UPI Transactions Surge, Private Banks Shine: BCG FY24 Report

Unified Payments Interface transactions grew by 57% YoY in FY24, with PhonePe and Google Pay capturing 86% market share. The Indian banking sector hit a net profit milestone of Rs 3 lakh crore, driven by high credit growth. Private banks’ profits rose by 25%, PSBs by 34%.

Unified Payments Interface (UPI) transactions have witnessed considerable growth, rising by 57% year-over-year (YoY) in FY24. Highlighting this shift, PhonePe and Google Pay dominated, securing a combined market share of 86%, according to the Boston Consulting Group (BCG) Banking Sector Roundup for FY24. Additionally, credit card transactions doubled in the past three years, while debit card transactions saw a notable YoY decline of 43%.

The Indian banking system maintained robust credit growth momentum, surging by 15%, alongside a deposit growth of 13% in FY24. For the first time, the sector's total net profit exceeded Rs 3 lakh crore, and all banking groups achieved a return on assets (ROA) greater than 1%. This significant profitability was driven by high credit growth, healthy fee income growth, and low credit costs.

Private banks experienced a 25% YoY increase in net profits, while public sector banks (PSBs) saw a 34% rise. The report also revealed an improvement in asset quality, with gross non-performing assets (GNPAs) hitting a decade-low of 2.8%, supported by a healthy provision coverage ratio (PCR). PSB GNPAs halved to 3.5%, whereas private banks reported GNPAs of 1.7%, below the industry average.

India's economic growth rate for FY24 surpassed projections, achieving 8.2% YoY, with expectations for FY25 ranging between 6.2% and 7% YoY. This robust economic performance led S&P Global Ratings to uplift India's sovereign rating outlook from stable to positive, citing enhanced growth and improved government expenditure quality. Despite these gains, the sector's cost-to-income ratio (CIR) deteriorated by 206 basis points (bps) to 49.6%. PSBs recorded a CIR of 52%, up from 50% in FY23, while private banks saw a modest increase to 47% from 46% in FY23.

In terms of provisioning, contrasting trends emerged: PSBs reported a 37% reduction, whereas private banks faced increases, with HDFC Bank and Kotak Mahindra Bank experiencing surges of 71% and 244%, respectively. The banking sector maintained strong capitalization, with 33 out of 35 banks recording a capital to risk-weighted assets ratio (CRAR) above 15%, well above the regulatory requirement of 9%. Additionally, PSU banks have outperformed private banks and non-banking financial companies (NBFCs) in market valuation growth over the past three years.

(With inputs from agencies.)