As the banking industry’s health continues to be at its best in decades, India Ratings and Research (Ind-Ra) announced on Monday that it has kept the outlook banks at improving for the remainder of 2022–2033.
Additionally, India Ratings increased its prediction for loan growth in FY23 from 10% to 13%. There are numerous factors influencing this upward revision, it stated. Given the accumulation of macrouncertainties, the demand for working capital is expected to increase even as capex is likely to moderate somewhat. With the adverse interest rate cycle, there is also a noticeable shift from capital markets to the banking system for longer-term funding, and the recovery in credit demand from the corporate segment is better than anticipated.
The report stated that the major financial measures are projected to keep getting better during the remainder of FY23, supported by strengthening balance sheets and an improving prognosis for loan demand, particularly for working capital.
According to the rating agency, the banks’ stable rating outlook for FY23 reflects their diminishing legacy asset quality difficulties, strengthening balance sheets, controllable covid-19 impact, and forecasts for increased profitability across the banking industry.
“Within the banking universe, private sector banks are likely to continue to gain market share, though the pace of gains is likely to moderate as public sector banks (PSBs) expand the loan portfolio faster, supported by strong balance sheets and supportive credit demand in the system,” it said.
The agency anticipates that PSB and private sector bank lending costs would converge and trend lower, which might counteract the banks’ anticipated rise in deposit costs. However, as competition for deposits increases, private sector banks are likely to pick up speed on deposit growth, underpinned by the provision of stronger returns, it said.