Jefferies Financial Tour Highlights Resilience In Indian Banking
During an extensive financial tour covering three major Indian cities, global investment banking firm Jefferies conducted over 20 meetings in five days, gathering insights from both banking and non-banking financial sectors. The key insights offer a detailed perspective on India’s current financial environment.
Banking Sector: Jefferies noted a strong outlook for credit growth despite a decline in unsecured personal loans. Banks face challenges on the deposit side, signaling potential liquidity management issues. However, they express confidence in asset quality, particularly in unsecured loans. While private capital expenditure remains modest, corporates are actively reducing debt. Notably, there's a positive trend in reducing high attrition rates among banks, indicating improved workforce stability.
Non-Banking Financial Sector (NBFCs): The NBFC growth outlook varies, with an expected increase in funding costs. Efforts are directed toward small and medium-sized enterprises (SME) and housing sectors, aiming to counter challenges in other segments. There's caution in unsecured loans, possibly impacting top-line growth over the next few quarters.
Fintechs and NLFs: Fintech platforms face regulatory tightening, especially in small-ticket personal loans. Platforms like Paytm are adapting by scaling down Buy Now Pay Later (BNPL) and small-ticket loan volumes. In contrast, Non-Banking Financial Institutions (NLFs) focused on capital markets experience favourable conditions, looking toward new markets for expansion.
Regulatory Perspective: Regulators focus on managing inflation, capex and fiscal management. The RBI aims to maintain inflation within the 4 per cent band and stabilise the currency. The government's emphasis on revenue quality and increased capex is viewed positively for economic growth.
These insights arrive amid a dynamic financial landscape. While challenges persist, the adaptability showcased by financial institutions, especially in the banking sector, demonstrates their ability to navigate evolving market conditions.
