Indian private banks are surmounting the storm

A analytical note by CareEdge on the Indian banking industry paints a positive picture for Indian private banks:

- Mohan

Indian banks have undergone significant structural changes due to global and domestic events, including regulatory changes brought about by the Reserve Bank of India, but over the years, the sector has emerged more resilient with improved capital adequacy, risk management and an increased focus on digital and sustainable banking. This is the finding by rating and analytics group CareEdge, which has recently brought out a note in this regard.

CareEdge says these structural changes, which are more apparent in the private banks, include:

• fall in gearing level with an increase in net worth;

• lower dependence on borrowings with an increase in the share of deposits in liabilities;

• reduction in investments along with an increase in advances in assets; and

• change in the composition of the loan book from being wholesale-oriented to retail centric.

The study notes that profitability has remained volatile and has been impacted by several major events but the sector has posted record profits for the last 2 years.

The study says private banks, with a higher share of unsecured loans, have been facing headwinds, which are impacting their asset quality and profitability.

MULTIPLE CHALLENGES