1 week ago

Goldman Sachs Sees Indian Banks Weathering West Asia Risks

Goldman Sachs studied whether problems in West Asia could hurt Indian banks.

It expects the banks’ loan quality to remain mostly stable.

The biggest concerns are loans without collateral, especially consumer loans and microfinance loans.

Some banks lent too quickly in these areas, which caused more borrowers to struggle.

Lending in these areas has slowed over the past 12-18 months.

The microfinance loan book is now 25% smaller than its March 2024 peak.

Large private banks have had limited stress, while state-owned banks had no exposure to the highlighted segment.

Guarantees covering many microfinance loans could help protect banks if more loans become bad.

Key facts

Overall outlook: Indian banks are expected to maintain stable asset quality.
Main risk areas: Consumer unsecured loans and microfinance lending.
Microfinance contraction: The microfinance loan book has declined 25% from its March 2024 peak.
Peak microfinance loan book: Rs 4.4 trillion in March 2024.
Consumer unsecured growth: Growth slowed to 10-12% in FY25 and FY26, compared with 25-30% in FY23 and FY24.
Microfinance guarantee coverage: About 80-90% of the loan book at several banks is covered by the Credit Guarantee Fund for Micro Units.
Exposure by bank type: State-owned banks had no exposure to the highlighted segment, while large private banks faced negligible to manageable stress.

firstpost.com · 1 week ago