Indian banks are facing a hidden threat in their unsecured credit portfolios, with banks like IndusInd Bank, Bandhan Bank, and Yes Bank showing signs of stress. Despite strong earnings and reduced bad loans, the increase in unsecured loans could lead to a rise in bad loans in the future. The RBI has taken measures to control this, including increasing risk weights for unsecured loans. However, these loans can be highly profitable if done with proper underwriting, even though deposit growth in Indian banks lags behind credit growth.
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