Deposits of Scheduled Commercial Banks (SCBs) grew by 11 per cent in June 2020 as compared to 10 per cent a year ago. In terms of credit, it grew by 7 per cent on YoY basis as compared to the growth of 11 per cent in June 2019.
In spite of the challenging environment arising due to outbreak of COVID-19, the aggregate interest income growth of SCBs was 3.7 per cent in Q1FY21. The interest income growth can also be attributed to decrease in gross NPAs.
Due to liquidity surplus in the banking system and to ensure better transmission of rate cuts, banks slashed deposit rates, which resulted in contraction in growth of interest expenses.
Total income growth of SCBs slowed down to 3.38 per cent in Q1FY21 as compared to the previous year due to the slow growth in interest income. Other income which accounts for the balance 13 per cent share of total income increased by 2.4 per cent in Q1FY21.
NIMs of both government and private banks recorded a marginal improvement as the transmission of rate cut was faster to the depositors as compared to the borrowers.
The amount of gross NPAs of SCBs declined during the quarter as compared with the previous year. Among PSBs, the State Bank of India (SBI), which accounts for the highest share at 20 per cent of the GNPAs of SCBs in Q1FY21, reported the highest asset quality improvement, with a decline in GNPA ratio to 5.4 per cent in June 2020 as against 7.5 per cent in June 2019.
The RoA for SCBs has improved from negative 0.14 per cent in Q1FY19 to 0.34 per cent in Q1FY21 owing to an increase in net profits of both PSBs and PVBs.