out in its report that this growth was mainly driven by private-sector banks. “In the rising interest rate cycle, term deposits have garnered healthy accretions at the cost of current account and savings account (CASA) deposits,” said RBI.

2. Credit growth surpassed 15 per cent

RBI highlighted that there has been remarkable credit growth in the banking sector, equally driven by the public sector banks and the private ones. Credit growth reached 15.4 per cent, with considerable contribution from the personal loan segment. Personal loans recorded a broad-based growth of 22.2 per cent (y-o-y) with all major segments, viz., housing, credit card receivables, vehicle/ auto loans, education, etc.

3. Improved asset quality: GNPA touched a decadal low

In the past few quarters, the banks have managed to improve their asset quality by bringing down the share of non-performing assets. As per the reports, the asset quality of SCBs continued to improve and their GNPA ratio declined to 3.9 per cent in March 2023 – a 10-year low. The net NPA ratio of the scheduled commercial banks also improved to 1.0 per cent, a level last observed in June 2011.

4. Fall in the number of large borrowers
 

The share of large borrowers in gross advances of SCBs declined successively over the past three years as it came down from 51.1 per cent in March 2020 to 46.4 per cent in March 2023 as retail loans grew faster than borrowings by corporates. The share of large borrowers in the GNPAs of SCBs also came down substantially

5. Higher profit margins

During 2022-23, the net interest margin or NIM improved by 30 bps as the transmission of monetary policy tightening to deposit rates lagged the passthrough to lending. Bank’s profit after tax (PAT) recorded a healthy growth of 38.4 per cent (y-o-y) during 2022-23, led by a strong increase in net interest income (NII) and a lowering of provisions.

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