Indian banks improved their profitability for the sixth consecutive year in 2023-24 while their gross bad loan ratio dropped to a 13-year low of 2.5% at end of September, according to the RBI data released on Thursday.

“Banks’ profitability rose for the sixth consecutive year in 2023-24 and continued to rise in H1:2024-25 with the return on assets (RoA) at 1.4% and return on equity (RoE) at 14.6%,” the Reserve Bank of India said in its report on Trend and Progress of Banking In India 2023-24.

Asset quality improved, with gross non-performing assets (NPA) ratio, or the proportion of bad assets to total loans, falling to its lowest in 13 years at 2.7% at end-March 2024 and 2.5% at end-September 2024, it said.

Net bad loans of banks fell to 0.57% of total loans at September-end, from 0.62% at end-March, driven by stronger loan-loss buffers.

Banks’ capital position remained satisfactory, as reflected in key parameters like leverage ratio and capital to risk weighted assets ratio (CRAR).

Net profit of the scheduled commercial banks increased by 32.8% to Rs 3,49,603 crore during the last fiscal.

At end-March 2024, India's commercial banking sector consisted of 12 public sector banks (PSBs), 21 private sector banks (PVBs), 45 foreign banks (FBs), 12 SFBs, six PBs, 43 RRBs, and two LABs.

Out of these 141 commercial banks, 137 were classified as scheduled banks, while four were non-scheduled.

The report said the consolidated balance sheet of the scheduled commercial banks (SCBs), excluding RRBs, increased by 15.5% during 2023-24, as compared with 12.2% during 2022-23.

The share of public-sector banks in the consolidated balance sheet of SCBs fell to 55.2% at March-end 2024 from 57.6% a year ago. Private banks increased their share to 37.5% from 34.7% during this period.

Public sector banks had a 59.3% share of deposits of SCBs and 55.5% of advances.

The asset quality of non-bank finance companies (NBFCs) improved in 2023-24 as they continued to post double-digit balance sheet growth, the central bank said.

The gross NPA ratio of NBFCs dropped to 3.4% at end-September 2024; strong capital buffers kept the CRAR well above the stipulated norm at end-September 2024.