Foreign and old private sector banks humbled public sector giants in terms of profitability in the last fiscal, the pre-Budget Economic Survey said on Wednesday.

However, the state-owned banks' incremental bad assets or non-performing loans fell but that of the foreign and private sector (old and new) rose, the Survey tabled in Parliament said.

The ratio of net profits to total assets was highest at 1.6 per cent for the foreign banks followed by old private sector banks at 1.2 per cent in 2002-03, it said.

Economic Survey 2003-2004: Complete Coverage

Though the state-owned banks' net profit stood at mere 1.0 per cent of the total assets during 2002-03, it had every reason to be joyous since it improved from 0.8 per cent from the previous fiscal.

Indicating the need for improved asset portfolio, the Survey said except for foreign banks, there was increase in provisions and contingencies prompted by RBI's mandate of 90-days norms for declaring a loan as non-performing from March 31, 2004.

New private sector banks topped the list of those making increased provisions with 99.7 per cent, followed by PSBs (30.3 per cent) and old private sector banks (4.1 per cent). Provisions of the foreign banks witnessed a decline of 5.8 per cent.

Despite all these provisions, all the 27 government-owned banks had capital adequacy ratio of 12.6 per cent, well above the RBI mandated 9.0 per cent during 2002-03.

Among the 30 private sector banks, Centurion Bank and GTB had CAR of less than RBI mandated norms.

The Survey said a "notable" development in 2002-03 was the 19.5 per cent rise in net interest income to Rs 47,111 crore (Rs 471.11 billion) of scheduled commercial banks from Rs 39,441 crore (Rs 394.41 billion) in 2001-02.

It said except foreign banks, all bank groups recorded double-digit increase in the spread by containing interest expenditure due to falling interest rates, particularly on deposits.

During 2002-03, total income of SCBS increased by 14.1 per cent to Rs 1,72,374 crore (Rs 1723.74 billion) and that the share of interest income has been declining in the total income due to slower growth of credit and softening of interest rates.

While ratio of spread to total assets had increased for all banks, the ratio was the highest for foreign banks at 3.4 per cent followed by PSBs at 2.9 per cent, old private sector banks at 2.5 per cent and new private sector banks at 1.7 per cent, it said.