Indian banks will give bonds to keep-up capital levels: CARE Ratings

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As credit off-take improves, Indian banks may expect to be issued bonds to keep up their capital levels and help their advances while the cost of funds — borrowings and deposits will be raised, said CARE Ratings.

“To give assistance to credit-off take, Banks may be anticipated to reveal their liability franchise by raising deposits and capital. The market is facing lower liquidity and upraised inflation, therefore borrowing value for deposits and The price of increasing capital are estimated to improve,” the credit rating firm said in an announcement.

The banks are raising their borrowing rate for security deposits and ideas for bonds issue. Further, advantageousness is also estimated to assist the capital prop of the banks.  altogether, the scheduled commercial banks (SCB) will be well-capitalized in the coming term as estimated.

All SCBs are keeping their Captial Adequacy Ratio (CAR) greater than the low required level for Q3FY23. The average CAR and Common Equity Tier 1(CET-1) ratio of the SCBS observed an increase in Q3FY23 compared with Q3FY22 and Q3FY21, the reports noted.

Because a higher pre-provisioning operating profit (PPOP) growth contrasted with lower growth in provisions, According to CARE Ratings, the net profit of SCBs grew by 45 percent year-on-year (y-o-y) to Rs 0.65 lakh crore in Q3FY23.

The net interest income growth and stability in non-interest income helped PPOP to grow by 28.5 percent y-o-y to Rs 1.30 lakh crore in Q3Y23. Meanwhile, provisions rose by 9.1 percent to Rs 0.38 lakh crore.

Public sector banks’ net profit rose by 64.3 percent y-o-y to Rs 0.29 lakh crore in Q3FY23, meanwhile private sector banks’ grew by 32.2 percent y-o-y to reach Rs 0.35 lakh crore in Q3FY23, the report added.

Return on Assets of SCBs improved by 28 bps y-o-y to 1.23 percent. At present, banks are in a better position after navigating the Covid period and managing mounted NPAs.

Healthy credit growth, improvement in asset quality, and lower growth in provisions due to lower incremental slippages and reduction in restructuring books are expected to generate healthy net profit growth.

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