India’s private banks to widen gap with state peers when economy rcovers: report

Investors will likely seek signs that private lenders will be able to step up lending once COVID subsides.

India’s private banks are expected to trounce state-backed lenders once India’s economy recovers, a widening gap that would likely be laid bare in the upcoming earnings season, reports Bloomberg.

Investors will likely be seeking signs that private banks have enough buffers to step up lending once the second wave of coronavirus infections subsides.

One metric is key—private sector banks’ market share in terms of loans surged 36% in 2020 from about 21% five years ago.

“We expect banks with a strong franchise, robust balance sheet, and governance to outpace peers in an environment impacted by the pandemic,” said Bloomberg Intelligence Analyst Rena Kwok.

Although the relaxing of regulations on asset quality and low-interest rates will likely help prop up profit, it may only be a short reprieve. Stressed loans remain elevated and credit growth is hovering near a six-decade low—all of which could deteriorate even more once lenders are able to classify those loans as non-performing from 2023.

Read more from Bloomberg.

Photo courtesy of Anurag Viray (Wikimedia)