The worst seems to be over for the ₹166 lakh crore banking industry. The merger of 10 public sector banks into four large banks is expected to bring scale. De-risking by new leaders at large private banks, especially ICICI Bank and Axis Bank, is showing results. Asset quality deterioration has halted after almost seven years. Balance sheet clean-up is almost complete with banks focusing on strengthening CASA (current account savings account) base, NPA provisioning coverage and return on equity. Last, but not the least, Indian banking returned to profitability in the first half of FY20. This will gather steam as loan recoveries under the insolvency and bankruptcy code (IBC) pick up further.
The BT-KPMG Best Banks and Fintech study took a deep dive into financials of banks for FY19 when conditions were most challenging. But, like every year, it found several stars in the banking universe. HDFC Bank and SBI emerged as joint winners as the Bank of the Year. Kotak Mahindra Bank, which graduated from being a mid-sized bank last year, straightaway secured a third place in the large bank category, only next to HDFC Bank and Axis Bank, in the quantitative study.
Big Boys’ Club
The ongoing consolidation, especially the new set of four large PSBs with assets of ₹10-12 lakh crore each, will transform the competitive landscape. SBI is at ₹36 lakh crore after merging five associate banks with itself. ICICI Bank and HDFC Bank are at around Ì€ 12 lakh crore.
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