4 public sector banks (PSBs) missed their targets for operating profit growth in FY23

Four public sector banks (PSBs) missed their targets for operating profit growth during the last financial year. Additionally, PSBs have performed well in terms of profits and bad loans but have lost market share in both loans and deposits.

According to a presentation by the department of financial services during an interaction between PSU bank chiefs and finance minister Nirmala Sitharaman, Indian Overseas Bank (IOB), Punjab National Bank (PNB), Punjab & Sind Bank (P&SB), and UCO Bank failed to achieve their growth targets for operating profits, sources told.

IOB's operating profit for the year increased marginally to Rs 5,900 crore from Rs 5,800 crore a year ago, representing a 3.1% rise.

IOB's operating profit for the year increased marginally to Rs 5,900 crore from Rs 5,800 crore a year ago, representing a 3.1% rise.

Similarly, PNB's operating profit rose by 8.5% to Rs 22,500 crore, while P&SB experienced a 9% growth to reach Rs 1,500 crore. UCO Bank was the fourth lender with single-digit operating profit growth (9.5%) at Rs 4,300 crore.

Among PSBs, Bank of India achieved the highest growth in operating profit, with a substantial 34.1% increase to Rs 13,400 crore.

According to the data, the market share of PSBs in total advances declined from 66.3% in 2018 to 58.4% in 2023.

This decline was observed across various sectors, including industry, services, agriculture, MSMEs and retail. The sharpest decline was in advances to MSMEs, where the PSBs' share dropped from 69.2% to 44.1%. Likewise, in terms of deposits, PSBs witnessed a decline in their market share from 70.1% to 61.5% during the same period.

The banks that underwent consolidation experienced the most significant drop in credit share during this period.

PNB's share of total credit decreased from 7.4% in 2018 to 6% in 2023. Union Bank's market share decreased from 6.5% to 5.5%, while Canara Bank saw its share decline from 6.7% to 5.8%.

The state-run lenders have also worked out the strategy to ensure that they completely address the concerns that were flagged by RBI governor Shaktikanta Das during a recent meeting with directors.

There will be greater attention on accounting policies to avoid evergreening of loans and artificial boosting of performance, banking sources said.