Two banks - HDFC Bank and SBI - contributed half of the industry's profits. Of the total profits, HDFC Bank at 31,116 crore accounted for 30%, an 18% increase over the previous year. The country's largest lender SBI accounted for another 20% at 20,410 crore. The third-highest was ICICI Bank, which earned 16,192 crore, more than double what it earned in the previous year. Private banks also gained market share as public sector banks (PSBs) went slow in lending.
The biggest turnaround was among PSBs which reported a collective net profit for the first time in five years. Only two of the 12 PSU banks - Punjab & Sind Bank and Central Bank of India - reported a net loss for the year. In the private sector, Yes Bank remained in the red with a net loss of 3,462 crore as it continued to make provisions. However, for banks in the red, the losses were lesser than what they reported in the previous year.
The single biggest reason for PSBs to post such a 57,832-crore turnaround - from a loss of 26,015 crore in FY20 to a combined profit of 31,817 crore - was the end of their legacy bad loan problem. This burden reached a peak after the RBI forced banks to classify 12 large defaulting accounts, followed by another 40 accounts, as non-performing assets and initiate bankruptcy proceedings. Given the size of these exposures, the move resulted in loans worth 4 lakh crore turning bad.
By March 2020, banks had completed making provisions for most of these loans. Additional provisions were offset by large recoveries from earlier written-off accounts, and banks stopped bleeding. According to rating agency ICRA, the profits for the current year were the windfall gains on bond portfolios of public banks account, which contributed two-thirds of their profits before tax in FY21.
In Covid year, banks see record profit of Rs 1 lakh crore - Times of India
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