In more ways than one, 2001-2002 has been a turnaround year for the public sector banking industry. Any which way one looks at it.
Consider these facts. The net profit of the industry, excluding the State Bank of India group, is up 129.09 per cent in 2001-02 compared to a 12.93 per cent drop the previous year; the net non-performing assets (NPAs) as a percentage of net advances, including SBI, are down to 5.80 per cent against 6.74 per cent in 2000-01; establishment costs as a percentage of total costs are down to 17 per cent from 21 per cent in the previous year and business per employee is up from Rs 1.54 crore to Rs 1.88 crore.
The net profit of the 19 nationalised banks for 2001-02 jumped 129.09 per cent -- from Rs 2,121 crore in 2001 to Rs 4,859 crore in 2001-02. What is significant about the performance of the industry is that after nearly a decade, all public sector banks have posted net profits. Indian Bank, which had last recorded a net profit in 1996, bounced back to the black this year with a modest Rs 33 crore net profit, against a Rs 274 crore net loss in 2001 and a Rs 427 crore net loss in 2000. Dena Bank, which plunged into the red last year with a Rs 266 crore loss, has also written its balance sheet with black ink in 2001-02 with a Rs 11 crore net profit.
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The net profit of the seven associates of the State Bank of India for 2001-02 increased by 64.46 per cent to Rs 1,018 crore from Rs 619 crore in 2000-01. The State Bank of India will announce its annual results on June 20. The bank is expected to announce a net profit of around Rs 2,250 crore for the year.
The operating profit of the nationalised banks for 2001-02 was up 64.26 per cent to Rs 13,228 crore from Rs 8,053 crore in the previous year. The wide gap between the operating profit and the net profit showed that the banks had made enough provisions to strengthen their balance sheets, said a banking analyst.
For the first time since the sector was liberalised, the public sector banks have been able to bring down their NPAs to below 6 per cent of their net advances. In absolute terms, too, the net NPAs declined by Rs 111 crore to Rs 27,875 crore compared to an increase to Rs 1,803 crore to Rs 27,986 crore in the previous fiscal.
Gross NPAs as a percentage of gross advances too came down to 11.79 per cent from 13.39 per cent in 2001-02. In absolute terms, the gross NPAs of the 27 public sector banks, however, increased by Rs 1,420 crore in 2001-02 as against Rs 1,797 crore in 2000-01. As on March 31, 2002, gross NPAs of these banks stood at Rs 55,459 crore (Rs 54,039 crore).
Despite the spectacular performance, there have been a few weak spots. For instance, two banks (Indian Bank and Dena Bank) have failed to achieve the stipulated 9 per cent capital-adequacy ratio (CAR). Dena's CAR is pegged at 7.64 per cent while Indian Bank's CAR is a meagre 1.7 per cent as on March 31, 2002.
Another area of concern is the fact that the bulk of the bank's income this year came from treasury operations and not from core areas like advances and investments. "If one takes away the other income (trading profit) from the balance sheets, most of the bank results will lose their lustre," pointed out another analyst. Bankers, however, say that they made the most of a thriving debt market. "You are a fool if don't reap the harvest when the bond prices are shooting up every day," said a banker.
Meeting put off
Finance minister Yashwant Sinha