India’s great banking divide

There are two sets of banks in India—the state-run banks, and private sector (both old and new) and foreign banks. If their earnings for the March quarter are anything to go by, it’s evident that private banks are in a better position to manage their operations in a slowing economy than their counterparts in the public sector that account for close to 70% of the Indian banking industry’s assets.

Let’s take a look at their earnings first. The net profit of 38 listed banks—private and public—including 14 banks that constitute the BSE’s banking index, Bankex, rose marginally, by 3.63%, in the March quarter. For the entire year, the rise was higher—10.63%. But the private sector banks are yards ahead of the state-owned banks. Their net profit for the quarter rose 24.63% and, for the full year, a little more than 28%. In contrast, public sector banks’ net profit for the quarter actually dropped 6.64% and, for the year, it’s only marginally higher—just about 2.63%. Most large public sector banks’ net profit in the March quarter dropped, including that of the State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda, Bank of India and Canara Bank. For the full year, SBI’s net profit rose 20.5%, but profit at three of the other four banks dropped; Bank of India’s net profit rose by just 2.68%. In contrast, the net profit of ICICI Bank Ltd, HDFC Bank Ltd, Axis Bank Ltd, Kotak Mahindra Bank Ltd, Yes Bank Ltd and IndusInd Bank Ltd—both for the quarter and the full year—rose by between 21% and 47%.

Read more >>Click here