Saturday, November 26, 2011

No systemic risk in Indian banking

Bank stocks have been hammered quite a bit in recent weeks, with SBI leading the lot. This was preceded by Moody's downgrades of SBI and the banking sector as a whole. You might think Indian banking is in a bit of trouble. You couldn't be more wrong. Going through the RBI's latest Trend and Progress in Banking, I was struck by how sound most of the indicators are. I was especially by the rise in the Net Interest Margin, a key driver of profitability, in 2010-11 and the fact that overall return on assets has gone past 1%. Don't be carried away by talk of mounting NPAs. We should NPAs to rise in the present environment but there is nothing to indicate that the NPA level will become unmanageable.

More in my ET column, Indian banks in good shape.

5 comments:

Anonymous said...

Thanks for assurance. For a layman, the news such as rising NPA and falling ratings, only meant that Indian Financial System has become fragile to global downturn.

jyoti26 said...

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