Mumbai, May 22, 2023 – The public sector banks (PSBs) in India have achieved a significant turnaround, as their cumulative profit crossed the Rs 1 lakh crore mark during the financial year ending March 2023. This impressive feat was spearheaded by the State Bank of India (SBI), which accounted for nearly half of the total earnings. The PSBs collectively posted a net loss of Rs 85,390 crore in 2017-18, but their financial performance improved drastically, with profits reaching Rs 1,04,649 crore in 2022-23. Twelve PSBs reported a remarkable 57% year-on-year increase in total profits.
This remarkable transformation can be attributed to various factors, including higher interest income and improved management of non-performing assets (NPAs). Analysts have also acknowledged the government’s efforts in implementing reforms and initiatives that have played a significant role in supporting the banks’ growth.
Among the PSBs, Bank of Maharashtra (BoM) in Pune witnessed the highest net profit growth, with an impressive 126% increase to Rs 2,602 crore. It was followed by UCO Bank, which recorded a 100% rise to Rs 1,862 crore, and Bank of Baroda, which saw a 94% increase to Rs 14,110 crore. With the exception of Punjab National Bank (PNB), all other PSBs reported impressive annual increases in their profit after tax.
PNB, headquartered in Delhi, recorded a 27% decline in annual net profit, dropping from Rs 3,457 crore in 2021-22 to Rs 2,507 crore in the year ending March 2023. However, PSBs such as Bank of Baroda (Rs 14,110 crore) and Canara Bank (Rs 10,604 crore) reported annual profits in excess of Rs 10,000 crore.
Other PSBs also demonstrated substantial growth in their annual profits. Punjab and Sind Bank recorded a 26% profit growth to Rs 1,313 crore, Central Bank of India saw a 51% increase to Rs 1,582 crore, Indian Overseas Bank experienced a 23% rise to Rs 2,099 crore, Bank of India witnessed an 18% growth to Rs 4,023 crore, Indian Bank achieved a 34% increase to Rs 5,282 crore, and Union Bank of India reported an impressive 61% rise to Rs 8,433 crore.
The turnaround story of the public sector banking industry can be attributed to the initiatives and reforms undertaken by the government, led by Prime Minister Narendra Modi, former finance minister Arun Jaitley, and financial services secretary Rajiv Kumar, along with their successors. The government’s comprehensive 4R strategy, which focuses on recognizing NPAs transparently, resolving and recovering debts, recapitalizing PSBs, and implementing financial reforms, has played a pivotal role in this success.
As part of this strategy, the government infused an unprecedented amount of Rs 3,10,997 crore to recapitalize PSBs over the past five financial years, from 2016-17 to 2020-21. This recapitalization program provided much-needed support to PSBs and prevented the possibility of any defaults on their part.
The reforms introduced by the government over the past eight years have addressed credit discipline, ensured responsible lending practices, improved governance, and encouraged the adoption of technology. Additionally, bank mergers and the maintenance of general confidence among bankers have also contributed to the banks’ overall success. In the latest March quarter of 2022-23, PSBs witnessed a cumulative profit