Reserve Bank of India 2021 edition Trends and Progress in Indian Banking Shows a huge jump in the profitability of the bank 10,911 crore for all scheduled commercial banks in 2019-20 1,21,998 crore in 2020-21. This is an astonishing tenfold increase. Their Gross Non-Performing Assets (GNPA) fell from 8.2% at the end of March 2020 to 7.3% at the end of March 2021 and 6.9% at the end of September 2021. Return on assets also increased. Looks great, doesn’t it? Except that a sudden decrease in body weight may not indicate so much a diet fixation as the progression of diabetes or an even more lethal increase inside.
Instead of strong reforms in banking practices, it is slowdown in lending, reduction in interest rates on current and savings accounts, regulatory relief on recognition of bad loans as bad loans and resolution on provisioning on bad loans after recovery of income. Responsible for withdrawal. For the betterment of Indian banking by the end of 2021.
Bank credit growth was a little over 5% in 2020-21. This appears to be good growth for an economy that declined by 7.3% that year. But we must remember that debt finance is not only investment and production, but also consumption. The huge jump in gold loans during the pandemic is a sign of a wider crisis. Individuals, households and small companies take out crisis loans. This may account for the seeming surge in loans.
Bank-group-wise credit growth also supports such an approach. Public sector banks registered a credit growth of 3%. Foreign bank lending has actually declined. Private banks saw their lending rise by 8%, possibly moving to capture the space vacated by public sector banks. The real increase in lending, about 118%, was from small finance banks, the exact same banks that were closer to the borrower, whom a company or someone in crisis could turn to for some immediate cash.
The collective interest income of banks in 2020-21 has declined as compared to the previous year. Other income, from investments and as such, grew 2.9%, helped by a written back provision after recovery from the IBC process. But the big increase in profits came from a reduction in expenses. Interest expense declined 8.9%, as deposit rates sank and banks borrowed less for on-lend. Provisioning outlay declined by 16.4%. This figure will go up once the pandemic-related regulatory relief for bad loans is removed next year.
The good looking figures of Indian banks for the last financial year hide some serious health problems in the sector.
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