Banks' profits healthy, but margins may shrink and deposits could disappoint
stress in unsecured retail, micro finance and some rural advances as seasonal impact of the heatwave, election season slowdown and higher risk weights led to increase in slippages during the first quarter. However, analysts do not expect asset quality to be a challenge yet.
Instead, most observers believe that Indian lenders will have to contend with falling margins and slow deposit growth this year.
Data from the results of 40 listed banks analysed by ET showed that though net profit increased a healthy 21%, margins continued to be weak and deposit growth still lagged credit demand. There was a notable increase in stress in some micro finance and personal loan accounts. State Bank of India's fresh slippages increased to ₹7,903 crore in June 2024 from ₹7,659 crore a year ago and was double the ₹3,867 crore reported in March 2024 mainly as ₹3,000 crore of loans to individuals slipped during the quarter and was the largest chunk of fresh slippages, followed by ₹2,500 crore of agriculture loans. Chairman Dinesh Khara attributed the slippages to some delay in salaries by some state governments during the quarter.
Private sector IDFC First Bank doubled provisions to ₹994 crore from ₹476 crore a year ago mainly to cover for losses from the bank's micro finance portfolio which was impacted by the flood in Tamil Nadu and seasonal impact, as a result of which profit fell 11%. Similarly, Axis Bank reported an increase in slippages from its retail portfolio, which the bank management attributed to seasonality in its
