Synopsis: Indian banks are tightening expenses to manage profitability amid rising credit costs and higher slippages. Axis, HDFC, Kotak Mahindra, and RBL Bank have all reported slower growth in operating expenses. Axis Bank CFO Puneet Sharma indicated moderation would continue through FY25.
Indian banks are adopting cost-cutting measures as rising credit costs and increased slippages, especially in unsecured loans and microfinance, impact profitability.
Major private banks like Axis Bank, HDFC Bank, and Kotak Mahindra Bank are focusing on controlling operating expenses to maintain margins.
Expense Moderation Across Major Banks:
- Axis Bank significantly reduced its operating expense growth to 9% in Q2, down from 34% a year ago. The bank also lowered its tech spends, reflecting a strategic moderation.
- HDFC Bank saw a 1.8% sequential growth in operating expenses, compared to over 9% last year. While branch openings increased, headcount growth normalized.
- Kotak Mahindra Bank recorded a 15% growth in operating expenses, down from 19% the previous year.
- RBL Bank also experienced a moderation in expenses, highlighting its focus on maintaining low operating expenditure (opex) ratios as a growth driver.
Banks are closely monitoring expenses amid the challenging environment, with most expecting further moderation in FY25.
In conclusion, with increased credit costs and elevated slippages, Indian banks are adopting strategies to rein in expenses.
While continuing to invest in key growth areas like technology and branch expansion, most banks have moderated the pace of expense growth.
This careful management of operating costs is expected to persist as banks navigate a challenging economic environment.
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Readers should consult with a certified financial advisor before making any investment decisions.
