Indian Banks Achieve Fourfold Increase in Profits Over the Past Decade

Indian Banks Experience Fourfold Profit Surge and Decline in Bad Loans Over a Decade

Indian banks have achieved a remarkable turnaround over the past decade, with profits quadrupling and a significant reduction in bad loans, according to a CLSA report. The report highlights that the balance sheets of Indian banks are the strongest they’ve been in over ten years.

Non-performing loans (Net NPL), once a major issue for the Indian banking sector, have now dropped to decadal lows. This improvement is driven by better asset quality, stronger provision buffers, and enhanced capital positions.

The report also notes that deposit growth should align with the accelerated loan growth, which rose from an average of 10% to 15% over the last two years during FY12-22.

Public sector banks have outperformed private sector banks over the past year and the last five years. However, private sector banks have outpaced public sector banks in current account (CA) deposits and reduced non-deposit borrowings over the past decade.

Loan growth in the sector has increased from a decadal average of 10% to 15% over the past two years, driven by all sub-segments and shifts from corporate bond substitution. Over the long term, loan growth and deposit growth have remained in sync. The quality of corporate credit has also improved significantly over the past 5-7 years, according to the report.

Overall, the Indian banking sector’s robust performance reflects positively on the finance landscape, contributing to a more stable and profitable stock market in India.