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Loan growth at 15% with private banks outpacing public banks

September 11, 2023

Loan growth at 15% with private banks outpacing public banks
The Indian banking sector has remained largely shielded from the recent turmoil in the US and European banking sectors and has even posted a strong performance. 

According to the takeaways from the Reserve Bank of India’s (RBI) release, loan growth is holding up at ~15 per cent, with private banks growing at a marginally faster pace than public banks. It said that the sector showed nearly similar performance across metro, urban, semi-urban and rural markets. It also stated that the household demand for loans is holding up at ~17 per cent yoy. 
 
The slowdown, RBI stated, is more pronounced to the government sector (10 per cent YoY) while the private corporate sector is recovering, but still not robust. The release said that the intent to lend appears to be still holding up as challenges on asset quality appear to still be comfortable. Kotak Institutional Equities estimates that the loan growth will be weaker towards the end of FY2024. 
 
The banking sector had a good run in the previous financial year with both public and private sector banks reporting net profits of more than ₹1 trillion and this performance continued in the first quarter of FY24. 
 
Public sector banks’ profits more than doubled to ₹34,774 crore during the first quarter. And, large private sector banks, such as HDFC, ICICI and Axis, posted strong double-digit growth in profits. Among public sector lenders, Bank of Maharashtra (BoM) emerged as the top performer in loan and deposit growth in percentage terms during Q1FY24. 
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