Unlocking Insights: Moderate Credit Growth Ahead for Indian Banking Sector, Says BCG Report – Lokmat Times

The Indian banking and financial services industry is in an interesting phase. A recent report from Boston Consulting Group (BCG) shows that while some areas are thriving, credit growth is slowing down.

Certain sectors, like mutual funds and insurance, are prospering. For instance, assets under management in mutual funds hit a record high, growing 18% year-on-year. Meanwhile, the insurance sector isn’t far behind, with premiums rising by 7% as of March 2025. This suggests that investors continue to have faith in these markets.

However, the overall growth in credit isn’t as strong. Despite a rise in deposits, credit growth is more modest. For instance, while total net advances grew by 12% year-over-year, overall credit increased by 13%. Surprisingly, Current Account Savings Account (CASA) growth has been limited, hinting that people might be shifting how they save money.

Profitability in the banking sector is also facing challenges. Banks are experiencing pressure on their Net Interest Margins (NIMs). As interest rates shift, particularly with repo-linked loans, banks may need to reduce deposit rates, which can squeeze profits. Smaller banks and Small Finance Banks (SFBs) might feel the impact more acutely.

Interestingly, while public sector banks have reported a solid 26% rise in profit after tax, private banks saw a more modest increase of 8%. On the other hand, SFBs have struggled, largely due to rising credit costs. Overall, banks have seen an improvement in credit costs, finding a decrease from 0.6% to 0.4%, but non-banking financial companies (NBFCs) are facing the opposite trend, with costs rising from 1.3% to 1.7%.

This mixed landscape indicates that while some parts of the BFSI sector are doing well, challenges persist. Keeping an eye on emerging trends will be crucial for understanding how this dynamic industry will evolve in the coming years.

The trends in this sector reflect broader movements in finance and investment patterns, providing insight into where the market might be heading. For more details, you can check the full report from BCG here.

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