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Time of India
2 days ago
- Business
- Time of India
Once weighed down by bad loans, public sector banks drive India's banking profits to highest ever in history
Government-owned banks demonstrated remarkable growth with a 26% increase in profits to Rs 1.83 lakh crore. (AI image) Big turnaround story! Public sector banks led India's banking sector to record-breaking profits in FY25, with industry earnings rising nearly 14-fold over a decade to Rs 3.71 lakh crore, driven by lending income, treasury gains and reduced provisions for non-performing assets. Government-owned banks demonstrated remarkable growth with a 26% increase in profits to Rs 1.83 lakh crore, closing in on private banks, which recorded a modest 7% growth to Rs 1.87 lakh crore, according to an ET analysis. State Bank of India emerged as the most profitable bank with net earnings of Rs 70,900 crore, with HDFC Bank following at Rs 67,347 crore, and ICICI Bank achieving Rs 47,227 crore in FY25. The overall private sector bank profits were affected by significant declines in earnings at IndusInd Bank and IDFC First Bank. The remarkable financial performance follows the cleanup initiative that began in 2015 with the asset quality review (AQR) under former central bank governor Raghuram Rajan. This led PSU banks to record substantial losses over three successive years, with bad loans exceeding 8% of advances in FY16. Sharp Post-Covid Rebound To support PSU banks' growth, the government provided capital injection of Rs 3.15 lakh crore since the 2015 AQR, according to the recently published Economic Capital Framework report. Motilal Oswal Finance Services' banking report has said: "Banks are prioritising asset quality over growth, with stricter credit filters, higher CIBIL score thresholds, and conservative underwriting—especially in retail segments… PSU banks' disbursements remain modest while private players have gained share." In fiscal year 2016, commercial banks collectively posted a net profit of Rs 24,854 crore, primarily attributed to the strong performance of private sector banks. Lenders then initiated a comprehensive balance sheet restructuring, prompted by regulatory guidance and supported by updated insolvency legislation designed to swiftly recover substantial funds locked in debt-laden assets. "The key driver of the impressive rise in profits is the stable credit growth in FY25 on top of the good growth in FY24," said VK Vijayakumar, chief investment strategist, Geojit Investments. The aggregate net profit of all commercial banks stood at Rs 3.19 lakh crore in the previous year. "A major concern at the beginning of the year was deposits lagging credit growth. But as the year progressed, the deposit growth converged with credit growth," he added. The AQR implementation resulted in enhanced recognition of non-performing loans and increased provisions. The subsequent introduction of the Insolvency and Bankruptcy Code strengthened banks' recovery mechanisms and negotiating position with defaulters. According to IBBI statistics, creditors have recovered approximately Rs 3.9 lakh crore across 1,194 cases through March 2025. Regarding stressed assets, Subha Sri Narayanan, director, Crisil Ratings, says, "Gross non-performing assets (NPAs) have bottomed at 2.4% as of March 31, 2025, and are seen rangebound at 2.4-2.6% by March 2026. While corporate NPAs would remain low on strengthened risk management of banks, and robust balance sheets of corporates." Discussing FY26 net interest margin (NIM) prospects, Vishal Narnolia, analyst, ICICI Direct, noted, "In the first half, NIMs are expected to decline around 15 bps as there is a strong probability of policy rate cut which the banks will have pass to EBLR-linked borrowers." He indicated that deposit repricing in the second half should support margin recovery, with overall margins likely decreasing by approximately 10 bps in FY26. Most banks maintain NIMs—the gap between interest income and expense—between 3% and 4%. Vijayakumar of Geojit confirms the banking sector's positive outlook. He cautioned that "However, there are some concerns arising out of rising delinquencies in unsecured loans, credit cards and stress in the microfinance segment which can moderate profit growth in FY26.' Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Time of India
3 days ago
- Business
- Time of India
