The Indian banking sector may see some slowdown in the January-March quarter of financial year 2023-24 triggered by recent regulatory actions on the sector, said Karthik Srinivasan, senior vice-president and group head at ICRA Limited.
“Q4 has normally been a quarter showing momentum and stability for the banking sector. But we expect some slowdown in the sector in Q4FY24 due to regulatory actions,” Srinivasan said in a webinar hosted by the agency.
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The Reserve Bank of India (RBI) in the recent months has taken regulatory actions on some entities.
For example, on January 31, the RBI imposed business restrictions on the bank citing repeated violations of norms and non-compliance with multiple rules. The RBI on March 4 asked IIFL Finance to stop sanctioning or disbursing gold loans with immediate effect after observing certain material supervisory concerns in the company's gold loan portfolio. The central bank on March 5 barred JM Financial Products Ltd (JMFPL) from giving loans against shares and debentures, including sanction and disbursal of loans against Initial Public Offering (IPO) of shares, with immediate effect.
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On CD ratio
The RBI has in the recent past highlighted concerns on the high credit-deposit (CD) ratio of some banks. On this, Srinivasan said that the incremental CD ratio of the sector has been around 100 percent in the last 2-3 years.
“We have seen some challenges on banks’ deposit growth. There would be some slowdown in the deposit growth of the banks in Q4,” Srinivasan said.
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