AT A CROSSROADS

IN A FINANCIAL services landscape fraught with interest rate and liquidity risks, India’s banking sector currently finds itself at a crossroads. The sudden decline in the share of low-cost current account and savings account (CASA) deposits is forcing banks to rethink their strategies. To attract funds, these lenders may need to raise deposit rates—a move that risks narrowing net interest margins (NIMs) and squeezing profitability. Simultaneously, surging unsecured loans now face tighter capital requirements from the Reserve Bank of India (RBI). And the micro-loans segment—once seen as a goldmine of fresh credit—is grappling with rising delinquencies, signalling a turning credit cycle. The stock market valuations of banking, financial services and insurance (BFSI) players, too, have corrected in a big way with the sector underperforming in the market. This is the high-stakes…