Public sector banks drive record profits in India for FY25 amidst asset quality improvements
Public sector lenders were at the vanguard of driving FY25 banking profits in India to the highest ever in history, as earnings from lending, treasury gains, and lower bad-loan provisions saw the industry's combined bottom-line soar nearly 14 times in a decade to Rs 3.71 lakh crore. Last fiscal year, public sector banks — once weighed down by legacy stress and bad loans — reported a robust 26% rise in profits to `1.83 lakh crore, narrowing the gap with private banks, which saw a relatively circumspect 7% increase to Rs 1.87 lakh crore, data compiled by ET showed. Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Hanoi: Unsold Furniture Liquidation 2024 (Prices May Surprise You) Unsold Furniture | Search Ads Learn More Undo A research report by Motilal Oswal Finance Services on banking outlook said, 'Banks are prioritising asset quality over growth, with stricter credit filters, higher CIBIL score thresholds, and conservative underwriting—especially in retail segments… PSU banks' disbursements remain modest while private players have gained share. State Bank of India , the largest government asset by market capitalisation, posted the highest net profit of `70,900 crore, followed by private lender HDFC Bank— at Rs 67,347 crore. ICICI Bank 's net profit was Rs 47,227 crore in FY25. However, a sharp fall in earnings reported by IndusInd Bank and IDFC First Bank dented the overall profits of private sector banks. Live Events Although in FY16, the net profit of all commercial banks was Rs 24,854 crore it was mainly because of higher earnings contributed by private banks. Lenders subsequently embarked on a balance sheet clean-up, nudged by the regulator and aided by a revamped bankruptcy legislation that aimed at quickly extricating billions of dollars stuck in leveraged assets. 'The key driver of the impressive rise in profits is the stable credit growth in FY25 on top of the good growth in FY24,' said VK Vijayakumar, chief investment strategist, Geojit Investments. A year ago, the total net profit of all commercial banks was Rs 3.19 lakh crore. 'A major concern at the beginning of the year was deposits lagging credit growth. But as the year progressed, the deposit growth converged with credit growth,' he added. Asset quality The impressive earnings come in the backdrop of the clean-up that started in 2015 with asset quality review (AQR) under the then central bank governor Raghuram Rajan. That caused PSU banks to report huge losses for three consecutive years while bad loans scaled past 8% of advances in FY16. The government supported PSU banks with growth capital by infusing Rs 3.15 lakh crore since AQR in 2015, according to the Economic Capital Framework report released last week. The AQR exercise led to better income recognition of non-performing loans and higher provisions. In the following year, the enactment of Insolvency and Bankruptcy Code improved recovery for banks giving them an upper hand in negotiation with defaulters. Insolvency and Bankruptcy Board of India (IBBI) data shows that creditors have recovered nearly Rs 3.9 lakh crore in 1,194 cases until March 2025. Giving the outlook on stressed loans, Subha Sri Narayanan, director, Crisil Ratings, said 'Gross non-performing assets (NPAs) have bottomed at 2.4% as of March 31, 2025, and are seen rangebound at 2.4-2.6% by March 2026. While corporate NPAs would remain low on strengthened risk management of banks, and robust balance sheets of corporates.' In a net interest margin (NIM)—a key profit indicator—outlook for FY26, Vishal Narnolia, analyst, ICICI Direct, said, 'In the first half, NIMs are expected to decline around 15 bps as there is a strong probability of policy rate cut which the banks will have pass to EBLR-linked borrowers.' He said that in the second half of this fiscal, deposit repricing is expected to aid recovery in margins and overall margins are likely to decline by around 10 bps for FY26. For most banks, NIM—the difference between interest income earned and interest expense—is between 3% and 4%. According to Vijayakumar of Geojit, the outlook for the banking sector continues to be positive. 'However, there are some concerns arising out of rising delinquencies in unsecured loans, credit cards and stress in the microfinance segment which can moderate profit growth in FY26,' he said.
