, India
Photo by Renzo D’Souza via Unsplash.

Three Indian banks’ profitability to improve

However, their rising share of risky loans will weigh on asset quality.

Moody’s Ratings hailed the improved credit metrics of India’s Bank of Baroda (BOB), Canara Bank, and Punjab National Bank (PNB).

All three banks’ non-performing loans (NPL) have reportedly declined thanks to “manageable household leverage and healthy corporate balance sheets, the ratings agency said in a report where it affirmed the three banks’ Baa3 long-term local and foreign currency bank deposit ratings, as well as maintained stable outlooks.

BOB, Canara, and PNB’s NPL ratios have declined to 2.9%, 4.2%, and 5.7%, respectively, as of 31 March 2024. 

All three banks are expected to register improving profitability, which in turn will support capitalization despite strong loan growth and higher risk weight requirements for unsecured lending.

The banks' strong liquidity buffers and low reliance on market funds support their funding, Moody’s said.

However, all three banks were noted to have registered a “rapid growth of unsecured retail loans”, which will pose risks to their asset quality.

On the upside, these loans represent a small share of their total loans. The banks have also built adequate loan loss reserves to buffer against future credit losses, Moody’s said.

Whilst the improved asset quality and lower credit costs translated to higher profitability, the three banks are expected to see funding costs increase over the next 12-18 months. This should moderate their profitability.

Their capitalisation will reportedly remain stable through 2025.

“Funding and liquidity will remain the banks' key credit strengths, underpinned by their status as public sector banks in India and linkages with the government, which result in good deposit franchises,” Moody’s Ratings said in the report.

”At the same time, their respective liquid banking assets as a proportion of tangible banking assets have remained above 30% in recent years,” it added.

Join Asian Banking & Finance community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!


ZA Bank’s Devon Sin on why Web3 is key to HK’s growth
The bank has expanded services to cater to stablecoin issuers and Web3 companies. 
Retail Banking
CIMB Niaga leads the way in captivating Indonesia’s youth
The bank’s digital solutions are winning over younger generations with 3.2M mobile users and 96% digital transaction rate in 2023.
BCA sets benchmark in Indonesia’s microfinance sector
Innovative approaches reflect the bank’s commitment to pushing financial inclusion and fostering economic growth.