Profitability of small finance banks likely to decline in FY25, says CRISIL

CRISIL has projected a decline in the profitability of small finance banks (SFBs) in FY25. The report attributes this decline to increased competition, higher operating costs, and regulatory changes. SFBs are expected to face challenges in maintaining their profit margins due to rising expenses and the need to invest in technology and infrastructure. The report also highlights the impact of the economic slowdown on the lending and deposit growth of SFBs. Despite these challenges, CRISIL notes that SFBs have the potential to adapt and innovate to sustain their growth in the long term.