Page 9 - Banking Finance July 2023

BANK UPDATE

was 3.62 trillion rupees, the RBI had Bankers seek fee on RuPay the meeting was 'Governance in
said. However, the central bank had Banks Driving Sustainable Growth and
debit card use
clarified that the banknotes will con- Stability'.
tinue to be legal tender. Banks have reached out to the govern-
ment seeking a merchant discount rate
On Jun 8, RBI Governor Shaktikanta PSU banks profit crosses
(MDR) on RuPay debit cards on the
Das at the Monetary Policy press con-
grounds that it will provide them with Rs. 1 lakh crore mark in
ference had said that around 1.8 tril-
the much-needed funds to enhance
lion rupees or 50% of the 2,000-rupee FY23
payment network security and develop
denomination banknotes were depos- Public sector banks' cumulative profit
innovative payment solutions.
ited with banks, out of which 85% crossed the Rs 1 lakh crore mark in fi-
were in the form of deposits. MDR is charged to a merchant for the nancial year 2023, with market leader
payment processing of debit and credit
SBI accounting for nearly half of the
card transactions. At present, there is
Banks' net bad loans drop total earnings.
zero MDR for transactions through the
to 15-year low of 1% RuPay debit card. From posting a total net loss of Rs
85,390 crore in 2017-18, PSBs have
Banks have ended FY23 with their bal-
A senior banker said the Indian Banks'
come a long way as their profit touched
ance sheets cleanest in 15 years. Ac-
Association (IBA) has also written a
Rs 1,04,649 crore in 2022-23. These 12
cording to a report by India Ratings letter to the finance ministry seeking
PSBs witnessed 57% increase in total
(Ind-Ra), an affiliate of Fitch, banks' restoration of MDR on RuPay debit
profit compared to Rs 66,540 crore
net non-performing assets (NPAs) have cards.
earned in 2021-22.
dropped to 1% while gross NPAs are at
"We have argued that MDR is essen-
4%. Analysts said that higher interest in-
tial and will foster sustainability and
come and improvement in manage-
The last time net NPAs were at the 1%
enable continued investments in cut-
ment of non-performing assets or bad
level was in 2008. The improvement in ting-edge technologies," the banker
loans are among the key reasons for
the NPA ratio in 2007-08 was also a said on condition of anonymity, adding
the improved profitability of the banks.
function of the high base as that year that these investments will strengthen
saw bank credit grow 24% on the back the security infrastructure, enhance In percentage terms, Bank of
of a 27% increase in 2006-07. The cur- user experience and provide dedicated Maharashtra had the highest net profit
rent improvement in asset quality support to merchants, thus strength- growth with 126% to Rs 2,602 crore,
comes after a massive clean-up by RBI ening the entire payments ecosystem. followed by UCO with a 100% rise to
in 2016 through an asset quality review Rs 1,862 crore and Bank of Baroda
which was followed by years of provi- with a 94% increase to Rs 14,110 crore.
RBI asks PSBs to focus on
sioning and insolvency proceedings. However, in absolute terms, SBI has
risk management reported an annual profit of Rs 50,232
The improvement comes despite the
The Reserve Bank of India exhorted crore in 2022-23, an increase of 59%
Covid-19 shock to businesses as banks
public sector banks to strengthen their over the preceding fiscal.
and the regulator had learnt from ex-
boards and increase focus on manag-
perience. Ind-Ra's report reveals that
ing risk. In a first, SBI's annual
gross non-performing advances
(GNPAs) stand at 4.0% at a system At a meeting with senior management profit crosses Rs. 50000
level, while net non-performing ad- of PSBs in the capital, RBI Governor
crore
vances (NNPAs) are at 1.0%. Public Shaktikanta Das asked lenders to
sector banks (PSBs) witnessed a signifi- strengthen governance so that they SBI has become the country's first
cant decline in GNPA, dropping from a are able to identify risks early. "The lender to report an annual net profit
peak of 14.1% in FY18 to 5.0% in FY23. Governor also emphasised the need for of over Rs 50,000 crore. The public
Private sector banks also showed im- banks to ensure continued financial sector bank has also overtaken HDFC
provement, with their GNPA reducing and operational resilience," said a Bank, which was the most profitable
to 2.3% from 6.3%. statement from the RBI. The theme of lender in India for several years.
BANKING FINANCE | JULY | 2023 | 9