Earlier this week, India’s central bank released the latest iteration of its annual report on the financial performance of the country. In it, the Reserve Bank of India (RBI) details that, despite the devastation caused by the COVID-19 outbreak in India, the financial performance of banks has improved, citing a fall in the gross non-performing asset ratio for scheduled commercial banks (SCBs). 

The report, titled ‘Report on Trend and Progress of Banking in India,’ also showed how a rise in profitability of SCBs in 2020-21 was driven less by an increase in income but more via reductions in expenditure. 

Here are the primary takeouts, 

1. During 2020-21, the consolidated balance sheet of scheduled commercial banks (SCBs) expanded in size, notwithstanding the pandemic and the resultant contraction in economic activity, the report noted. In 2021-22 so far, nascent signs of recovery are visible in credit growth. Deposits grew by 10.1 per cent at end-September 2021 as compared with 11.0 per cent a year ago, it added. 
2. Gross non-performing assets (GNPAs) ratio of SCBs fell from 8.2 per cent at the end of March 2020 to 7.3 per cent in March 2021. This decreased further to 6.9 per cent at the end of September 2021. 
3. While SCBs asset quality registered improvements, the same could not be said for the growing NBFC sector. “In 2021-22 (up to September), asset quality of the [NBFC] sector deteriorated to some extent. Gross NPA ratio increased from 6.0 per cent to 6.8 per cent and net NPA ratio increased from 2.7% to 3.0%,” read the report. The report also took note of rising credit-to-GDP ratios of NBFCs which reached a record level in 2021. 
4. Capital to risk weighted assets ratios(CRAR) – a vital measure of a bank’s stability – of SCBs improved from 14.8 per cent at the end of March 2020 to 16.3 per cent at the end of March 2021. It strengthened further to 16.6 per cent at the end of September 2021. The report notes that this was partly aided by higher retained earnings, recapitalisation of public sector banks (PSBs) and capital raising from the market by both public and private sector banks. 
5. The report noted that despite the suspension of fresh insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) till March 2021, this route remained one of the primary modes of recovery in terms of value recovered. The report shows that, in FY21, 537 cases worth Rs 1.35 lakh crore were referred under IBC – a significant yet anticipated fall from the 1,986 cases registered in the previous fiscal. A total of Rs 27,311 crore was recovered under IBC this fiscal compared to over Rs 1 lakh crore last year. 
6. Banks have been plagued with an increase in the incidences of fraud in the current fiscal. The report notes that the number of frauds between April and September 2021 rose in comparison to the corresponding period last year. However, the cumulative amount involved in the frauds fell. This, the report states, was primarily due to a fall in advances frauds detected and reported. Yet, the number of internet-and credit-card related frauds rose to 1,532 in the first half of 2021 from 1,247 last year (during the corresponding period.) 
7. During the first half of 2021-22, it was private sector banks (PVBs) that made up over half of the total number of fraud cases. However, in value terms, the share of public sector banks (PSBs) was higher, indicating the predominance of high-value frauds, said the report.