India’s finance ministry projects a windfall in dividends from state-run banks for the fiscal year 2024/25, buoyed by surging profits and improved asset quality, according to a top official’s statement.
Vivek Joshi, India’s financial services secretary, revealed that the government expects to rake in at least Rs 15,000 crore ($1.8 billion) in dividends from state banks in the upcoming fiscal year, marking an 8.7% increase from the anticipated Rs 13,800 crore for the current financial year ending in March.
The optimism surrounding these projections stems from the remarkable performance of state-run banks, including the nation’s largest lender, State Bank of India. Net profits for these banks are poised to exceed Rs 1 trillion ($12 billion) in the current fiscal year, driven by robust credit demand.
Joshi highlighted that the 12 state-run banks collectively reported net profits totaling Rs 98,000 crore in the first three quarters ending in December, showcasing a robust financial performance.
Moreover, India’s efforts to strengthen its banking sector, initiated under Prime Minister Narendra Modi’s leadership since 2014, have borne fruit. Measures such as bank mergers and the implementation of a bankruptcy law to recover funds from defaulters have contributed to this success.
The improved asset quality of state banks is evident in the decline of gross non-performing assets (GNPAs) to 3.2% in September 2023, down from 9.6% in the March 2017 quarter, as per central bank data.
Finance Minister Nirmala Sitharaman, in the interim budget presentation last week, estimated that the government would receive Rs 1.02 trillion ($12.3 billion) in dividends from the Reserve Bank of India, state banks, and financial institutions in 2024/25, slightly lower than the Rs 1.04 trillion received in the current financial year.
Notably, the Reserve Bank of India (RBI) transferred Rs 87,416 crore in dividends to the government in the current fiscal year, underscoring the significant contribution of central bank dividends to the government’s revenue.
State banks have also demonstrated greater financial independence, with Rs 43,000 crore raised through markets in the current fiscal year, compared to Rs 45,000 crore in the previous fiscal year, indicating reduced reliance on budgetary support.
These developments reflect a positive trajectory for India’s banking sector, instilling confidence in its resilience and potential for sustained growth in the coming years.
