A Positive Outlook for Banks as the Economy Recoups
Though the start of COVID wasn’t the best period for banks, the prospect is improving as the economy recoups and the quality of asset may no longer dwindle speedily as it looked before
The turning point, which began in September, has seen the Bank Nifty surpass the Nifty 50 by almost 22%. This particular index category had flopped around 19% in the March-September period due to worries of NPAs jumping significantly with the August lift of loan vetoes.
Nevertheless, hopeful remarks from bank managements after the Quarter-two collection & asset quality findings have increased investors’ optimism. The sector has seen a 90% jump in September’s Collection efficiency, a significant increase from March’s 50% amid a looming economic recession.
“Quarter-two results marked the turning point for the struggling banking industry. Moving on, we expect to see a steady performance,” according to experts at ICICI Securities.
The analysts say that collection has improved remarkably, while previous industry data shows there won’t be a need for further precautionary measures.
Business recovery is also a contributing factor. And with a recovering economy, the holiday season is expected to cause an increase in credit utilization, more so in retail.
According to ICICI Securities, though corporate credit may not show any significant growth, the ECLGS (emergency credit line guarantee scheme) promised it would help forward credit to the MSMEs.
Insights from a high-ranking banker (who wishes to stay anonymous) said the total NPAs for this financial year would likely fall somewhere below 12.5%. This compares well with the Reserve Bank’s estimates of a 14.7% gross NPA in the worst-case scenario and 12.5% in a normal situation.
Reports from Emkay show gross NPAs dipped 40 basis points during Quarter-two in both PSU and private-industry banks. But this may have been the ripple effect of the Supreme Court’s August 31 memo to banks to declare all NPAs, even those on default.
The banking sector’s survival depends on many variables, which COVID disrupted a great deal. Nevertheless, hopeful remarks from bank managements after the Q2 collection & asset quality findings have increased investors’ optimism. The sector has seen a significant 90% jump in September Collection efficiency, a substantial increase from March’s 50% amid a looming economic recession.
This improved performance has increased the hope of a better future and optimism among investors.
Author Bio: Payment industry guru Taylor Cole is a passionate payments expert at bestpaymentproviders.co.uk who understands the complex world of merchant accounts. He also writes non-fiction, on subjects ranging from personal finance to stocks to cryptopay. He enjoys eating pie with ice-cream on his backyard porch, as should all right-thinking people.