The economy has been through a rough patch in the past three years, which has resulted in GDP growth slowing down to below 5%. This has adversely impacted the banking system, leading to lower credit growth and increasing asset quality problems. So far, the impact has been limited to state-owned PSU banks, which have borne the brunt of asset quality stress, while private sector banks have remained largely immune to the slowdown. The Bankex fell nearly 10% over the past six months, owing to the particularly difficult quarter for the banking system with a few private sector banks also feeling the pressure of the policy U-turn by the Reserve Bank of India (RBI). Investors started to question the sanctity and safety of private banks as cracks started to appear in their financial performance. So, is it gloom and doom for all banking stocks?
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