India's banking system is all set for its next growth cycle. The sector is witnessing its best ever asset quality in over a decade, capital ratios are holding strong, and domestic demand continues to drive growth.
At the BQ Prime's maiden banking summit—Banking Unlimited—on Sept. 15, leaders from private and public sector lenders as well as non-banks will share their views on 'Accelerating India's Banking Potential'. Panellists will discuss growth philosophies, growth indicators, fresh opportunities, and challenges over the course of four panel discussions.
As the Covid-19 pandemic has created avenues for open banking, just being digital is no longer a differentiator. Going beyond traditional products to partner with third parties for better distribution and customised offerings can potentially achieve growth and higher market valuations for the banks.
Watch the event live on Friday here.
(Click here to register for BQ Prime's Banking Unlimited)
In addition to the needs currently met by banks and the corporate bond market, an EY report from February of this year highlighted an unmet need for enterprise credit in India. In 2020, India's domestic credit to the private sector at 55% of gross domestic product was significantly below the world average of 148% and was the lowest among its Asian peers.
"India has a tremendous runway for increasing leverage to drive growth by filling the credit gap, i.e., 200 to 300 bps incremental annual GDP growth for the next 20 to 30 years," the EY report stated.
Besides, private banks have been increasing their market share in retail deposits as well as lending to micro, small, and medium enterprises and the agriculture sector. According to the Reserve Bank of India data, public sector banks held only 31.8% of the total bank accounts as of March, compared with 59.2% with private lenders as well as small finance banks.
In terms of outstanding loans, public sector banks continue to lead with a 54.3% market share. Private banks accounted for 37.8%, while small finance banks accounted for 1.3% at the end of the last fiscal.
The RBI's latest financial stability report shows that banks' gross non-performing assets ratio fell to 3.9% in March 2023, indicating improvement in loan repayments.
Aggregate deposit growth picked up pace to 13.2% year-on-year in the fortnight ended Aug. 25. While non-food bank credit was up by nearly 20% year-on-year in the same period.
While these point to a fast-growing opportunity for the sector, an eye is needed on potential pitfalls facing the sector as well. Asset quality conditions could quickly worsen for the sector if growth is not supported by prudent underwriting. The Insolvency and Bankruptcy Code, which is widely considered one of the most important legal provisions for pushing up recoveries, is still dealing with severe judicial delays. Similarly, cyber security remains a key point of discussion for bankers.
Panellists will discuss these and more on Friday at the BQ Banking summit—Banking Unlimited.
(Click here to register for BQ Banking Unlimited)
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