# Bank of India MF CIO Predicts Bank Sector Re-rating Low NPAs and strong fundamentals may trigger upward valuation. - **Source:** [Economic Times](https://brifing.si/source/37791137-c35a-4ffe-b6a9-fe103afc9e48) - **Published:** 2026-09-19 - **Topic:** [Finance](https://brifing.si/c/finance) - **Original article:** - **On Brifing:** https://brifing.si/s/c2b1430f-fbef-4570-9746-0effb06ee1eb ## Bank sector poised for re-rating Bank of India Mutual Fund CIO Alok Singh identifies strong potential for a re-rating of Indian banks, driven by improved fundamentals. Key factors include historically low non-performing assets (NPAs) and sustained healthy returns across the sector. Loan growth has remained robust, supporting earnings momentum. Singh's analysis suggests current valuations may not fully reflect these strengthening fundamentals. ## NPA levels at historic lows The banking sector's improved asset quality is a cornerstone of the re-rating thesis, with NPAs reaching multi-year lows. This reduction in bad loans has strengthened balance sheets across public and private sector banks. The cleanup of legacy NPAs combined with more disciplined lending practices has created a healthier credit environment. These factors collectively reduce systemic risk in the sector. ## Policy announcements as catalysts Singh highlights upcoming policy decisions as potential triggers for sector revaluation. Market participants are particularly focused on measures affecting net interest margins (NIMs) and foreign currency non-resident (FCNR) flows. Clarity on these policy fronts could alleviate investor concerns and support higher valuations. The timing coincides with broader economic reforms in the Indian financial landscape. ## Business metrics show strength Operational metrics across major banks indicate sustained business momentum, with loan growth consistently outpacing deposit growth. This positive gap reflects improving credit demand across corporate and retail segments. Fee income streams have also shown resilience, diversifying revenue sources. Such business performance provides fundamental support for valuation upgrades. ## Earnings momentum sectors Beyond banking, Singh identifies capital goods and metals as sectors likely to show strong earnings acceleration. These segments benefit from India's infrastructure push and global commodity cycles. The interconnectedness of these sectors with banking creates positive feedback loops. Banking sector performance often leads these cyclical industries by 6-12 months. ## NIM concerns being addressed While net interest margin compression has been a concern, recent trends suggest stabilization. Banks have optimized their deposit mix and repriced assets to protect margins. The potential for policy rate adjustments could further relieve pressure on NIMs. This margin stability is crucial for sustaining return ratios that drive valuations. ## FCNR flow dynamics Foreign currency non-resident deposits, a critical funding source for Indian banks, face evolving regulatory treatment. Clarity on FCNR-related policies could remove an overhang on bank valuations. These flows significantly influence liquidity conditions and funding costs. Their stabilization would enhance predictability of bank earnings. ## Valuation gap presents opportunity The current price-to-book multiples of Indian banks remain below historical averages despite improving fundamentals. This disconnect creates potential for meaningful multiple expansion. Institutional investors are increasingly recognizing this opportunity, as evidenced by recent flows. A sector-wide re-rating could deliver significant alpha for early position-takers. ## Sources covering this story - https://economictimes.indiatimes.com/markets/expert-view/bank-of-india-mf-cio-alok-singh-sees-banks-poised-for-a-re-rating-heres-what-could-trigger-it/articleshow/134351586.cms — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._