The banking sector was taken for a surprise, when new private banks (NPB) outperformed the nationalized banks (NB) in the last fiscal. The FY 2011-12 has seen a global economic crisis and the GDP fell 2% below the previous year's 8.5 to 6.5%.
The entire economic condition has affected the banking sector adversely. The growth in advances and deposits were thinner than the previous year. The deposits for the year grew by 13.4% against 15.9% year before; similarly advances grew by 17% compared with 21.5 in FY10.
However, a comparison of NBs and NPBs shows latter outshining the former. NBs deposits grew by 15%, 1.3% below NPBs' 16.3%, while the advances grew by 18.1% for NBs against NPBs' 20.1%.
The net interest margins (NIM) followed the similar story, with NPBs having 3.53% against 2.98% for NBs. NPAs continue to be trouble for NBs, they increased from 1.9% to 2.5% over the year; on the other hand NPBs saw a decline in their NPA ratio, which dipped from 2.2% to 1.9%. These two numbers resulted in a lower return on assets (RoA) for the NBs.
However NBs maintained a better cost to income ratio vis-a-vis NPBs, which was 44.30% and 50.16% respectively. The economic conditions make it difficult for banks to keep NPA and RoA under control, but NPBs have managed to do it by better management of their assets, and absence of pressure to lend to particular sector like in case of NBs.