Public sector banks in India have posted a stellar performance, with cumulative profits crossing Rs 1.4 trillion for the fiscal year ended March 2024, a robust growth of 35% over the previous year, which was based on a high profit base of Rs 1 trillion.
The 12 major public sector banks collectively earned a net profit of Rs 1,04,649 crore during the fiscal year 2022-23. State Bank of India (SBI), the market leader, contributed over 40% of the total earnings for FY24, with a profit of Rs 61,077 crore, representing a 22% increase over the previous financial year.
Among the notable performers, Punjab National Bank (PNB) recorded the highest net profit growth percentage, with a remarkable 228% rise to Rs 8,245 crore. Union Bank of India followed closely with a 62% increase to Rs 13,649 crore, and Central Bank of India reported a 61% rise to Rs 2,549 crore.
Several other banks also saw substantial profit growth, including Bank of India (57% increase to Rs 6,318 crore), Bank of Maharashtra (56% rise to Rs 4,055 crore), and Indian Bank (53% improvement to Rs 8,063 crore).
However, Punjab & Sind Bank was the only public sector bank out of the 12 that reported a decline in profit, with a significant 55% drop from Rs 1,313 crore in 2022-23 to Rs 595 crore in FY24.
The propellors
This performance of PSBs can be attributed to various government-led initiatives and reforms. Over the past nine years, the government has implemented a comprehensive strategy focusing on recognizing non-performing assets (NPAs), resolving and recovering debts, recapitalizing banks, and introducing reforms in the financial ecosystem.
The recapitalisation efforts, amounting to an unprecedented Rs 3,10,997 crore over the last five financial years (from 2016-17 to 2020-21), provided crucial support to public sector banks, preventing defaults and strengthening their financial position.
The prospects
Looking ahead, large public sector banks like SBI, Bank of Baroda (BoB), and PNB are targeting to maintain net interest margins (NIM) within a range of 2.90%-3.30% in the first quarter of FY25. SBI, for instance, aims to sustain its NIM at 3.30% for the full fiscal year.
Despite challenges such as pressure on net interest margins due to rising funding costs, public sector banks are optimistic about continued growth. Advances are expected to grow between 10%-16% in FY25, driven by a combination of retail, corporate, MSME, and agriculture sectors. Additionally, banks are focusing on enhancing non-core income through diversified business strategies and technology adoption, aiming for sustainable growth and profitability in the evolving financial landscape.
