NPAs of public sector banks decline to 5.53% in December 2022: Finance Ministry

Banks, earlier placed under the Prompt Corrective Action (PCA) framework by RBI, have made significant improvement resulting in the removal of each one of them from the PCA restrictions.

Bad loans of state-run banks declined from a peak of 14.6 percent in March 2018 to 5.53 percent in December 2022, the government said on March 20 citing official data.

"Government implemented a comprehensive 4R’s strategy of Recognising NPAs transparently, Resolution and recovery, Recapitalising PSBs, and Reforms in the financial ecosystem," said Minister of state Finance, Bhagwat Karad in Parliament.

Further, all PSBs are in profit with aggregate profit being Rs. 66,543 crore in the financial year (FY) 2021-22, the minister said. "Profit continued with PSBs earning aggregate profit of Rs. 70,167 crore in first nine months of FY 2022-23," Karad added.

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

Additionally, the minister added that major banking reforms undertaken by the Government over the last eight years addressed credit discipline, responsible lending and improved governance, besides adoption of technology, amalgamation of banks, and maintaining general confidence of bankers.

"Increase in NPAs led to additional provisioning, which affected the profitability of banks, and number of PSBs were brought under the prompt corrective action (PCA) framework of RBI. This had an adverse impact on business growth of PSBs," said the minister.

Banks, earlier placed under the Prompt Corrective Action (PCA) framework by RBI, have made significant improvement resulting in the removal of each one of them from the PCA restrictions, the minister added.