Right now, the banks in India feel the pressure, in conducting profitable business. The present weak economic condition, increase in the bad loans and the cost of borrowing are the significant factors that affect the growth of the banking sector. It may not be possible for the banks to make profits, during this fiscal, according to the Indian Credit Rating Agency. Recently, the RBI said that many banks in the public sector and the private sector have fallen short of their target in the priority loan department.
All the banks in India should disburse 40% to the priority loans, out of the total advances. Mr. Batra feels that the returns on the equity of the state run banks may drop to below ten percent, in this financial year. The ICRA examined 26 government banks and 15 private banks. These banks are responsible for 90% of the total credit portfolio and deposits.