Indian banking sector pips IT as net profit tops Rs 3 lakh crore in FY24, rises 39% YoY (2024)

India's banking sector achieved a milestone as its net profit surpassed Rs 3 lakh crore for the first time in FY24. The combined net profit of listed public and private sector banks surged by 39 per cent, reaching Rs 3.1 lakh crore compared to Rs 2.2 lakh crore in FY23, TOI reported.

The Rs 3 lakh crore figure is roughly equivalent to the cumulative quarterly profits of all listed companies during the initial three quarters of the fiscal year.

The profits of banks surpass those of IT services, which have traditionally been the most profitable sector in recent times. In FY24, listed IT services companies recorded a net profit of close to Rs 1.1 lakh crore, considerably lower than the profits generated by banks.

PSBs Vs Pvt Banks

During the year, public sector banks achieved a record net profit of Rs 1.4 lakh crore, marking a 34 per cent rise from the previous year. Meanwhile, private sector banks saw their net profit increase by 42 per cent to nearly Rs 1.7 lakh crore, up from Rs 1.2 lakh crore a year ago.

Consequently, the gap in earnings between the two sectors has expanded.

In recent years, public sector banks have been closing the profit disparity with private banks by improving their balance sheets and boosting earnings. In fact, the net profit of public sector banks has multiplied more than fourfold over the past three years.

Public sector banks would have recorded a greater net profit in FY24 if not for a one-time provision allocated to pensions by several banks. Nevertheless, since the pension provisions were lower than anticipated, this resulted in a rise in their stock value.

Certain public sector banks, such as Bank of Baroda, incurred losses due to provisions made for their exposure to Go Air, despite the fact that the loan is backed by collateral.

Public banks, on a roll?

PSB is a turnaround story from record losses of Rs 85,390 FY18 to record profit in FY24. India's 12 Public Sector Banks (PSBs) together had earned a net profit of Rs Rs 1,04,649 crore in 2022-23.

Among the banks which recorded over 50 per cent jump in net profit included Bank of India with a 57 per cent growth to Rs 6,318 crore while Bank of Maharashtra with a 56 per cent rise to Rs 4,055 crore and Chennai-based India Bank recorded a 53 per cent improvement to Rs 8,063 crore.

During the year, the only public sector bank out of 12 reported drop in profit was Punjab & Sind Bank.

The government has implemented a comprehensive 4R strategy: Recognising NPAs transparently, Resolution and recovery, Recapitalising PSBs, and Reforms in the financial ecosystem. This strategy has played a role in the revival story of India's PSBs.

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