The Hindu Business Line : Significant rise in rural banks’ profits

Mangalore, Dec. 19 A huge jump in net profit, gradual decrease in NPAs and further reduction in the number of banks are the major factors that marked the progress of regional rural banks (RRBs) during 2007-08.

The report on ‘Trend and Progress of Banking in India 2007-08’ released by the Reserve Bank of shows a significant improvement in the net profit of RRBs. The regional rural banks as a group earned net profit of Rs 1,374 crore during 2007-08 as against Rs 625 crore in the previous year, recording a growth of 119.84 per cent. Out of 90 RRBs, 82 earned a combined profit of Rs 1,429 crore, whereas eight RRBs incurred a combined loss of Rs 55 crore in 2007-08.

Aggregate income of RRBs during 2007-08 grew by 20 per cent on account of higher interest and non-interest income. The interest income of RRBs stood at Rs 8,392 crore (Rs 7,123 crore) and non-interest income at Rs 803 crore (Rs 540 crore), showing a growth of 17.8 per cent and 48.7 per cent, respectively.

Growth in expenditure during the year was relatively subdued on account of lower increase in interest expenditure and wage bill. Interest expended during the period stood at Rs 4,064 crore (Rs 3,716 crore) and wage bill at Rs 2,215 crore (Rs 2,051 crore), recording a growth of 9.4 per cent and 8 per cent, respectively.

The report attributes these as the reasons for the significant improvement in the profitability of banks during 2007-08.

While gross NPAs to total assets ratio declined to 5.9 per cent at end-March 2008 (6.6 per cent), the net NPAs to assets ratio declined to 3 per cent (3.5 per cent).

The consolidated balance-sheet of RRBs showed an increase of 16.8 per cent (18 per cent). On the assets side, net advances of RRBs increased by 21.7 per cent (22.7 per cent) during the period. Among the major items on the liabilities side, both deposits and borrowings increased by 19.2 per cent each during the year.

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