Gross NPA Ratio Declined From Peak 14.6% In March 2018 To 5.53% In December 2022: Govt In Lok Sabha

Total market cap of PSBs (excluding IDBI Bank, which was categorised as a private sector bank in January 2019) increased from Rs 4.52 lakh crore in March 2018 to Rs 10.63 lakh crore in December 2022

The total market cap of PSBs increased from Rs 4.52 lakh crore in March 2018 to Rs 10.63 lakh crore in December 2022

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Asset quality of Public Sector Banks (PSBs) has improved significantly with the Gross NPA ratio declining from the peak of 14.6 per cent in March 2018 to 5.53 per cent in December 2022, the government said in Lok Sabha on Monday. Minister of State for Finance Bhagwat K Karad said in a written reply to Lok Sabha said, "All PSBs are in profit with aggregate profit being Rs 66,543 crore in 2021-22, and that further increased to Rs 70,167 crore in first nine months of the current financial year."

He also said that resilience has increased with the provision coverage ratio of PSBs rising from 46 per cent to 89.9 per cent in December 2022, adding capital adequacy ratio of PSBs improved significantly from 11.5 per cent in March 2015 to 14.5 per cent in December 2022.

The total market cap of PSBs (excluding IDBI Bank, which was categorised as a private sector bank in January 2019) increased from Rs 4.52 lakh crore in March 2018 to Rs 10.63 lakh crore in December 2022, the reply added. 

Karad said banks, earlier placed under Prompt Corrective Action (PCA) framework by RBI, have made significant improvements.

"Government implemented a comprehensive 4R’s strategy of Recognising NPAs transparently, Resolution and recovery, Recapitalising PSBs, and Reforms in the financial ecosystem. Major banking reforms undertaken by the government over the last eight years addressed credit discipline, responsible lending, and improved governance, besides the adoption of technology, an amalgamation of banks, and maintaining general confidence of bankers," the minister of state said.

Karad in his reply said that the Asset Quality Review (AQR) initiated by the Reserve Bank of India (RBI) in 2015 revealed a high incidence of non-performing assets (NPAs) in banks. Following the AQR results, banks initiated transparent recognition, reclassifying standard restructured advances as NPAs and providing for expected losses on such advances. Thus, primarily as a result of transparent recognition of advances with stress as NPAs, the gross NPA ratio of public sector banks (PSBs) rose from 5.0 per cent in March 2015 to 14.6 per cent in March 2018.

The proportion of standard restructured advances reduced progressively from 7.0 per cent to 0.8 per cent during the same period. An increase in NPAs led to additional provisioning, which affected the profitability of banks, and the number of PSBs were brought under the prompt corrective action (PCA) framework of RBI. This had an adverse impact on the business growth of PSBs, the reply said.