As per the Reserve Bank of India, India’s banking sector is sufficiently capitalised and well-regulated. In 2024, total assets in the public and private banking sectors were US$ 1861.72 billion and US$ 1264.28 billion, respectively. The interest income of public banks reached US$ 128.1 billion in 2024. In 2024, interest income in the private banking sector reached US$ 95.7 billion.
Moody’s Outlook on India’s Banking System
On March 12, 2025, Moody’s Ratings stated that its outlook for India’s banking system is “stable,” driven by healthy economic growth and strong fundamentals within the banking sector.
The rating agency expects the operating environment for banks to remain positive, supported by government capital expenditure, tax cuts for middle-income groups to boost consumption, and monetary easing. Moody’s forecasts India’s real GDP growth to exceed 6.5 percent for the financial year ending March 2026. Banks’ asset quality will deteriorate slightly after significant improvements in recent years, with some stress in unsecured retail loans, microfinance loans, and small business loans.
Banks are expected to maintain strong capitalization, supported by internal capital generation that aligns with asset growth and access to a deep domestic equity market. Funding and liquidity will remain stable, with loan growth in line with deposits. Moody’s also anticipates continued strong government support for banks in times of need.
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Moody’s View on Banks’ Profitability
Bank profitability is expected to remain solid, with only minimal declines in Net Interest Margins (NIMs) due to modest interest rate cuts. NIMs may slightly decrease as banks adjust loan rates before repricing deposits. Non-interest income is expected to remain robust, driven by large business volumes, particularly in wealth management, insurance services, and opportunistic bond gains, according to Moody’s.
Moody’s report comes a day after the IndusInd bank shares plunged 27 percent after the firm informed about its derivative losses, which could decrease its net worth by 2.35 percent.
As per Moody’s, India’s Banking System will remain stable overall, and major banks like State Bank of India, HDFC Bank, ICICI Bank, Punjab National Bank, Axis Bank, etc, are positioned to have stable and decent growth.
Written By Adhvaitha Nayani
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