Banks unlikely to face shocks, but tech can't fix all the cost worries
Indian banks are preparing to deal with rising compliance costs, compression in margin and intense competition for fee business, which could impact their earnings, banking analysts said.
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In addition, this year, it would be challenging to lower operating costs, which may not fall despite the use of technology, as was expected earlier, while other income, such as guarantees and commissions, may remain stagnant if economic activity slows, they said.
That banks are well-capitalised and the share of bad loans is at a decadal low gives analysts hope that banking and finance companies will not face any severe shocks this year, although the risk related to the growing number of cyber frauds will keep bankers worried.
In 2025, banks are staring at the likelihood of the Reserve Bank of India (RBI) issuing final guidelines on half a dozen subjects for which a draft has already been circulated. These range from higher provisioning on project finance, higher run-off rates for liquidity coverage ratio, climate-related financial risks, and credit management models.
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