Economic Times
3 days ago
- Business
- Economic Times
Public sector banks drive record profits in India for FY25 amidst asset quality improvements
Public sector lenders were at the vanguard of driving FY25 banking profits in India to the highest ever in history, as earnings from lending, treasury gains, and lower bad-loan provisions saw the industry's combined bottom-line soar nearly 14 times in a decade to Rs 3.71 lakh fiscal year, public sector banks — once weighed down by legacy stress and bad loans — reported a robust 26% rise in profits to `1.83 lakh crore, narrowing the gap with private banks, which saw a relatively circumspect 7% increase to Rs 1.87 lakh crore, data compiled by ET showed. A research report by Motilal Oswal Finance Services on banking outlook said, 'Banks are prioritising asset quality over growth, with stricter credit filters, higher CIBIL score thresholds, and conservative underwriting—especially in retail segments… PSU banks' disbursements remain modest while private players have gained share. State Bank of India, the largest government asset by market capitalisation, posted the highest net profit of `70,900 crore, followed by private lender HDFC Bank— at Rs 67,347 crore. ICICI Bank's net profit was Rs 47,227 crore in FY25. However, a sharp fall in earnings reported by IndusInd Bank and IDFC First Bank dented the overall profits of private sector banks. Although in FY16, the net profit of all commercial banks was Rs 24,854 crore it was mainly because of higher earnings contributed by private banks. Lenders subsequently embarked on a balance sheet clean-up, nudged by the regulator and aided by a revamped bankruptcy legislation that aimed at quickly extricating billions of dollars stuck in leveraged assets. 'The key driver of the impressive rise in profits is the stable credit growth in FY25 on top of the good growth in FY24,' said VK Vijayakumar, chief investment strategist, Geojit Investments. A year ago, the total net profit of all commercial banks was Rs 3.19 lakh crore. 'A major concern at the beginning of the year was deposits lagging credit growth. But as the year progressed, the deposit growth converged with credit growth,' he quality The impressive earnings come in the backdrop of the clean-up that started in 2015 with asset quality review (AQR) under the then central bank governor Raghuram Rajan. That caused PSU banks to report huge losses for three consecutive years while bad loans scaled past 8% of advances in government supported PSU banks with growth capital by infusing Rs 3.15 lakh crore since AQR in 2015, according to the Economic Capital Framework report released last AQR exercise led to better income recognition of non-performing loans and higher provisions. In the following year, the enactment of Insolvency and Bankruptcy Code improved recovery for banks giving them an upper hand in negotiation with defaulters. Insolvency and Bankruptcy Board of India (IBBI) data shows that creditors have recovered nearly Rs 3.9 lakh crore in 1,194 cases until March 2025. Giving the outlook on stressed loans, Subha Sri Narayanan, director, Crisil Ratings, said 'Gross non-performing assets (NPAs) have bottomed at 2.4% as of March 31, 2025, and are seen rangebound at 2.4-2.6% by March 2026. While corporate NPAs would remain low on strengthened risk management of banks, and robust balance sheets of corporates.' In a net interest margin (NIM)—a key profit indicator—outlook for FY26, Vishal Narnolia, analyst, ICICI Direct, said, 'In the first half, NIMs are expected to decline around 15 bps as there is a strong probability of policy rate cut which the banks will have pass to EBLR-linked borrowers.' He said that in the second half of this fiscal, deposit repricing is expected to aid recovery in margins and overall margins are likely to decline by around 10 bps for FY26. For most banks, NIM—the difference between interest income earned and interest expense—is between 3% and 4%. According to Vijayakumar of Geojit, the outlook for the banking sector continues to be positive. 'However, there are some concerns arising out of rising delinquencies in unsecured loans, credit cards and stress in the microfinance segment which can moderate profit growth in FY26,' he said.
