The shares of public sector banks have been in focus these days. The Nifty PSU Bank index surged 3.6 percent today, on the expectation of an improvement in the banking industry’s loans ratio amid favourable economic prospects. Over the past year, the index delivered a massive return of 71.13 percent., as compared to the Sensex which delivered 22.49 percent returns and 22.05 percent returns by the Nifty 50.
Some of the top gainers include Canara Bank (up 6.31 percent), Bank of India (up 5.37 percent), Bank of Maharashtra (up 5.19 percent)Bank of Baroda (up 4.94 percent), Punjab National Bank (up 4.55 percent) and Union Bank of India (Up 3.94 percent).
According to reports, the gross non-performing assets (GNPA) ratio of Scheduled Commercial Banks (SCBs) has nearly reached pre-Asset Quality Review (AQR) levels in the fourth quarter of the fiscal year 2022-23 (Q4FY23). Experts say that this trend might continue in the fiscal year 2023-24, due to factors like lower incremental slippages, a reduction in restructured portfolios, and healthy growth in advances driven by an uptick in economic activities.
According to CARE Ratings, SCBs have maintained a substantial buffer for provisions, which positions them well to address asset quality concerns.
S&P Global Ratings expects India’s financial institutions, especially through public-sector banks, to sustain their improvement in capital positions. It believes that the industry’s weak loans ratio will continue to improve. This ratio was about 5.2 percent of gross loans as of March 31, 2023 and it expects this to decline to 3-3.35 percent by March 31, 2025.
Indian Banks have sharply cut their high stock of problem assets accumulated during the previous downturn. They have also reduced economic imbalances.
In its recent coverage on June 26, S&P Global Ratings raised its long-term issuer credit ratings on Union Bank of India, Bajaj Finance, Shriram Finance, and Hero FinCorp Ltd. Moreover, it affirmed the ratings on the remaining eight Indian financial institutions under their coverage.
Written By Simran Bafna
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