net interest income from banks (NII) grew by a record 25.5 per cent to reach Rs 1.78 lakh crore in the quarter ending December 2022. This reflects a situation of better credit taking and higher loan yields. This fact has emerged from an analysis. Banks have made higher profits on loans during the quarter. Banks’ net interest margin (MIN) increased 0.17 percentage points to 3.28 percent during the quarter. Sanjay Agarwal, a senior director at Care Ratings, said this is because banks re-rated existing loans at a higher rate and raised interest rates on new loans. On the other hand, it did not change the deposit rates. Market experts say its effect will be seen in the shares of many good banks. Some banking actions will run at rocket speed.
The private sector bank gained a lot
The increase in the net interest margin was led by private sector banks. Its NIM increased by 0.15 percent to 4.03 percent on an annual basis. For its part, the NIM of public sector banks increased 0.17 percent to 2.85 percent. Net interest income or INI is the main source of income for banks. It is the difference between the interest earned by banks and the interest paid on deposits. Aggarwal believes that the revaluation of liabilities will stabilize the net interest margin in the future. He said that demand for loans remained in the high double digits, so now some leading banks have started giving depositors higher yields. The Reserve Bank of India has increased the key policy rate repo by 2.50 percent since May last year. Inflation remains above the Reserve Bank’s comfortable level of four percent (two percent up or down).
Meeting with the heads of banks on February 22
The Ministry of Finance has called a meeting of heads of public sector banks and four private lenders on February 22 to review the Emergency Credit Line Guarantee Scheme (ECLGS). ECLGS was launched to help the business sector affected by COVID-19. The sources said that progress on ECLGS and the Credit Guarantee Scheme in Corona Affected Areas (LGSCAS) will be reviewed at this meeting. Representatives of leading private sector banks HDFC Bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank will also attend the meeting which will be chaired by Financial Services Secretary Vivek Joshi. The extension of ECLGS and LGSCAS beyond March 31 will also be discussed along with the challenges related to these.
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