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Pvt banks see margins drop, small loans sour
Mint Mumbai
|October 24, 2023
High cost of deposits hits margins; Stress in unsecured book at some banks
Private sector banks delivered a strong performance in the September quarter, buoyed by robust loan growth and improved asset quality.
Most banks saw 20% growth in their loan books during the second quarter, led by retail loans. However, unsecured loans grew even stronger, at 35-40%.
Banks' net interest margins, which represent the return they earn on their interest-earning assets, have been shrinking recently due to their rising cost of deposits. ICICI Bank, Kotak Mahindra Bank and Yes Bank have all experienced a sequential drop of 20-35 basis points in their net interest margins. Despite this, their margins continue to be healthy when compared to the previous year.
A basis point is one-hundredth of a percentage point.
The share of current and savings accounts (CASA) in total deposits continued to fall for most banks, adding to margin contraction.
This story is from the October 24, 2023 edition of Mint Mumbai.
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