Despite certain challenges, particularly in the unsecured retail and microfinance institutions (MFI) sectors, the overall outlook for the sector remains positive, supported by strong fundamentals and operational efficiency.
Credit growth is projected to be ~11% in FY25 and is expected to improve to ~12.5% ​​in FY26, demonstrating the sector’s ability to sustain demand across key areas.
On the deposit front, growth continues to be robust at 11.5% as of December 2024, supported by intensified competition among banks and aggressive strategies to strengthen the funding base.
CASA growth faces challenges as depositors lock in higher term deposit rates, but banks are successfully navigating these pressures.
Public sector banks (PSBs) continue to perform well, with profits expected to grow 36.3% year-on-year in Q3 2025. Strong collections, controlled credit costs and well-managed operating expenses contributed to this strong performance. Private sector companies like ICICI Bank, HDFC Bank and Union Bank maintain healthy net interest income (NII) and are growing to reflect that growth. Despite pressures in the unsecured retail and MFI segments, asset quality remains largely stable and slippage is under control. Public sector banks have shown strength in managing credit costs and collections, while private banks continue to improve operational efficiency.
Pre-provision operating profit (PPoP) across the sector is projected to increase 13.2% YoY in Q3 2025, indicating a solid performance trajectory.
Advances in technology are also creating opportunities, with digital initiatives gaining momentum.
Fintech companies such as Paytm have made great strides, with the latter expected to achieve adjusted EBITDA breakeven by Q4 FY25, further reinforcing the sector’s adaptability and innovative potential. It shows.
As India’s economy develops, the banking sector continues to be a pillar of stability and growth. Large private banks and PSU banks are particularly well placed to weather the current cycle effectively.
With strong credit and deposit growth, stable asset quality and technological advances, the sector is poised to maintain its momentum and continue contributing to a resilient and progressive financial ecosystem.
ICICI Bank: Buy|Target Rs 1,550| LTP Rs 1,290|Upside 20%
ICICIBC is poised to achieve superior performance with healthy loan growth, superior asset quality and industry-leading profitability.
The bank’s operating leverage has emerged as a key driver of profit growth due to strong deposit inflows and favorable CD ratio, one of the lowest among large private sector banks, positioning ICICIBC for profitable growth. It is located in
The company’s asset quality outlook remains stable, supported by solid underwriting standards, strong PCR and a high contingency buffer of up to 1% of loan amount.
We estimate ICICIBC to achieve 15%/12% CAGR in PPoP/PAT from FY25 to FY27, with RoA/RoE of 2.1%/16.7% in FY27.
SBI: Purchase|Target Rs 1,000|LTP Rs 801|Increase rate 24%
SBI plans to open 500 new branches in FY25, deploy $1.5 billion in international business and strengthen its domestic and global reach with strong growth initiatives.
Credit growth is expected to be 14-15% and deposit growth is expected to exceed 10% with focus on SA growth and intensive deposit mobilization.
SBI maintains solid guidance of RoA of 1%, credit cost of 0.5% and controlled slippage, highlighting strong risk management and growth potential beyond FY25.
(The author is Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd)
(Disclaimer: Recommendations, suggestions, views, and opinions expressed by experts are their own. (They do not represent the views of Economic Times)
