24 December 2015 07:52:36 IST

Private banks outshine PSBsin profit share in 2014-15

The return on assets of public sector lenders also showed significant decline: RBI report

Private sector banks’ share in the total banking sector profits surpassed that of public sector banks during 2014-15, according to the Reserve Bank of India’s Report on Trend and Progress of Banking in India 2014-15.

Despite substantive share of 72.1 per cent in total banking sector assets, public sector banks (PSBs) accounted for only 42.1 per cent in total banking sector profits during 2014-15 while the private sector banks’ share was 44 per cent.

This development should ring alarm bells in the government, which is the owner of PSBs, and keeps pumping money at regular intervals to capitalise them.

The banking sector in the country remained predominantly in the public sector with the PSBs accounting for 72.1 per cent of total banking sector assets, notwithstanding a gradual decline in their share in recent years.

While profits of the banking sector turned around from an absolute decline in the previous year, the positive growth was on account of a decline in the growth of operating expenses rather than a rise in the growth of income of the banks, the RBI report said. Further, notwithstanding the increase in profit growth, the return on assets (RoA), a common indicator of financial viability, did not show any improvement in 2014-15. In particular, the profitability of PSBs diminished with their RoA declining significantly in recent years.

The maximum foreign shareholding in the case of PSBs was around 17 per cent as of March-end 2015 (20 per cent is regulatory maximum prescribed by the Reserve Bank). In case of the private banks, the maximum non-resident shareholding was 73.4 per cent (74 per cent is regulatory maximum prescribed).