RBI May allow foreign banks greater stakes in local lenders

 

🔍 CURRENT SCENARIO

👮 Regulatory Caps:

• Foreign banks can currently hold up to 15% in an Indian private sector bank (with prior RBI approval).

• Aggregate FDI limit for private banks is 74%, but individual entities (especially foreign banks) are restricted to 10–15%.

• Exemptions are given on a case-by-case basis (e.g., RBI allowed DBS to fully merge Lakshmi Vilas Bank).

ABFRL MOAT

 Post-demerger:

ABFRL (the listed entity) = Pantaloons + TMRW (D2C platform) + Ethnic wear brands + TCNS Clothing

Aditya Birla Lifestyle Brands Ltd (ALBL) = Van Heusen, Louis Philippe, Allen Solly, Peter England, Innerwear, Reebok, American Eagle etc.

Gross Margin Vs Operating Profit Margin

✅ 1. Definitions

Metric	Meaning	What it reveals
Gross Margin	= (Revenue - Cost of Goods Sold) / Revenue	Measures core value addition; how much profit is made after producing the product
Operating Margin	= Operating Profit (EBIT) / Revenue	Measures overall business efficiency, including marketing, R&D, employee costs, admin, etc.

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 Matthew Berry and his paper “Mean Reversion in Corporate Returns”:

Red Flags in Axis Bank

 Here are some key red flags to watch for before investing in banks like Axis Bank (or any other financial institution):

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1. Regulatory Actions & Fines

• Frequent penalties from regulators (RBI, SEBI, CCI, PMLA, etc.) signal lapses in compliance, weak controls, and potentially risky culture.
  • Axis Bank Example: Recently fined Rs. 39.2 lakh by PMLA Tribunal (June 2025, reduced from Rs. 2.64 crore); Rs. 1.91 crore penalty by RBI (Sept 2024); Rs. 1.66 crore (June 2024); Rs. 90.92 lakh (Nov 2023).
• Show-cause notices relating to fraud, KYC/AML violations, or governance issues are major warnings.
  • Axis Bank Example: SEBI show cause notice over alleged fraudulent transactions (May 2025).

What Differentiates IndusInd Bank from Peers?

 1. Pan-India Scale with Strong Rural Penetration

• IndusInd Bank is India’s 5th largest private sector bank, with a “disproportionately large distribution network” (7,000+ outlets, serving ~41 million customers, as of June 2024) and deep rural penetration via Bharat Financial Inclusion Ltd (BFIL), covering over 1,60,000 villages.
• This is unlike regional banks such as Karnataka Bank or South Indian Bank, which are mostly region-concentrated, or PSU banks that can be burdened with legacy processes.

Fusion Microfinance Annual report 2025 Highlights

🧭 Key Industry Insights (from CEO & MD commentary)

❗ Microfinance Industry in FY25:

• The industry experienced severe stress and a credit downcycle in FY25.

• Gross Loan Portfolio (GLP) declined 13.9% YoY to ₹3.81 lakh crore.

• Disbursements fell 38% YoY to ₹71,500 crore as of March 2025.

• Delinquency remained high, especially in the PAR180+ bucket, but early delinquency (PAR1–30) showed improvement:

  • PAR1–30 dropped to 1.4% by March 2025 (from 2.1% in Sept 2024).

  • PAR31–180 dropped slightly to 6.2% by March 2025.

Key takeaway: The sector was hit hard by overleveraging and external shocks, but early signs of recovery were visible in Q4FY25.