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Banks may see 4-11% impact on earnings
Business Standard|July 27, 2024
The Reserve Bank of India's draft norms proposing an additional 5 per cent "run-off” for retail deposits in the liquidity coverage ratio (LCR) calculations threaten to slice bank earnings by 4-11 per cent as lenders will have to decelerate loan growth while taking measures to bolster sluggish deposit growth by offering higher interest rates, according to according to analysts.
- MANOJIT SAHA & ANJALI KUMARI
Banks may see 4-11% impact on earnings

Citing the increasing prevalence ( mobile and internet banking in India, which enables depositors to easily withdraw their funds, the central bank has suggested an additional 5 per cent run-off factor for retail deposits with digital banking facilities. Analysts predict that the potential impact on LCRs, should these norms be enacted, could be as severe as a 20-30 percentage point reduction.

"Banks do carry buffers over LCR norms, but to maintain current levels, they may need to increase deposit growth/trim loan growth, which could affect earnings by 4-10 per cent, with a higher impact on PSU banks," Jefferies said in a note to its clients.

According to analysts, banks with an LCR exceeding 130 per cent are relatively comfortable, though not many lenders boast such robust ratios.

Bu hikaye Business Standard dergisinin July 27, 2024 sayısından alınmıştır.

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Bu hikaye Business Standard dergisinin July 27, 2024 sayısından alınmıştır.

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