Challenging times for the banking sector: HR Khan

Credit growth of banks, which was close to 15% in March 2014, came down to less than 10% in March 2015

The banking sector is going through a challenging time, with issues such as falling credit and deposit growth, quality of assets and a global financial crisis, said H R Khan, deputy governor, Reserve Bank of India, at the launch of Bandhan Bank on Sunday.  

"Bandhan is being born in challenging times. The past few years have been trying times for the  sector, in terms of low growth of business, impairment of asset quality and profitability,” he said. Credit growth, close to 15 per cent in March 2014, was less than 10 per cent in the year till March 2015. Deposit growth came down from 15 per cent to 11 per cent, said Khan.  

“Stressed assets, which was nine per cent (of the total), is now 10 per cent. The return on equity, which was 10 per cent, has come down to less than 10 per cent this year. In the last quarter it has come down further, to close to eight per cent,” he said.

Recently in its biannual Financial Stability Report, the central bank had said bank assets were likely to remain under stress. "The times are difficult, as we do not have help coming from the external sector as we saw prior to the financial crisis," added Khan.
 
Outlining some of the challenges Bandhan could face, Khan said it needed to focus on products, process and customer protection, while aiming at profitability and forging partnerships, while carefully positioning as a bank with a sustainable business model.