India Becomes Back-Bencher In BRICS: Lags In Banking Profitability, Says Report

In a sharp remark, Moody’s Investors Service (MIS) has categorised the profitability of Indian banks as ‘’distinctively weak” when compared to its peers in other BRICS countries, as reported by Business Standard. The report also mentioned that the Indian banking system as a whole remained unprofitable due to the high credit costs at dominant state-owned banks. Indian PSBs (Public Sector Banks) have a market share of around 70 per cent in India.

While Chinese banks had the lowest problem loan ratio, Russia had the highest ratio of 11.8 per cent. India had the next highest number of NPAs in the banking system. Moody’s also said that while banks in India were the “weakest” in maintaining a strong tangible common equity ratio, South Africa’s performance topped the category. Also, Brazilian and South African banks gave the best returns on assets.

Though the Indian banking system has remained under stress for the past few years, Moody’s expects an improvement in the profitability of the banks as asset quality stabilises. The gross NPA’s in the balance sheets of Indian banks crossed Rs. 10 lakh crore in June 2018.

However, with Modi Government's flagship legislation, Insolvency and Bankruptcy Code (IBC) of India, helping Indian banks recover their losses, the worst might be over for India.