India’s banking sector in five charts

Credit growth is steady, but bad loans are rising.
Credit growth is steady, but bad loans are rising.
Image: AP Photo/Rajesh Kumar Singh
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India’s banks have been plagued by challenges ranging from bad loans to shrinking profitability in the last few years.

In its financial stability report, released on Dec. 23, the Reserve Bank of India’s governor Raghuram Rajan also warned that ”corporate sector vulnerabilities and the impact of their weak balance sheets on the financial system need closer monitoring.”

Indian companies have long been criticised for huge debts on their books. According to the RBI’s analysis of 2,368 “non-government, non-financial, listed companies,” 15.8% were defined as “weak companies,” which are primarily firms whose interest paying ability is stressed. The RBI has measured this by the interest coverage ratio, which is less than one for these companies. 

Overall, the current financial health of banks in Asia’s third largest economy is a mixed bag. While credit growth across the banking sector has been inching higher, profits are moderating. Much of this can be attributed to the rise in non-performing assets (NPAs), which has been repeatedly flagged by Rajan as a significant risk.

Quartz brings to you some important indicators that give a snapshot of India’s banking industry. (All years represented below are financial years, and the data is updated till March 31, 2015.)

Income is rising, but profits sputtering

Meanwhile, returns have flattened…

…and NPAs have risen

But some good news: Cashless banking is on the rise