Rather than a robust improvement in banking practices, it is the deceleration in the granting of loans, the fall in interest rates on current and savings accounts, the regulatory suspension on the recognition of bad debts and the write-backs of loans. Bad debt provisions after collection of resolution proceeds which are responsible for the beauty of Indian bank at the end of 2021.

Bank credit growth was just over 5% in 2020-2021. That sounds like good growth for an economy that shrank 7.3% that year. But we must remember that credit finance is not only investment and production, but also consumption. The big jump in gold lending during the pandemic is indicative of widespread distress. Individuals, households and small businesses take out distress loans. This could explain the apparent jump in loans.

The growth of loans at the level of banking groups also supports such a vision. Public sector banks recorded credit growth of 3%. Foreign bank loans have actually declined. Private banks saw their credit grow by 8%, possibly to fill the space left vacant by public sector banks. The real loan growth of around 118% came from smaller financing banks, precisely the kind of banks close to the borrower, to which a struggling business or individual can turn for immediate cash. .

Collective interest income of banks decreased in 2020-2021 compared to the previous year. Other income, from investments and others, grew by 2.9%, helped by reversals of provisions after recoveries from the IBC process. But the big increase in profits came from the reduction in expenses. Interest spent fell 8.9%, both because deposit rates fell and banks borrowed less to on-lend. Provisioning expenses fell 16.4%. That figure would increase once the pandemic regulatory stay to recognize bad debts is lifted next year.

The fine figures of Indian banks for the last fiscal year mask serious health problems in the sector.