The Daily Brief What's going on with banks?
9 snips
Aug 8, 2025 The podcast dives into the stagnant state of Indian banks, exploring contrasting strategies between public and private sectors. It highlights the challenges of declining interest margins while emphasizing the importance of treasury income. The discussion shifts to innovative energy storage solutions, their impact on electricity markets, and the complexities of battery management. Additionally, it uncovers risks associated with India’s rare earth crisis and the broader implications for various financial sectors.
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Indian Banks Slowing, Margin Squeeze
- Indian banks show slowing credit growth and margin compression despite no major surprises in Q1 FY26 results.
- Public sector banks grow loan volumes, focusing on priority sectors, while private banks prioritize margins and caution in lending.
Margin Pressure from Rate Dynamics
- Repo rate cuts reduced lending rates faster than deposit rates, squeezing banks' net interest margins.
- Falling CASA ratios push banks towards costlier funding, amplifying margin pressure.
Unsustainable Treasury Income Boost
- Banks' decent profits in Q1 FY26 were buoyed by treasury gains from falling bond yields.
- This boost is unsustainable unless RBI cuts rates further, which seems unlikely given current liquidity absorption.