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Enam's Sridhar Sivaram said he expects banks’ profit growth to moderate to 12-15% annually, but the downside risk is limited since banking shares have underperformed in recent years and are less exposed to high-risk lending segments.
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The rise in defaults is being driven by overleveraging, sub-lending, and a recent state ordinance
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Speaking at the launch of Platinum Jubilee celebrations of Foundation Day of State Bank of India (SBI), the minister also said SBI has continuously evolved to meet the changing landscape and retained its position as a market leader despite regulatory tightening.
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Analysts expect the government to maintain a strong focus on capital expenditure, particularly in roads, railways, and urban development, to spur investment opportunities and thus credit demand for banks.
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Banking sector is eagerly awaiting measures in the 2025 Union Budget to stimulate credit expansion and improve liquidity, fostering future growth
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"Mr Market grades you on a daily basis" - Chris Browne
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Q2 would just be a peak in the quality of the loan book, but investors must closely watch the upcoming quarters
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Good times are typiclly followed by tough cycles. Banks had seen a spike in bad loans following the credit boom in the early part of last decade following the global crisis when careless lending crept in.
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When a loan is written off, it is removed from the bank's asset books, reflecting the lender's acknowledgment that the borrower is unlikely to repay.
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Addressing a conference of statutory auditors and chief financial officers of commercial banks and all India financial institutions here, the deputy governor also said the Reserve Bank of India (RBI) has undertaken several initiatives to enhance the effectiveness of the auditing process
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As per the Citi TTS Client Survey report, 93 percent of financial institution respondents said adoption of AI could improve profitability in the next 5 years, based on productivity gain expectations.
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Out of the banking pack, Kariwala preferred large private lenders over state-owned banks from a long-term perspective
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Kariwala added that the Indian banking sector is in early stages of a strong upcycle, supported by normalisation of credit costs, steady loan growth, and expected healthy earnings
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The RBI report also said that with an aim to curb frauds and enhance the payment experience further, the introduction of real-time payee name validation before the actual fund transfer will be explored in compliance with newly enacted "The Digital Personal Data Protection Act, 2023".
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PM Modi said that the improvement in banks’ health would boost the availability of credit to the poor, MSMEs and farmers
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The public-sector lender's NIMs stood at 3.47 percent in Q4FY24, down 37 bps from 3.84 percent in Q4FY23
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Despite the management's assurance of a minimal financial impact, analysts say they will watching how the private lender navigates this challenge.
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The management said that they would focus on building up IT capacity to get bank's tech risk-resilient after RBI's ban
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Sitharaman said that handling banks after COVID is still a big worry for Western countries. She compared this to how India managed to deal with these problems, even though it started from a difficult position.
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The agency said the credit growth will moderate to 11.6-12.5 per cent in FY25 from 16.3 per cent (excluding the impact of the HDFC twins merger) in FY24, while the lower net interest income margins on higher deposit rate payouts will lead to a dip in profits.
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Srinivasan also added that due to these actions, the asset quality of some players may get impacted.
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Around 1.1 million credit card net issuances were done in February, with HDFC Bank leading from the banking pack
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Analysts caution that challenges like slowing loan growth, margin pressures, and tepid deposits could weigh on the banking sector
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In this episode of Political Economy with Shweta Punj, we speak to Prasanna Tantri of the Indian School of Business on restoring trust and balance sheets of banks, policies that aggravated the banking crisis in early-mid 2000s, how RBI tightened the screws around lending practices and more. Listen in.
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The 2024 budget on February 1 is a mere vote on account but the banking sector would be surprised to see if the Finance Minister makes announcements that will further propel the already prospering sector. What can you expect for the sector? Is capital infusion on the government’s agenda? Or something else? Watch as Moneycontrol's Jinit Parmar and Harsh Kumar, in discussion with industry experts, talk about the likely announcements.
