Banking Stocks Outlook: Can Lower Costs And Strong Credit Growth Drive The Next Rally?

India's banking sector could be entering a stronger growth phase as liquidity improves and credit demand remains robust. Ajay Bagga, Sr. Market Veteran, says the RBI's FCNR(B) scheme has already attracted significant inflows, which could lower banks' cost of funds and improve net interest margins over time. He believes private banks, PSU banks, NBFCs, and housing finance companies stand to benefit from healthy credit growth and improved liquidity. While deposit mobilization remains a challenge, strong capital positions, low NPAs, and steady loan demand could support the banking sector's performance in the coming quarters.