Capital Is King: Top Indian Banks Hold ~Rs 8 Trillion of Excess Capital

India Financials

Saumya Agarwal

Thematic (Sector/Industry)

India Financials / Thematic (Sector/Industry)

<p>The coronavirus contagion has intensified the divergence in the credit and deposit growth of Indian Banks. Should this trend persist, it will amplify another key concern for Banks – the Asset-Liability mismatch. Most Indian banks have a negative asset-liability mismatch in the short term i.e. in the less than one year time horizon.  With retail inflation breaching the RBI's prescribed limit, upside risks to inflation and bond yields remain a worry.  Should interest rates start rising,  Indian banks with a negative asset-liability gap will be the most susceptible. However, there are a few outliers too.</p>

The coronavirus contagion has intensified the divergence in the credit and deposit growth of Indian Banks. Should this trend persist, it will amplify another key concern for Banks – the Asset-Liability mismatch. Most Indian banks have a negative asset-liability mismatch in the short term i.e. in the less than one year time horizon.  With retail inflation breaching the RBI's prescribed limit, upside risks to inflation and bond yields remain a worry.  Should interest rates start rising,  Indian banks with a negative asset-liability gap will be the most susceptible. However, there are a few outliers too.

Indian Banks: Be Mindful of the Negative Asset-Liability Gap in the Short-Term