India's banks poised for loan growth boost amid rising profits: S&P Global report

India's banks are set to benefit from an anticipated uptick in loan growth, as improving profitability and declining provisions continue to strengthen the sector, according to a new report by S&P Global Market Intelligence as quoted by news agency ANI.All six of India’s largest public and private sector banks recorded full-year net income growth in the latest fiscal year, supported by stable net interest margins and reduced provisioning, the report said.Among the major lenders, State Bank of India (SBI) — the country’s largest — saw its net income rise by 16.1% to 709.01 billion rupees, with a net interest margin (NIM) of 2.81%. Meanwhile, HDFC Bank, India’s top private lender, posted a 10.7% increase in net income, with a NIM of 3.45%.Loan books for these six banks expanded by an average of 11.29% in the latest fiscal year, lower than the 21.18% recorded in the previous fiscal. However, according to consensus estimates from Visible Alpha, average loan growth is expected to exceed 12% in FY2025-26, and 13% in FY2026-27.While overall profitability is on an upward trend, public sector banks may see a slight dip in net profits in the coming fiscal. For example, SBI’s net income is projected to decline by 3.1% to 687.20 billion rupees in FY2025-26. In contrast, HDFC Bank’s profit is forecast to grow 9.5% to 737.20 billion rupees in the same period.Separately, government data reveals a historic performance by India’s Public Sector Banks (PSBs), which collectively posted their highest-ever net profit of 1.41 lakh crore rupees in FY2023-24. This turnaround reflects a marked improvement in asset quality, with the Gross Non-Performing Assets (GNPA) ratio falling to 3.12% as of September 2024.In the first half of FY2024-25, PSBs maintained momentum, earning 85,520.6 crore rupees in net profit. Additionally, over the past three years, PSBs have returned 61,964 crore rupees to shareholders in dividends — a testament to their enhanced operational efficiency, healthier balance sheets, and stronger capital positions.