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India banks in a Goldilocks zone, but face two key risks: Report
October 18, 2023
Indian banks are currently enjoying a favourable situation, referred to as a “Goldilocks scenario,” where everything seems just right, thanks to a surge in retailization fueling credit growth, states a report by Anand Rathi Institutional Equities. The report highlights that while this positive trend is likely to continue, banks do face risks linked to economic shocks and fluctuations in interest rates.
According to the report, large banks are better positioned to handle challenges like inflation and increasing indebtedness due to their low concentration, high capital adequacy, and substantial domestic exposure.
The study emphasizes the importance of digital readiness, openness to collaborations, and robust technology infrastructure for banks to achieve profitable growth. The growth in Indian banking credit has been robust, driven by domestic consumption and government expenditure. The report points out changes in consumer finance explained by the “3T model,” leading to increased lending to government departments. Despite global challenges, the overall outlook remains positive, buoyed by the country’s emerging demographics.
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