Axis bank result analysis 
CASA 42% to 39% , Retail Growth QOQ 1%, SME 3%: Weakening Consumption, Reducing Disposable Income, and Rising NPAs stress assets have to worry?

Axis Bank Results Highlight Need for Tax Reductions, Interest Rate Cuts, and Boosted Liquidity to Revive Consumption

Key Observations from Axis Bank’s Q3FY25 Results:

1. Declining CASA Ratio and Savings Growth:

CASA ratio dropped by 3% YoY to 39%, indicating reduced reliance on low-cost deposits.

Savings account growth remained flat YoY, reflecting lower consumer ability to save due to inflationary pressures and stagnant disposable incomes.

2. Sluggish Credit Growth:

Retail Loan Growth: QoQ growth at just 1%, despite 11% YoY growth, highlights weak credit demand driven by reduced spending power.

SME Loan Growth: While YoY growth was strong at 15%, QoQ growth slowed to 3%, signaling liquidity challenges for small businesses.

3. Rising NPAs and Asset Stress:

Gross NPA increased marginally QoQ to 1.46%, with slippages spiking to ₹5,432 crores (up from ₹4,443 crores in Q2FY25).

Stress is most notable in unsecured retail loans and SME segments, further burdened by high borrowing costs.

Implications for the Economy:

Axis Bank's results mirror broader economic trends of weakening consumption, rising financial stress, and slowing growth across key sectors. The data underscores the urgent need for structural reforms to address these challenges.

Recommended Actions:

1. Reduce Taxes:

Lower GST rates on high-consumption goods to reduce cost pressures on consumers and SMEs.

Provide income tax relief to middle-income earners, increasing disposable incomes and spurring demand.

2. Cut Interest Rates:

Reduce lending rates to make credit more affordable, driving borrowing for consumption and investment.

Lower borrowing costs for SMEs to ease operational pressures and improve cash flows, reducing default risks.

3. Increase Liquidity:

Introduce targeted liquidity infusion measures, ensuring funds are available to high-impact sectors like SMEs and retail.

Encourage government-backed credit guarantees for SMEs to boost confidence and lending.

Expected Benefits:

1. Boosting Consumption:

Tax relief and affordable credit will directly increase consumer spending, revitalizing demand across sectors.

2. Supporting SMEs:

Easier access to credit and reduced tax burdens will enable SMEs to invest, expand, and generate employment.

3. Improving Asset Quality:

Enhanced financial support will stabilize stressed portfolios, curbing slippages and NPAs.

Axis Bank’s results underline the critical need for fiscal and monetary reforms to address systemic challenges. Reducing taxes, lowering interest rates, and boosting liquidity are essential to revive consumption, support SMEs, and stabilize the banking system, setting the stage for sustainable economic growth.

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