Hindustan Times
3 days ago
- Business
- Hindustan Times
Raghuram Rajan warns US risks future by curbing foreign students
Former Reserve Bank of India Governor Raghuram Rajan warned about the long-term risks to the US economy if politics eroded the pipeline of international students to American universities. In an interview with Bloomberg TV Wednesday, Rajan cautioned that foreign student inflows have historically been a cornerstone of US innovation and economic leadership, but that current policies risk unraveling this advantage. 'The Sergey Brins of the world came as students and did wonders for the US economy,' Rajan said, pointing to one of the founders of Google. 'To some extent, the problem is the universities haven't made the case that they are so central to US growth, but also central to the distribution of that growth.' Rajan, who is professor of finance at the University of Chicago Booth School of Business, warned that squeezing foreign students could impact job growth, noting that companies like Alphabet Inc.'s Google employ thousands, thanks in part to immigration-linked talent pipelines. At the heart of Rajan's concerns is the ongoing battle between the White House and universities — one that initially centered on elite schools such as Harvard University and Columbia University over antisemitism — but that's morphed into a larger attack over the role of US higher education. On Tuesday, the Trump administration escalated that fight further by ordering US embassies worldwide to stop scheduling interviews for student visas as it weighs stricter vetting of applicants' social-media profiles. 'It is not a great environment,' Rajan said, citing rising fears among academics and administrators over visa security and retaliation from the White House. 'It's an environment which is inhibiting the ultimate production that the universities contribute to the US economy.' International students accounted for 5.9% of the total US higher education population of almost 19 million. In the 2023-2024 school year, more than 1.1 million foreign students came to the US, with India sending the most, followed by China. The former central banker also drew a parallel between the decisions foreign students now face and the investment choices businesses make amid uncertainty. 'If uncertainty increases, you tend to either postpone the investment or take it to a place where things are more certain,' he said.
Time of India
3 days ago
- Business
- Time of India
‘Sergey Brins of the world came as students..': Raghuram Rajan warns about risks to US economy if foreign students are curbed by Trump
US President 's move to curb entry of foreign students in the US has been criticised by . The former RBI governor has warned that if the pipeline of international students into America is hit, it will have long-term consequences for the US economy. Tired of too many ads? go ad free now Statistics show that international students constitute 5.9% of nearly 19 million students in US higher education. During the 2023-2024 academic year, the US welcomed over 1.1 million international students, with India leading in numbers, followed by China. Speaking to Bloomberg TV, Rajan emphasised that the influx of overseas students has traditionally been vital for America's economic dominance and innovative capabilities, but present-day policies threaten to diminish this strategic advantage. Raghuram Rajan explains importance of foreign students in US "The Sergey Brins of the world came as students and did wonders for the US economy," Rajan said, referencing Google's co-founder. "To some extent, the problem is the universities haven't made the case that they are so central to US growth, but also central to the distribution of that growth." Also Read | Currently serving as a professor of finance at the University of Chicago Booth School of Business, Rajan highlighted that restricting foreign student enrolment could affect employment growth, citing how organisations such as Alphabet Inc.'s Google have created thousands of jobs, partially due to their access to immigrant talent. What's the curb on foreign students? What began as scrutiny of prestigious institutions like Harvard University and Columbia University regarding antisemitism has evolved into a broader challenge to US higher education's foundation. The Trump administration intensified this situation on Tuesday by directing US embassies globally to halt student visa interview scheduling whilst considering more rigorous social media screening of applicants. Tired of too many ads? go ad free now Secretary of State Marco Rubio has instructed all American embassies globally to cease scheduling student visa interviews whilst the administration evaluates enhanced scrutiny of applicants' social media accounts. In a diplomatic cable sent to embassy staff worldwide, this latest measure represents another step in the US government's efforts to limit international student access to American educational institutions, citing concerns about national security and antisemitic behaviour. Also Read | The cable stated: "Effective immediately, in preparation for an expansion of required social media screening and vetting, consular sections should not add any additional student or exchange visitor (F, M and J) visa appointment capacity until further guidance is issued." Rajan expressed his unease about the current situation, noting the growing anxiety amongst academic staff and leadership regarding visa stability and potential governmental repercussions. "It is not a great environment," he said. "It's an environment which is inhibiting the ultimate production that the universities contribute to the US economy." Rajan also highlighted how international students' current decision-making process resembles business investment behaviour during uncertain periods. "If uncertainty increases, you tend to either postpone the investment or take it to a place where things are more certain," he said.
