Reserve Bank of India (RBI) released its annual Report on Trend and Progress of Banking in India 2023-24

Current Context: The Reserve Bank of India (RBI) released its annual Report on Trend and Progress of Banking in India 2023-24 on December 27, 2024. 

The report provides an in-depth analysis of the banking sector's performance over the fiscal year.

• Profitability: The profitability of Indian banks improved for the sixth consecutive year. The Return on Assets (RoA) stood at 1.4%, and the Return on Equity (RoE) was 14.6%. This improvement in profitability is attributed to higher net interest income and lower provisions for bad loans.
• Asset Reconstruction Companies (ARCs): The report highlights that the book value of assets acquired by ARCs has crossed ₹10 lakh crore as of March 31, 2024. This indicates a significant growth in the volume of distressed assets being managed by ARCs.
• Asset Quality: The Gross Non-Performing Assets (GNPA) ratio declined to a 13-year low of 2.7% by the end of March 2024. This reduction in bad loans is a positive sign of the improving health of the banking sector.
• Credit Growth: There was robust credit growth across various segments, with a notable increase in retail loans, particularly housing and vehicle loans. This growth reflects the rising demand for credit in the economy.
• Capital Adequacy: Banks maintained strong capital positions with adequate buffers to absorb potential shocks. The Capital to Risk-weighted Assets Ratio (CRAR) remained well above the regulatory requirement.
• Technological Advancements: The report highlighted the increased adoption of digital banking and technological innovations. This shift towards digital platforms has enhanced customer experience and operational efficiency.
• Policy Measures: The RBI implemented various policy measures to support the banking sector, including liquidity infusion, regulatory relaxations, and measures to strengthen risk management practices.
• India's current account deficit (CAD) declined slightly to 1.2% of GDP in the second quarter of fiscal year 2024-25 (Q2 FY25), down from 1.3% in the same quarter last year.

Question:

1 What was the Return on Assets (RoA) for Indian banks as reported in the RBI’s Annual Report for 2023-24?

• A) 1.0%
• B) 1.2%
• C) 1.4%
• D) 1.6%

Answer: C) The RBI report highlighted that the profitability of Indian banks improved for the sixth consecutive year, with an RoA of 1.4%, driven by higher net interest income and lower provisions for bad loans.