Indian Banks Face New Challenges

A recent Boston Consulting Group (BCG) report highlights a critical juncture for Indian banks as they brace for an era of heightened interest rate volatility. This comes after over a decade of relatively stable and declining rates, marking a significant shift in the financial landscape.

Understanding the Impact

The study underscores that the effect of policy rate changes on bank performance is neither immediate nor uniform. It reveals that credit growth is more influenced by borrower sentiment and lender confidence than by interest rates alone.

Strategic Recommendations

BCG advises banks to move away from linear forecasting and embrace scenario-based planning to navigate the uncertain waters ahead. This strategic shift is crucial for maintaining stability and growth in the face of fluctuating rates.