HDFC Bank Ltd’s gross non-performing assets or NPAs in the March quarter dropped marginally from 1% to 0.93%. They would have remained at the same level had the bank not sold a bad asset to an asset reconstruction company (ARC).
In the fiscal year that ended 31 March, credit growth of India’s banking industry dropped to an 18-month low. The microfinance industry, in contrast, saw its loan book grow at the fastest pace and for a few it more than doubled. The scenario has not changed for banks in the past few months; year-on-year credit growth is now 9.
It looks like none of the private sector bankers could make it to the final list. I understand that the appointment committee has picked senior public sector bankers to head five relatively large state-owned banks for a three-year fixed tenure from a list of 26, which featured at least seven representatives from the private sector. The five successful candidates, according to a couple of people familiar with the selection process, are Usha Ananthasubramanian, chairman and managing director (MD) of Bhartiya Mahila Bank; M.
Finance minister Arun Jaitley has finally appreciated the need for capital infusion in India’s public sector banks. Saddled with bad assets, these banks need capital, and they have started losing their market share. This was the theme of my last column.
India’s public sector banks are heading towards bad times. We don’t need a soothsayer to say this—a close look at the earnings of banks in the quarter ending March makes it quite clear. Among 39 listed banks in India—both private and public—four recorded net losses in the March quarter, and three of them are public sector banks.
Just about every analyst has been predicting a quarter-percentage-point policy rate cut by the Reserve Bank of India (RBI) in its monetary policy review on Tuesday. A few of them had even anticipated such an event ahead of the 2 June bimonthly policy meeting. In the previous monetary policy meeting on 7 April, RBI maintained the status quo, but that was preceded by back-to-back inter-meeting rate cuts in January and March of a quarter percentage point each.
Reserve Bank of India (RBI) governor Raghuram Rajan on Tuesday delivered what the market wanted—a quarter percentage point rate cut which brought the policy rate down to 7.25%—but the traders in both bond and equity markets rushed to sell. Bond prices fell and yield rose as dealers who took positions anticipating a rate cut did not lose time in booking profits even as the stock market presented a different story.