Thanks to economic management by the government.
Despite Indian banks' bad loan problems that deterred investors, financial experts told CNBC that they are still positive on Indian lenders, crediting the government for its economic management.
J.P. Morgan Private Bank's emerging markets multi-asset portfolio manager Rashmi Gupta told CNBC that India's private banks provide "strong" returns on investment. "Many of them are considered well run with capable management teams," Gupta said.
In addition, the government's move to inject capital into Indian banks could improve the sector.
"The overall opportunity for allocations to banks/financials in India may now be widening and our view for overall growth driven by domestic recovery remains well supported," Gupta said. "The recap should also free up the ability of state banks to lend, which should support growth, particularly in rural segments of the country, which is where the state-owned banks tend to play a bigger role."
With news that India will regain its title as the world's fastest growing major economy, senior equity analyst at investment firm London and Capital Renata Klita, told CNBC, “India's private sector is one of the least leveraged, which should put its financials in the spotlight.”
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