According to ASSOCHAM, all key indicators suggest that Public Sector banks (PSBs) maintained their supremacy over private banks in recent times despite pressures of global meltdown, these not only succeeded in lowering lending rates with maintaining record growth of net profits but also drastically reduced their non-performing assets (NPAs) as compared to private banks.
The findings are from a ASSOCHAM Financial Pulse (AFP) Study on “Performance Analysis of Indian Banking Sector”, which tracked quarterly results of 25 national banks, (15 public and 10 private sector banks and show that PSBs have recorded impressive performance across all significants of banking parameters.
While these reduced their prime lending rates by 75- 125 basis points; higher than the 50 - 75 basis points cut made by private banks, their credit growth has far surpassed the latter at 28.6 per cent as compared to meager 11.8 per cent growth registered by private banks.
The public sector banks have emerged strong across all key indicators as the global financial turmoil and slowing domestic economy put the banking sector on a test. The public banks have not only reduced the lending rates but have also managed to record higher average net profit and lower NPA level than their private sector counterparts, reveals an AFP Study.
Despite lower lending rates, the net interest income growth of the PSBs was much higher at 50 per cent as against 32 per cent growth witnessed by private banks which fuelled the bottom line growth of public banks. The net profit of public banks jumped by 57 per cent as compared to 44 per cent rise in the bottom line of the private banks.
Progressing on bringing a significant shift in their conventional image, the public sector banks have considerably improved their quality of assets. The rise in Net NPAs of the private banks was far higher at 44 per cent than the public sector banks at 29 per cent.
“In divergence to the turmoil in the global banking institutions; Indian banking sector stands tall with stupendous growth in profits, however rise in NPAs may remain a key challenge”, said Shri D. S. Rawat, Secretary General, ASSOCHAM.
The AFP Study also revealed that even if the banking sector is among the front runners in terms of growth in net profit during the third quarter of the fiscal, the quality of bank assets deteriorated significantly with an average 34.46 per cent rise in net non performing assets (NNPAs) accompanied by a marginal slippage in average capital adequacy ratio (CAR) to 13.22 per cent in Q3 FY‘09 from 13.39 per cent in the corresponding period last year.
The aggregate net non-performing assets (NPA) of 25 banks increased to Rs 19,899.47 crore in Q3 FY’ 09 from Rs 15,962.58 crore in the corresponding period last year.
During September - December 2008, the Reserve Bank slashed its key lending rate, the repo, by 250 basis points as an indication to the commercial banks to soften their interest rates. However, the banks acted reluctantly to transfer the benefit by reducing their benchmark Prime Lending Rate (PLR) aggressively, according to the ASSOCHAM Study.
Third Quarter Banking Sector Performance Analysis
|
| Q3 Average Growth rate (%) |
| Sector | No. of Banks | Net Profit | Net Interest Income | Net NPA | Reduction in PLR during |
| Public | 15 | 57.29 | 49.98 | 28.83 | 75 - 125 |
| Private | 10 | 43.88 | 32.08 | 43.84 | 50 - 75 |
Source: ASSOCHAM Research Bureau
Source: ASSOCHAM
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written by Kim, March 06, 2011
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