The infra-major going belly up cracked open some major flaws in the system - the most evident being weak corporate governance and how layers of corporate structures could be formed adding to the opaqueness of the group.

Despite a shaky Q3, conviction over the stock remained high, with 65 per cent of the analysts polled on Bloomberg retaining their 'buy' recommendation.

This is a key reason for the finance ministry's objection to fixing the tenure at 100 years, as it is pushing PSBs to be self-dependent and raise funds from the market, reports Hamsini Karthik.

It is nearly after 13 years that a foreign brokerage has resumed holistic coverage on stocks of public sector banks (PSBs). To that extent, Morgan Stanley's report dated March 3, where the analysts have listed their order of preference for PSB stocks, is an indication that the state-owned banks may once again be attracting some interest, thanks to three back-to-back quarters of good results in FY21 so far. "State-owned banks' balance sheets have improved, and bad loans formation should moderate going forward," the analysts note and this is the key reason for them to relook at their stance on PSBs. While State Bank of India (SBI) remains their preferred pick, stocks of Bank of Baroda (BOB) and Punjab National Bank (PNB) have been upgraded from 'underweight' to 'equal-weight'. The brokerage maintains its underweight recommendation on Bank of India and Canara Bank.

For non-banks, the IL&FS crisis was nothing short of India's Lehman moment, which has for a foreseeable future reset the sector on multiple grounds.

'The concern that the bad bank may create a moral hazard for the system is extremely valid.'

Banks such as IndusInd Bank, Federal Bank, DCB Bank and Axis Bank which have renewed their focus on secured loans may be, hence, walking on a tightrope.

While the lender has Rs 17,000 crore of retail assets and land parcels in Juhu, Borivali, Worli, and Chembur in Mumbai, there may be a disconnect between the quality of DHFL's books and the value bidders ascribe to it.

Despite the increasing adoption of digital transactions in the past three to five years, brick-and-mortar interaction across geographic catchments remains a potent distribution channel. Though the functions of a branch may have not changed in years, their focus has shifted from transaction to customer retention.

The life insurer tinkered with its business strategy - raised the share of protection plans and reduced dependency on ULIPs in the past four years.

Reports suggest state-owned banks have lapped up Rs 40,000 crore, so far, using both bonds and equity instruments. The question, though, is whether there will be a perceptional change for PSB stocks.

India may adopt norms similar to the US Federal Reserve model, which regulates conglomerate-led banks in the country.

With slippages increasing every quarter, any derailment on growth or change in customers' repayment behaviour after moratorium may impact the overall asset quality. Correction, though, presents attractive buying opportunities, given the bank's sustained leadership position.

With a potential liability of Rs 750-800 crore, sources say Clix Capital's stand on the matter would be crucial in finalising the merger valuation.

Should deposit growth continue to outpace credit growth, banks may end up ceding some hard-earned 25-50 bps improvement in profitability or net interest margin gained in the past two years.

The coming years could be exciting for Bandhan Bank, IDBI Bank, IDFC First Bank, Federal Bank, and CSB Bank.

Jio

Morgan Stanley removed banking stocks from its model portfolio when it slashed its weighting on the sector by 500 basis points. Several foreign brokerages, such as UBS, JP Morgan, and Credit Suisse, of late, have also become less optimistic about banking stocks.

With the Reserve Bank of India's (RBI's) draft reconstruction scheme for the troubled lender suggesting a permanent write-down of these bonds outstanding as of March 5, bondholders who have invested RS 10,800 crores are up in arms, reports Hamsini Karthik.

While the overall loan disbursements stood strong at 15 per cent YoY in Q2, pockets such as vehicle finance, loans to NBFCs, and business banking showed some weakness. A continued fall in these numbers may make it tough for AU SFB to defend its valuations under the current circumstances.