BUSINESS
Indian banking’s held back by inadequacy of long-term funding
RBI has eased short-term liquidity pressures through various tools, but these are no substitute for the stable, long-term funding banks need to support credit growth. The core issue is long-term availability of stable funding—mainly through deposits or long-term bond issuance. India’s banking system is in a delicate balance—supported by liquidity interventions but hindered by long-term funding gaps
BUSINESS
Eight wishes for Indian banking in 2025
Both economic and geopolitical contexts have deteriorated since the beginning of the previous year. After a robust performance in FY24, banks have begun experiencing challenges. In this backdrop, here’s a wish list to navigate a challenging year safely
BUSINESS
A Kafkaesque tale of Indian consumer banking
After discovering a shocking drop in his credit score, the author faces a frustrating battle against a mysterious fraudulent account. Despite efforts to rectify the situation, he finds himself trapped in an unresponsive system, highlighting the challenges many consumers face in India
BUSINESS
Here’s how to bypass the hurdle of credit-deposit growth mismatch
Indian banks have experienced significant credit growth in the post-pandemic years, but weak deposit growth threatens to undermine this progress. Permitting banks to issue bonds could address the challenge of sluggish deposit growth
BUSINESS
Banks face challenges in making ECL-based provisioning work
The information needed to make ECL provisions has characteristics akin to a public good. While procuring and aggregating them may entail private costs, the communal benefits from their dissemination are substantial
BUSINESS
Why investors were lukewarm to SBI’s July AT-1 bond issuance
The underwhelming performance of SBI’s AT1 bond issue is perhaps indicative of the new normal for subordinated bonds issued by banks and financial institutions. Banks may have to significantly increase the premium offered on these bonds, given the uncertainties associated with the loss absorption hierarchies
BUSINESS
Stagnant household bank deposits cast shadow on credit growth
The stagnation in household savings, despite robust economic growth, is both intriguing and concerning. Understanding the dynamics of household banking deposits is challenging due to limited granular and segmented data in the public domain
BUSINESS
Aligning With The Target: Is RBI signalling a change in its inflation targeting strategy?
On June 8, the RBI introduced a new phrase to communicate its future strategy — aligning with the inflation target. The introduction of this new terminology could inadvertently create ambiguity which could end up hurting the credibility of the inflation targeting framework
BUSINESS
Is the good run of the Indian banking sector over?
FY2023 saw an unusual confluence of factors all of which resulted in extraordinary performance for Indian banks, after a prolonged phase of banking sector woes. The road ahead seems bumpier
BUSINESS
A flat yield curve does not bode well for bank margins
We may see bank margins taking a hit in FY 2023 as the numbers come out. If the current flat yield curve continues, then FY 2024 margins may be even lower
BUSINESS
SVB crisis has brought the trade-off between price stability and financial stability back into focus
Should a monetary authority take financial stability into account when setting its monetary policy or be guided by the mandated objectives of inflation control and economic growth?
BUSINESS
Banking | Will 2023 be as good as 2022?
Unless we see the return of the capex cycle, credit growth will eventually subside as the global commodity prices cool off with slow economic growth or even recession
BUSINESS
Buy Now Pay Later | RBI’s timely move will check explosive growth of unsecured credit
The RBI’s new guidelines have re-established the basic purpose of the PPIs. It has affirmed that these were meant to be purely payment instruments, and not Trojan horses to extend unsecured credit
BUSINESS
Banking | Coming Soon: The battle for deposits
Intensifying competition for deposits will mean that the cost of deposits will go up, and it will dent margins, unless the cost hike is passed on to the borrowers
BUSINESS
A wish-list for the Indian banking sector in 2022
A pick-up in bank credit, smooth normalisation of monetary policy, bank privatisation, and a sustainable partnership between banks and fintechs are things to be desired for next year
INDIA
Liquidity Management | The difficult art of smooth landing
If inflation pressures keep rising, at some point the RBI will need to withdraw the excess liquidity. While it is relatively easy for a central bank to infuse abundant liquidity, it is significantly harder to come out of it
BUSINESS
More banking does not need more banks
It would be a giant leap of faith to believe that the new banks backed by return-seeking private capital will target the segments and geographies left unserved or underserved by the established large banks
BUSINESS
Why banks are buying more bonds
Discussions on the development of bond market are often misplaced as a choice between bank loans and the bond market. It is critical to note that banks can become an important player in the bond market
