Mumbai, Aug 18 (IANS): The net profit of the banks rose by 37.1 per cent year-on-year to Rs 44,048 crore in the first quarter of the current financial year, according to a Bank of Baroda research report.

The net profit of public sector banks rose 9.2 per cent to Rs 15,307 crore, while that of private banks increased at a faster pace of 54.9 per cent to Rs 28,165 crore in Q1FY23.

The report has analysed the financial performance of 35 banks of which 12 are public, 19 private while the remaining are small finance banks.

"We have looked at the key indicators of profitability, margins and efficiency ratios for the consolidated groups," the report said.

Net interest income of the industry grew 14.6 per cent in the first quarter of the current financial year due to rising interest rate regime and pick up in credit demand.

During the quarter under review, weighted average lending rate on fresh loans for schedule commercial banks rose by 31 basis points, while interest expenditure rose by 6.7 per cent.

However, rising yields on the government securities resulted in falling non-interest income due to mark-to-market valuations.

For both public and private sector banks, NII rose sharply to 11.9 per cent and 17.2 per cent, respectively, in Q1FY23, from 5.4 per cent and 10.5 per cent in Q1FY22. Non-interest income of PSBs fell sharply by 45.1 per cent in Q1FY23 from 44 per cent increase seen in Q1FY22, whereas for private banks, it fell by 4.4 per cent from 17.7 per cent increase in Q1FY22.

Operating profit of the industry declined by 8.6 per cent in the quarter under review. However, operating profit of PSBs fell sharply by 16.4 per cent as against 21.1 per cent increase in Q1FY22, led by decline in operating income due to drag down in non-interest income.

Provisions for the industry have fallen by 42 per cent in Q1FY23 from 8.9 per cent decline in Q1FY22. For PSBs, provisions fell by 30 per cent in Q1FY23 from 9.6 per cent decline in Q1FY22. For private banks, provisions declined far sharply by 58.5 per cent from 9.9 per cent fall in Q1FY22.

The decline may be attributed to the fact that banks have been making progressive provisions for NPAs in the last few years thus obviating the need for the same in the current financial year.

On the asset quality front, gross non-performing asset ratio of the industry improved to 5.72 per cent in Q1FY23 from 7.57 per cent in Q1FY22, owing to sharp improvement in gross NPA ratio of PSBs to 6.94 per cent from 9.13 per cent in the same quarter of last year. For private banks, it improved to 3.82 per cent from 5.04 per cent.