In the aftermath of the coronavirus pandemic, the banking and financial services sectors played a pivotal role in propelling India’s economic growth. While some leading economies grappled with a banking crisis resulting from the collapse of major financial institutions, India’s banking system demonstrated resilience by effectively navigating credit, market, and liquidity risks. To counter inflationary pressures, central banks globally opted to raise interest rates, a move that proved advantageous for the financial sector, contributing to an uptick in net interest margins.
In recent quarters, nearly all banks have posted remarkable financial results, marked by significant growth in both net interest income and net profits. This positive trend has been fuelled by robust loan expansion and notable improvements in the asset quality of non-performing assets. The resilience of the banking sector has contributed to a widespread sense of optimism within the financial services industry.
Considering sector-wise net investments, the banking and financial services sector attracted a substantial number of inflows, driven by corporate profits led by financial entities. The BSE Financial Services index, a sectoral gauge for financial services companies, gained 10 per cent over the last three months, while multiple stocks emerged as multibaggers. The question now is whether the rally is sustainable and what the future’s growth drivers and risk factors are.
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