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Banking sector India: Indian banks are better placed with strong balance sheet, low NPAs and higher profits: CLSA

Indian banks in India have seen a significant improvement in their financial position after facing government challenges and bad loan issues. According to CLSA, a capital markets and investment group, Indian banks now have stronger balance sheets and higher profits. The return on equity in the banking sector is at its highest since 2011.

Deposit growth has aligned with an increase in loan growth, which has risen from 10% to 15% on average over the past two years. The firm anticipates that private sector banks, which have not performed well in the stock market recently, will see better returns due to positive business prospects.

While public sector banks have performed better than private sector banks in the past year and over the last five years, private sector banks have outpaced PSU banks in current account deposits and reduced non-deposit borrowings in the past decade. Non-performing loans have decreased to their lowest level in ten years, driven by better asset quality, stronger provision buffers, and improved capital position.

Profits for the banking sector have quadrupled over the past decade, with a return on equity of 15%. Loan growth has increased from 10% to 15% over the past two years, driven by all sub-segments. Corporate credit quality has also improved over the past 5-7 years.

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