February 18th 2025.
During a recent gathering in Mumbai, State Bank of India's Chairman, C.S. Setty, shared some positive updates on the performance of public sector banks. He mentioned how the combination of recapitalisation and reforms over the past few years has significantly improved their balance sheets. This has also led to a change in the saving behavior of depositors, who are now practicing asset allocation across different segments.
Setty highlighted the crucial role of capital in achieving India's vision of becoming a developed nation. He stressed the need for diversified sources of debt capital, beyond traditional bank loans, to support this goal. According to him, public sector banks have always enjoyed the trust of depositors, but it is the recent recognition, recapitalisation, and reforms that have truly boosted their credibility.
Furthermore, Setty noted that banks have learned from past mistakes and are now utilizing the vast amount of available data to underwrite loans more effectively. This has resulted in cleaner balance sheets for these banks. He also pointed out that public sector banks, traditionally known for wholesale lending, have now adopted a more balanced approach by providing loans to retail, agriculture, MSME, and corporate sectors.
Setty emphasized the importance of capital for the success of India's blueprint for development, Viksit Bharat. He mentioned that currently, a significant portion of the country's debt capital comes from bank loans. However, as the nature of saving is changing and depositors are diversifying their assets, it is essential to deepen the bond market and leverage capital from sources such as mutual funds, insurance, and pension funds.
On a positive note, State Bank of India reported an impressive 84.32% increase in net profit for the October-December quarter, amounting to Rs 16,891 crore. This growth was driven by higher core income, which saw a 4.09% increase from the previous year. The bank also reported an improvement in its gross NPA ratio, which now stands at 2.07% as of December 31, 2024, compared to 2.13% in the previous quarter. The net NPA ratio remained unchanged at 0.53% during the same period.
These positive developments reflect the success of the measures taken by public sector banks, and it is clear that they are on the right track towards achieving their goals. As India aims to become a $35 trillion economy by 2047, it is crucial to continue this momentum and strive towards a stronger and more stable financial sector.
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