Public Sector Banks in India Outshine Private Banks in Profit Growth
In the second quarter of FY25, India’s public sector banks (PSBs) have shown remarkable performance, surpassing private sector banks in net profit growth. According to a report by the State Bank of India, PSBs achieved a 39.3% year-over-year increase in net profit, significantly higher than the 7.1% growth of private banks.
Leading Performers
Punjab National Bank (PNB) led the PSBs with a 145% increase in net profit, attributed to a decrease in new provisions and contingencies. Other PSBs like Central Bank of India, UCO Bank, and Bank of Maharashtra also reported substantial profit gains of 50.9%, 50%, and 44.2% respectively.
Private Banks’ Performance
Among private banks, Axis Bank recorded the highest profit growth at 18%, followed by ICICI Bank with 14.5%. HDFC Bank and Kotak Mahindra Bank had modest increases of 5.3% and 4.8%, while IndusInd Bank saw a 39.6% decline in profit.
CASA Ratios and Advances
Private banks maintained stronger domestic Current Account Savings Account (CASA) ratios, with Kotak Mahindra Bank leading at 43.6%. Among PSBs, Bank of Maharashtra had the highest CASA ratio at 49.3%. In terms of advances, private banks grew by 14.9%, while PSBs grew by 9.8%, with Indian Overseas Bank and Bank of Maharashtra showing strong growth.
The results indicate a shift in the banking sector, with PSBs leveraging reforms and government support to enhance profitability, while private banks focus on high CASA ratios and advances.
Doubts Revealed
Public Sector Banks -: Public Sector Banks (PSBs) are banks where the government owns a major part of the bank. In India, these banks are controlled by the government and include banks like State Bank of India and Punjab National Bank.
Private Banks -: Private Banks are banks that are owned by private individuals or businesses. In India, these include banks like HDFC Bank and ICICI Bank.
FY25 -: FY25 stands for the financial year 2024-2025. In India, a financial year starts on April 1st and ends on March 31st of the next year.
Net Profit Growth -: Net Profit Growth refers to the increase in the amount of money a bank earns after all expenses and taxes are paid, compared to the previous year.
CASA Ratio -: CASA Ratio stands for Current Account Savings Account Ratio. It shows how much money a bank has in its current and savings accounts compared to its total deposits. A higher ratio means the bank has more low-cost funds.
Advances Growth -: Advances Growth refers to the increase in the amount of money that banks lend to customers. It shows how much more loans the bank has given compared to before.
Reforms -: Reforms are changes made to improve a system. In the context of banks, reforms might include new rules or policies to make banks work better and be more profitable.