S&P said that banks will have to face margin pressure

By | May 16, 2011

A recent report from the S&P said that the Indian banking sector is likely to face pressure on margins in the current fiscal, in spite of the expectations in the improvement of asset quality will improve, said Standard & Poor’s Rating Services.

The average gross non-performing loan of Indian banks are expected to improve from 2.6 per cent in 2010-11 to 2.4 per cent in 2011-12.

She said that most of the restructured assets have already slipped into NPLs and further slippages are doubtful to be very important.

She added saying that bank margins are likely to see a compression of 25-50 basis points predominantly due to rising funding costs. The banks are unlikely to pass on the entire costs to customers because of the powerful competition.

Reports said that the government is likely to infuse more capital into public sector banks because the public sector banks are under pressure regarding capital issues where as private banks are well capitalized.

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About Pradeep Yuvaraj

Pradeep Yuvaraj is a Co-Founder and Director at Finerva Financial Solutions Private Limited, a financial education company focused on personal finance education. He has penned over 250 articles relating to Personal Finance and clocked over 500 hours of educating individuals on managing personal finance. He is a serial entrepreneur and has been associated with 7 Start-ups. His entrepreneurial experience spans industries as varied as Education, Gas Engineering, Automobile Design, Software development and more recently a Pure play presentation design company. Prior to turning entrepreneur in 2005, he has worked for 3 of the top ten companies of the world - Shell, ExxonMobil and Total SA. This experience included handling Branch Operations, Channel Sales and Business Development across 5 states over a period of 8 years. He holds an MBA from Symbiosis and an Electronics Engineering Degree from the University of Pune.

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