While endorsing enhancement in the asset quality of banks, led by improved borrower selection, more effective debt recovery and heightened debt awareness among large borrowers, the Economic Survey says since the inception of the Insolvency & Bankruptcy Code (IBC) in 2016, underlying defaults worth Rs10.2 lakh crore were settled at the pre-admission stage.
According to the survey presented in Parliament by Union minister of finance and corporate affairs, Nirmala Sitharaman, more than one-fifth of the companies undergoing the resolution process are from the real estate sector.
Also, during the past six years since FY17-18, the IBC has enabled over Rs3 lakh crore recovery for banks, which was much more than what the lenders had recovered through previous mechanisms of Lok Adalats, debt recovery tribunals (DRTs) and the SARFAESI Act, the Survey says.
The government has strengthened the national company law tribunal (NCLT) regarding infrastructure, increasing its strength by filling vacancies and proposing an integrated IT platform, the Survey says. "The regulations have been amended to keep in line with the needs of the markets and the advances in judicial pronouncements."
Since the implementation of IBC in 2016, a total of 31,394 corporate debtor cases involving a value of Rs13.9 lakh crore have been disposed (including pre-admission case disposals) as of March 2024.
According to the Survey, the gross non-performing assets (GNPA) ratio of scheduled commercial banks (SCBs) continued its downward trend, reaching a 12-year low of 2.8% at the end of March 2024 from its peak of 11.2% in FY17-18.
"The macro-and micro-prudential measures by Reserve Bank of India (RBI) and the Union government have enhanced risk absorption capacity in recent years, improving the banking system's stability. For the top 10 Indian banks in asset size, loans constitute more than 50% of their total assets, making banks immune to the rising interest rate cycle," it added.
The Survey notes that RBI maintained a steady policy rate throughout the year, with the overall inflation rate under control. The effects of the monetary tightening following the Russia-Ukraine conflict are evident in the increase in lending and deposit interest rates among banks.
RBI's monetary policy committee (MPC) maintained the status quo on the policy repo rate at 6.5% in FY23-24. During the current tightening cycle, from May 2022 to May 2024, the external benchmark-based lending rate and the one-year median marginal-cost-of-funds-based lending rate increased by 250bps (basis points) and 175bps, respectively, the Survey says.
Bank loans saw significant and widespread growth across various sectors, with personal loans and services leading the way.
According to the Survey, credit growth remains robust, mainly driven by lending to services and personal loans.
Lending by non-banking financial companies (NBFCs) accelerated, led by personal loans and loans to the industry, and their asset quality improved. Credit disbursal by SCBs stood at Rs164.3 lakh crore, growing by 20.2% at the end of March 2024, compared to 15% growth at the end of March 2023.
Agricultural credit increased nearly 1.5 times from Rs13.3 lakh crore in FY20-21 to Rs20.7 lakh crore in FY23-24. The Kisan credit card (KCC) scheme played a pivotal role in providing timely and hassle-free credit to farmers, with over 74mn (million) operative KCC accounts at the end of 2023, it added.
During the second half (H2) of FY23-24, industrial credit growth picked up, registering 8.5% growth in March 2024, compared to 5.2% a year ago, driven by an increase in bank credit to small and large industries.
"Improving credit flow to the micro, small and medium enterprises (MSME) sector at low cost has been a policy priority of the Union government and RBI. Bank credit disbursal to the services sector remained resilient. Despite a slowdown in credit growth to NBFCs credit disbursal for housing loans increased from Rs19.9 lakh crore in March 2023 to Rs27.2 lakh crore in March 2024," the Survey says.
The Survey highlights the remarkable expansion of Indian capital markets. Capital markets have shown impressive results, with India's stock market-capitalisation to gross domestic product (GDP) ratio ranking fifth globally.
According to the Survey, the Indian stock market was among the best-performing markets, with India's Nifty 50 index ascending by 26.8% during FY23-24, as against (-)8.2% during FY22-23.
The Survey says that the exemplary performance of the Indian stock market compared to the world can be primarily attributed to India's resilience to global geo-political and economic shocks, its solid and stable domestic macroeconomic outlook and the strength of the domestic investor base.
The Indian capital markets have seen a surge in retail activity in the last few years, it says, adding, "The registered investor base at the National Stock Exchange (NSE) has nearly tripled from March 2020 to March 2024 to 9.2 crore as of 31 March 2024, potentially translating into 20% of the Indian households now channelling their household savings into financial markets. The number of demat accounts rose from 11.45 crore in FY22-23 to 15.14 crore in FY23-24."
FY23-24 has been a spectacular year for mutual funds (MFs) too as their assets under management (AUM) increased by Rs14 lakh crore, registering a year-on-year (y-o-y) growth of 35% to Rs53.4 lakh crore at the end of FY23-24, boosted by mark-to-market (MTM) gains and expansion of the industry.
The Economic Survey notes that the significant increase in retail investors in the stock market calls for careful consideration as there is the possibility of overconfidence leading to speculation. Firms operating in banking and capital markets must keep the interests of the consumers in mind through fair selling, disclosure, transparency, reliability, and responsiveness, it added.
During FY23-24, primary markets remained robust, facilitating capital formation of Rs10.9 lakh crore (which is about 29% of the gross fixed capital formation of private and public corporates during FY22-23), compared to Rs9.3 lakh crore in FY22-23. "Fund mobilisation through all three modes, such as equity, debt, and hybrid, increased by 24.9%, 12.1% and 513.6%, respectively, in FY23-24 compared to the previous year."
The number of initial public offers (IPOs) increased by 66% in FY24 from 164 in FY22-23 to 272 in FY23-24, while the amount raised grew by 24% from Rs54,773 crore in FY22-23 to Rs67,995 crore in FY23-24.
The corporate debt market in India is going from strength to strength, the Survey says. During FY23-24, the value of corporate bond issuances increased to Rs8.6 lakh crore from Rs7.6 lakh crore during the previous financial year.
"The number of corporate bonds public issues in FY23-24 was the highest for any financial year so far, with the amount raised (Rs19,167 crore) at a four-year high. Increasing investor demand and the rise in the cost of borrowing from banks have made these markets more attractive for corporates for funding requirements," it says.
The Survey says that the insurance sector has seen remarkable growth. India is poised to emerge as one of the fastest-growing insurance markets in the coming decade. Economic growth, an expanding middle class, innovation, and regulatory support have driven insurance market growth in India, it pointed out.
Non-life premium growth moderated slightly from 9% in FY21-22 to an estimated 7.7% as the market stabilised after the pandemic. Recently, Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) achieved a milestone of generating 342mn Ayushman cards across India, with 49.3% of them held by females, the Survey says.
Talking about the developments in the pension sector, the Survey states that India's pension sector has expanded since the introduction of the national pension scheme (NPS) and, more recently, the Atal pension yojana (APY). The total number of subscribers stood at 73.56mn as of March 2024, registering a YoY growth of 18% from 623.6 lakh as of March 2023.
The total number of APY subscribers (including its earlier version, NPS Lite) increased from 50.12mn as of March 2023 to 58.84mn as of March 2024. APY subscribers account for around 80% of the pension subscriber base. APY subscribers have witnessed an improvement in gender mix, with women subscriber share rising from 37.2% in FY16-17 to 48.5% in FY22-23, the Survey says.
