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India’s banks have it all, except caution
April 28, 2023
India’s banks spent most of the last decade out in the wilderness, as a punishment for the lax underwriting standards on their corporate loans. Now they have regained their health, restored profitability and reestablished investors’ trust.
The benchmark Nifty Bank Index is close to an all-time high. With everything going well, the lenders should be turning cautious. But recent full-year results show an opposite trend: Provisions for future loan losses are beginning to decline. This may not be prudent.
Across most of Asia, muted big-ticket consumer expenditure such as on housing and restrained capital expenditure by firms have led to only a mild post-pandemic recovery in credit, which makes India’s double-digit loan growth a notable exception, according to economists at Australia & New Zealand Banking Group Ltd. Just last month, New Delhi-based developer DLF Ltd. sold $1 billion worth of million-dollar homes on the outskirts of the national capital in 72 hours.
A one-year, 29% jump in credit-card debt has made even the Reserve Bank of India, the regulator, a little uncomfortable. The central bank has cautioned lenders about the risk of delinquencies on their unsecured loans at meetings over at least the past three months, Reuters reported recently.
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