INDIAN BANKS EARN RECORD PROFIT, CUT NPA RATIO TO A DECADAL LOW, IMPROVE ASSET QUALITY AMIDST GLOBAL FINANCIAL TURMOIL

Amidst global uncertainties and a faltering global economic growth prospect, the Indian economy continues to display robust growth momentum, supported by strong macroeconomic fundamentals. The Reserve Bank of India has projected the real GDP growth at 6.5% for 2023-24 over and above the 7.2% growth it achieved last year. The International Monetary Fund has projected India’s GDP growth at 5.9% for 2023-24 while the World Bank has projected it at 6.3%.

- Tushar K Mahanti

The UN report ‘The World Economic Situation and Prospects as of mid-2023’ published last May was even more optimistic about India’s growth prospect. India's GDP is expected to grow by 6.7% in the calendar year 2024, supported by resilient domestic demand, according to the report which suggested that higher interest rates and weaker external demand will continue to weigh on investment and exports this year for the country.

There are several factors which are contributing to India’s higher growth dynamic, but probably the most important of them has been its stable and growing financial sector. India’s growth resilience has been supported by its well-performing financial sector. The banking sector has done remarkably well last year against the financial turmoil experienced by the advanced economies. Heightened uncertainty persists in the global economy due to fragility in certain banking systems, geopolitical tensions, and moderating but elevated inflation world over.

Only a few months ago the world’s biggest economy, the US saw some of its big banks failed. On March 10, 2023, Silicon Valley Bank (SVB) failed after a bank run, marking the third-largest bank failure in the United States’ history and the largest since the 2007–2008 financial crisis. It was one of the three bank failures, along with Silvergate Bank and Signature Bank, in March 2023 in the US.

In March 2023, Switzerland’s Credit Suisse bank collapsed following several years of scandals. It was purchased by the Swiss rival MBS without shareholders’ approval. Switzerland will now have only one major banking institution and the country’s reputation for banking stability is shaken.