THE ROAD TO RECOVERY

“BANKING IS VERY good business if you don’t do anything dumb,” advised fabled investor Warren Buffett, who knows a thing or two about making money in the stock market. Yet, history is laced with innumerable anecdotes of banks’ dumbness and their eventual fading into obscurity. Globally, hundreds of banks failed after the global financial crisis as they took risky bets in subprime customers. More recently, three Indian banks—PMC Bank, YES Bank and Lakshmi Vilas Bank—went belly up as their corporate borrowers defaulted on loans. In the banking business, it doesn’t require rocket science to mobilise low-cost public deposits, write loans to retail and corporate borrowers, grow the loan book, and earn interest for customers as well as shareholders. But banks have often thrown conservatism out of the window and embraced high growth to build scale in the fastest possible time.

Barring HDFC Bank, which sits comfortably at the third position in the BT500 list for 2021, there are no role models in the banking business of sustaining growth in market capitalisation (mcap) year after year. The mcap position of some mid-sized banks, especially the promising names, has taken a big knock in the BT500 this year. The Hindujas-owned IndusInd Bank, which had