Fall­ing Core In­come is An­other Hur­dle for PSB Prof­itabil­ity

Con­trac­tion in loan books in­creas­ingly get­ting re­flected in de­te­ri­o­rat­ing NII pro­file

The Economic Times - - Companies: Pursuit Of Profit -

‘other in­come’ such as trea­sury gains and fees may not be able to sup­port op­er­at­ing profit given the sharp spike in the bench­mark bond yields af­ter the Re­serve Bank of In­dia an­nounced a change in its mon­e­tary pol­icy stance to “neu­tral” from “ac­com­moda­tive”. In the past two quar­ters when the bench­mark yield de­clined by 63 ba­sis points (bps) and then 30 bps, other in­come of PSBs grew by as much as 47% and 54%, re­spec­tively, ex­clud­ing the sale of stake in life in­sur­ance busi­ness by SBI in the lat­est quar­ter. The slow­down in NII growth could also im­pact the net in­ter­est mar­gin (NIM) es­pe­cially if banks con­sider to fur­ther re­duce their in­cre­men­tal lend­ing rates or mar­ginal cost of funds based lend­ing rates (MCLR). In case of SBI, which has seen its NIM con­tract by 15 bps in the last one year, close to 40% of its loan book is cur­rently MCLR-linked.

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