The central government has implemented a series of reforms over the past decade aimed at improving the performance of Public Sector Banks (PSBs). These measures have addressed challenges such as non-performing assets (NPAs), financial inclusion, and credit growth.
In 2015, the Reserve Bank of India introduced the Asset Quality Review (AQR) to identify and address stressed accounts. This led to the transparent recognition of NPAs, with the gross NPA ratio peaking at 14.58% in March 2018 before declining to 3.12% in September 2024. The government adopted a strategy focused on recognition, resolution, recapitalization, and reform to manage these challenges effectively.
The financial performance of PSBs has shown improvement. The banks reported a combined net profit of ₹1.41 lakh crore in FY 2023-24, an increase from ₹1.05 lakh crore in the previous fiscal year. In the first half of FY 2024-25, the net profit stood at ₹0.86 lakh crore. Over the last three years, these banks have distributed ₹61,964 crore in dividends. The capital adequacy ratio rose to 15.43% in September 2024 from 11.45% in March 2015, allowing banks to access market capital without government assistance.
The number of bank branches increased from 1,17,990 in March 2014 to 1,60,501 in September 2024, with a focus on rural and semi-urban areas. Financial inclusion efforts resulted in the opening of 54 crore Jan Dhan accounts and the disbursement of more than 52 crore collateral-free loans under government schemes. Advances to micro, small, and medium enterprises (MSMEs) grew at a compound annual rate of 15% over the past three years, reaching ₹28.04 lakh crore in March 2024.
In agriculture and small business sectors, the Kisan Credit Card scheme provided short-term crop loans, with 7.71 crore active accounts and an outstanding amount of ₹9.88 lakh crore as of September 2024. Credit to MSMEs continued to expand under government initiatives, showing an annual growth of 17.2% in FY 2023-24.
The government also implemented policies to support bank employees. Automation of transfer processes and provisions for women employees were introduced, along with welfare measures that increased salaries and allowances under the 12th Bipartite Settlement. Pension benefits were revised, and the Staff Welfare Fund ceiling was raised from ₹540 crore to ₹845 crore annually.
