Banks' return on assets fell in 2009-10

Commercial banks saw a fall in their returns on assets (RoA) in the financial year ended March 31, 2010 as a decrease in funding costs was unable to offset a fall in the interest rates charged to customers.

RoA, which refers to net income as a percentage of total assets, fell to 1.05 per cent in 2009-10 from 1.13 per cent in 2008-09, according to a report by RBI, titled ‘A Profile Of Banks 2009-10’. Cost of funds for all banks fell to 5.09 per cent in 2009-10 from 5.96 per cent in the previous financial year, while return on advances adjusted for funding costs decreased to 4.19 per cent from 4.53 per cent over the same period.

Both private sector banks and foreign banks stocked up on capital in last financial year. For private banks, capital adequacy ratio rose to 17.45 per cent from 15.23 per cent, while it rose for foreign banks from 14.32 per cent to 17.25 per cent over the period under review.