Borrowers may argue that the rates are already too high and it seems like many banks are already finding it a losing proposition to lend for housing purposes. But out of all the options in loans, if there is one good loan that ppl can take it is housing.
Personal and credit card loans already were through the roof over the last few years and it will take good time for that cycle to cool down and come back again.
So where will the growth come from? It needs to be seen if RBI does something in the upcoming meeting to push growth.
First and foremost, the amount being lent out as housing loans by these “leading banks” what % is that to the total amount lent out by banks in other forms at higher returns?
One likely reason to justify the behavior of banks described in the above screenshot,
is that these “leading banks” are currently incentivizing relatively lower-risk loans
to ensure that the risks associated with their loans stay within the thresholds set by RBI.
Presumably these banks have managed to lend out a wide-variety of delinquent loans / high-risk loans / NPAs that have (or even continue to) provide the banks way higher returns, but they are pushing the risk factors the banks are exposed to, beyond the thresholds set by RBI, and thus the banks need to adjust/account for it.
Other reasons would exist too.
Assets and liabilities are rarely matched perfectly in terms of duration,
The above could be a “widening” Duration gap, not the end of the world for a “leading bank”.
Immediate thought is - What does Mr. Kotak have to gain (either financially or otherwise)
by pushing this narrative on his audience, at this point of time?
From goods and services provided, and any actual productivity improvements.
Not from simply financialisation.
Well, some of it will.
Maybe a smaller share of the overall growth comes from financialization, if the recent trends hold.
I remember hearing in some twitter space or post maybe, the surge in IPOs affects the loan books of banks. If the RBI eases policies, will that also lead to reversal in high valuations during public issues?
Reversal to higher valuations of Equity (IPO or otherwise) sounds likely…
…IFF credit becomes cheaper…
…without any other incentives/hindrances to deter speculation in equity,
relative to other methods to deploy the newfound liquidity.
However, based on recent trends, this doesn’t seem to be the current direction.
Even if credit becomes cheaper,
i fully expect other “levers to be turned”
to limit any speculation in equity right now
from reaching the rampant levels seen during the recent years.
