India’s Leading BFSI & FinTech Companies 2024

[ BANKING SECTOR OVERVIEW ] India’s Leading BFSI and FinTech Companies 2024 7 Gross NPAs peaked in 2018 (%) Source: RBI, Dun & Bradstreet Research ASSET QUALITY Indian banking sector spent most of the past decade with high bad loans as gross NPAs (GNPAs) were lingering above 5% for most part of the decade. Aggressive lending practices, wilful default/ loan frauds in some cases and economic slowdown were some of the key reasons behind the spurt in bad loans. Banks have written off bad loans worth ` 14.56 trillion since FY2014-15 out of which ` 7.4 trillion bad loans were written off for large industries and services. In view of accumulation of NPAs, comprehensive steps were taken by the government and the RBI. The key measures include amendment to Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, increase in pecuniary jurisdiction of debt recovery tribunals (DRT) from ` 1 mn to 2 mn to enable DRTs to focus on high value cases, set up of National Asset Reconstruction Company Ltd (NARCL) to resolve stressed assets above ` 5 bn. The government also capitalised the banks and approved extending a guarantee of upto ` 306 bn to back security receipts issued by NARCL to lending institutions for acquiring stressed loan assets. Coordinated measures taken by the government and the RBI eventually led to reduction in NPAs by FY2023. PERFORMANCE OF BANKING SECTOR IN FY2023 The Indian banking system remained sound and healthy with strong capital and liquidity position during FY2023. The combined balance sheet of SCBs expanded in double digits at 12.2%, the highest since FY2015, driven by sustained growth in bank credit on assets side. Bank credit by SCBs reported a decadal high of 15% in FY2023 driven by credit expansion for categories like personal loans, service sector and agriculture & allied activities. Growth in deposits though picked up as compared to the previous year, it lagged the credit growth, leading credit to deposit ratio of banks increased to 75.8% in FY2023 from 72.2% in FY2022. Dun & Bradstreet