Bank credit grown steadily, SCBs seeing constant improvement in profitability: Economic Survey

Economic Survey 2024-25 shows growth in bank credit, decline in GNPAs, and improvement in profitability of SCBs.

Bank credit has grown at a steady rate in the current financial year and there has been a consistent improvement in the profitability of Scheduled Commercial Banks (SCBs) as reflected in a fall in gross non-performing assets (GNPAs) accompanied by a rise in the capital-to-risk weighted asset ratio (CRAR) according to the Economic Survey 2024-25 which was tabled by Union Minister of Finance and Corporate Affairs, Nirmala Sitaraman in the Parliament on Friday (January 21, 2025). 

GNPA ratio of SCBs has declined consistently from its peak in FY18 to a 12-year low of 2.6% at the end of September 2024 and lower slippages and a reduction in outstanding GNPAs through recoveries, upgradations, and write-offs have led to this decrease, the Economic Surrey has highlighted. 

“Lower GNPAs and higher provisions accumulated in recent years also contributed to a decline in net NPAs at around 0.6% at the end of September 2024. Improvements in asset quality parameters were observed across all major bank groups,” it stated. 

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Emphasising that all major bank groups reported a decrease in this ratio, the Survey stated that CRAR of SCBs has increased in the post-asset quality review period, which was conducted from August to November 2015. 

For FY24, around 93% of the increase in the capital funds was contributed by the rise in Tier-I capital of banks, indicative of the robustness of capital buffers, it stated.

At the end of September 2024, the CRAR of SCBs stood at 16.7%, and all banks met the Common Equity Tier-1 (CET-1) requirement of 8%. The profitability of SCBs improved during H1 of FY25, with profit after tax (PAT) surging by 22.2% (YoY). The cost of funds rose in sync with the tightening monetary policy cycle, it has mentioned.