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State Bank of India's goal Extending Jansuraksha Schemes to the grassroots level

November 01, 2023

State Bank of India's goal Extending Jansuraksha Schemes to the grassroots level
Indian private banks are facing a tough time as their Net Interest Margins (NIM) are shrinking due to high deposit rates. In the last quarter, major banks couldn’t improve their NIM; instead, it decreased by 20 to 50 basis points (bps). HDFC Bank and Kotak Mahindra Bank saw significant drops, nearly 50 bps, although HDFC Bank’s numbers are different due to its merger with HDFC, a mortgage lender.

Another worry is the CASA (Current Account-Savings Account) ratio, crucial for stable funds. A higher CASA ratio means lower costs for banks. However, HDFC Bank’s CASA ratio fell by 490 bps, and ICICI Bank’s dropped by 180 bps in the recent quarter. Other banks had smaller declines, usually under 100 bps.

The shrinking NIM is because banks are raising interest rates on term deposits to attract more customers. This trend is expected to continue, making deposits more expensive for banks in the next few quarters. This situation poses challenges for the banking sector as they navigate these financial hurdles. 

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