Banks hit the slow lane in FY'12, says RBI

The consolidated balance sheet of scheduled commercial banks (SCBs) in the country recorded slower growth during 2011-12, compared with the previous year, amidst an overall slowdown in the domestic economy, the Reserve Bank of India (RBI) said in a report released on Friday.

Banks reported a slowdown in profit growth, mainly due to steep increase in interest expenditure. Consequent to the slowdown in net profit, return on assets (RoA) and return on equity (RoE) dipped marginally. Also, net interest margin (NIM) declined marginally during 2011-12 compared with the previous year, RBI said in its `Report on Trend and Progress of Banking in India-2011-12'.
The capital to risk-weighted asset ratio (CRAR) remained well above the stipulated minimum for the system as a whole as well as for all bank groups during 2011-12, indicating that Indian banks remained well-capitalised. As at end-March 2012, Tier I capital accounted for more than 70 per cent of the total capital of Indian banks.

During 2011-12, the deteriorating asset quality of the banking sector emerged as a major concern, with gross non-performing assets (NPAs) of banks registering a sharp increase, RBI noted.

However, banks have progressed well under the financial inclusion plan (FIPs), and have almost completed the process of providing banking outlets in all villages with population more than 2,000.

Co-operative banks
Urban co-operative banks (UCBs) posted double-digit growth in assets and showed an improvement in profitability and asset quality in 2011-12 amidst consolidation in the sector with the exit of the weak and emergence of the financially strong.

About 61 per cent of these institutions, accounting for 78 per cent of the total banking business of the UCB sector, had ratings of 'A' and 'B' as per the new CAMELS rating model, RBI said in its report.