Indian Banks Have Bounced Back in 10 Years with 4-fold Jump in Profits: Report

Indian banks have bounced back over the last 10 years with a 4-fold increase in profits and a sharp decline in bad loans, according to a report by capital markets and investment group CLSA.

"Balance sheets of Indian banks are the strongest they have been in over a decade, and profits have rebounded sharply (quadrupling in 10 years)," the report states.

The report points out that non-performing loans (Net NPL), which were a bane of the Indian banking sector earlier, have now declined to decadal lows, driven by better asset quality, stronger provision buffers, and an improved capital position.

Deposit growth should coincide with the acceleration of loan growth, which increased from 10 per cent to 15 per cent on average over the previous two years during FY12-22, it added.

In the past year and over the last five years, public sector banks have done much better than private sector banks, the report points out.

However, it also noted that in the past decade, the private sector banks have outpaced PSU banks in current account (CA) deposits and have also pared down non-deposit borrowings.

CLSA report also states that the loan growth in the sector has picked up from a decadal average of 10 per cent to 15 per cent over the past two years driven by all sub-segments and possibly some shifts from corporate bond substitution.

Over a long period, loan growth and deposit growth have been in sync. The quality of corporate credit, too, has improved over the past 5-7 years, the report added.