India's Best Banks

After being hit by a series of events, from a slowdown in the economy to a raging pandemic, the banking industry seems to have pressed the reset button

- Anand Adhikari

MAY YOU LIVE in interesting times,” goes a Chinese proverb—apparently both a curse and a blessing. It fittingly describes the state of affairs in the banking space. In the past decade, the sector has weathered several storms—a slowing economy, corporate deleveraging, non-performing assets (NPAs), digital disruption, and the Covid-19 pandemic.

In such times, lenders that have been able to exploit every adversity to their advantage have emerged as winners—as the 26th edition of the BT-KPMG Best Banks Survey 202021 finds. ICICI Bank, the country’s second-largest private bank by market capitalisation, is the Bank of the Year for the second successive year. (See box Roll of Honour.)

The banking sector as a whole has had a better year. It posted a net profit of ₹1.21 lakh crore in FY21 against ₹10,999 crore in FY20. Return on assets (ROA) and return on equity (ROE)—two key parameters of profitability—also came out of the red over a three-year period. Among other parameters, the capital adequacy ratio—a measure of a bank’s lending capacity—improved from 15.3 per cent to 16.3 per cent, while gross NPAs declined from 9.1 per cent in FY19 to 7.3 per cent in FY21. “The improved parameters partly reflect regulatory relief provided to banks during Covid-19 as well as fiscal guarantees and financial support given by the government,” Reserve Bank of India (RBI) Governor Shaktikanta Das said recently. But, as Das was quick to point out, there are risks and challenges going forward that require serious introspection and action on the part of the banking system.

BUSINESS RESET