Banking sector to see major reforms in 2022

The Banking sector is set to witness significant reforms in the next year with privatization of public sector banks and strategic disinvestment of IDBI Bank on the agenda of the government by next year.

All said, the merging covid situation, especially in the wake of Omicron variant, might pose problems in the pace of reforms.

Going by the numbers, the banking sector has done very well this year, notwithstanding the impact of the second wave of the covid outbreak.

Pursuant to the government’s 4Rs strategy recognition, resolution, recapitalization, and reforms, non-performing assets of the banking sector have declined to ₹8,35,051cr as on Mar 31, 2021.

As per the financial stability report released by the RBI in July 2021, macro stress tests, on the basis of regression modelling, indicate that the Gross NPA ratio of scheduled commercial banks, under the baseline scenario, may rise from 7.48% in Mar 21 to 9.80% by next year.

The net profit of public sector banks surged to ₹14,012cr in the first quarter and further increased to ₹17,132cr in the second quarter. Similarly, private sector banks including HDFC Bank, ICICI and Kotak Mahindra Bank also posted healthy profit. Improved financial health coupled with new public sector enterprise policy have prepared a strong ground for the privatization of public sector banks, a long pending financial sector reform.