UPI Transactions Surge with Credit Growth Boosting Indian Banking Sector in FY24

UPI transactions grew 57% YoY in FY24, with PhonePe and Google Pay holding an 86% market share. India's banking sector saw a 15% credit growth with net profits exceeding Rs 3 lakh crore. Private banks' profits rose by 25%, PSBs by 34%, and economic growth hit 8.2% YoY.

Unified Payments Interface (UPI) transactions saw a significant increase, rising by 57% year-on-year (YoY) in FY24, according to the Boston Consulting Group's Banking Sector Roundup. Dominating the UPI space, PhonePe and Google Pay held an 86% combined market share. A notable shift in digital payments was observed, with credit card transactions doubling over the past three years, while debit card transactions fell by 43% YoY.

The Indian banking system showed robust momentum in credit growth, which surged by 15%, coupled with a deposit growth of 13% in FY24. For the first time, the total net profit of the banking sector surpassed Rs 3 lakh crore, with all banking groups achieving a return on assets (ROA) greater than 1%, underscoring the sector's profitability driven by high credit growth, healthy fee income growth, and low credit costs.

Private banks' profits saw a 25% YoY increase, while public sector banks (PSBs) experienced a 34% rise in net profit. Asset quality improved significantly, with gross non-performing assets (GNPAs) hitting a decade low of 2.8%, supported by a healthy provision coverage ratio (PCR). PSBs halved their GNPAs to 3.5%, while private banks reported GNPAs below the industry average at 1.7%.

India's economic growth for FY24 outpaced all estimates, growing at 8.2% YoY. The forecast for FY25 ranges between 6.2% and 7% YoY. This performance led to S&P Global Ratings upgrading India's sovereign rating outlook from stable to positive, citing improved growth and better government expenditure quality. Despite positive financial performance, the cost-to-income ratio (CIR) for the sector worsened by 206 basis points to 49.6%. PSBs recorded a CIR of 52%, up from 50% in FY23, while private banks saw a slight increase to 47% from 46% in FY23.

Contrasting provisioning trends were observed; PSBs reported a 37% drop, while private banks saw increases, notably HDFC Bank by 71% and Kotak Mahindra Bank by 244%. The banking sector remains well-capitalized, with 33 out of 35 banks maintaining a capital to risk-weighted assets ratio (CRAR) above 15%, exceeding the regulatory requirement of 9%.

Over the past three years, PSU banks outperformed private banks and non-banking financial companies (NBFCs) in market valuation growth. (ANI)

(With inputs from agencies.)