Morgan Stanley – The New Indian Express
MUMBAI: The balance sheets of public sector banks (PSBs) in India have improved and bad debt formation is expected to moderate in the future, according to a Morgan Stanley report. The Tier 1 (CET 1) mutual fund for state-run banks (excluding State Bank of India) under its coverage is now 9.6% versus 9.1, according to the report. % in the F20 and 6.8% in the F18.
“In recent years, public banks have seen a large injection of capital from the government, lower RWA (risk-weighted assets) density, higher provisioning and large recoveries. The GNPL coverage ratio for the public banks (excluding SBI) under our coverage improved to 67 percent and to 55 percent on all impaired loans, ”he said.
Noting that underwriting practices remain weak in state-run banks, he said the formation of bad loans in the retail, agriculture and MSME segments at these banks other than SBI has increased in recent years. These segments have been a key driver of growth in most PSBs and represent 50-60% of loan portfolios. relatively lower coverage will limit any sharp decline in credit costs, ”he said.
The Morgan Stanley report added that PSBs will continue to lose loan market share due to technological changes, strong competition and a low internal rate of capital generation. “Most importantly, we note that the additional market share of state banks in overall deposits has also weakened in recent years – due to term deposits as well as the accelerating loss of market share by savings deposits in urban / semi-urban areas, ”he said.