Indian Banking Sector Witnesses Improvement in Health, Survey Finds

A recent survey conducted by industry body FICCI and the Indian Banks’ Association (IBA) unveiled promising results regarding the health of India’s banking sector. The survey, spanning from July to December 2023, revealed a positive trajectory marked by enhanced asset quality and robust credit growth.

Representing about 77 percent of the banking industry by asset size, surveyed banks showcased commendable performance amidst a relatively stable Indian economy, with an estimated growth of 7.6 percent in 2023-24. This growth was underpinned by substantial investment and industrial revival.

Credit growth remained buoyant, bolstered by economic expansion and a surge in retail credit facilitated by digitalization efforts. With clean balance sheets, banks are poised for further loan expansion in the future.

The survey highlighted a sustained uptick in long-term credit demand, particularly in sectors like infrastructure, metals, iron and steel, and food processing. Notably, infrastructure witnessed a significant surge in credit flow, with 82 percent of respondents reporting increased long-term loans.

Looking ahead, the outlook for non-food industry credit appears optimistic, with 41 percent of banks anticipating growth above 12 percent in the next six months. Additionally, customers’ inclination towards higher interest rates has led to a surge in term deposits, with around 70 percent of respondents witnessing an increase.

On asset quality, a substantial majority of banks reported a decrease in Non-Performing Asset (NPA) levels, attributed to policy and regulatory support. Banks expressed confidence, with over half expecting Gross NPAs to range between 3-3.5 percent in the next six months.

While challenges persist, the survey underscores a positive trajectory for India’s banking sector, buoyed by resilience and prudent policies, offering hope for sustained growth and stability in the future.