Stories
Indian Banks Poised to Absorb Q2 Treasury Losses Amidst Robust Credit Growth: Digant Haria
- •Indian banks are well-positioned to absorb potential mark-to-market treasury hits in Q2FY27, driven by strong 17-18% credit growth, according to Digant Haria.
- •Haria highlighted standout performances from HDFC Bank, NBFCs like Bajaj Finance and L&T Finance, and small finance banks such as Equitas and Ujjivan.
- •Public sector lenders, including Bank of India and Union Bank of India, are experiencing significant 17-18% growth, a level not seen recently.
- •Haria anticipates a token 25-50 bps RBI rate hike on October 7 due to rising global bond yields, which should benefit banks as over 50% of portfolios are linked to EBLR.
- •Despite concerns over rising Indian 10-year yields, Haria emphasized that the current strong growth trajectory provides a substantial cushion for banks.
Key Questions Answered
Yes, Indian banks are well-positioned to absorb potential mark-to-market treasury hits in the July-September quarter of 2026, driven by a robust credit growth of 17% to 18% that provides a strong operating leverage cushion for their profit and loss statements.
Digant Haria expects the Reserve Bank of India to implement a token rate hike of 25 to 50 basis points on October 7 in response to rising global bond yields, demonstrating readiness to take rate hikes if needed despite strong domestic credit growth.
More than 50% of bank portfolios are linked to the external benchmark lending rate, meaning potential policy rate hikes by the central bank should benefit the banking sector, though non-banking financial companies might experience margin pressures depending on the RBI's tone.
