INSUBCONTINENT EXCLUSIVE:
heart of countless life-changing moments.The Nifty Private Bank Index Fund offers a simple, structured, and low-cost way for investors to
From facilitating credit to expanding access for the underserved, it serves as the lifeblood of financial inclusion and economic
This reflects their superior efficiency, stronger balance sheets, and relentless focus on customers.Performance behind the scenesThe numbers
Net Interest Income (NII) for private banks has seen a staggering rise over the past two decades
They grew steadily from less than Rs 25,000 crore in FY05 to over Rs 350,000 crore by FY25
a critical efficiency marker, have also remained healthy, sustaining a level above 4% in recent years.As depositors, borrowers, and
investors vote with their feet, private banks have gained share in the loan market, from 13% in FY05 to 36% in FY25, and deposit market,
where share expanded from 11% to 32% over the same period.Low risk, strong coreWhile growth dazzles, risk matters
Private banks score well on this count too
regulatory threshold (11.7%).Meanwhile, net Non-Performing Assets (NPAs), those numbers that reflect asset quality, are at a 10-year low of
just 0.50% compared to post-Covid stressful times of 1.92%
Constituents are selected from the Nifty 500 and ranked based on market capitalisation, with weight caps to avoid over-concentration
Each stock weight is capped at 23%, and the top three combined cannot exceed 62% at rebalancing done semi-annually.The index includes
household top private bank names
Together, they represent a mix of scale, innovation, and regional depth.At a P/E of 17.6 and P/B of 2.4, the Nifty Private Bank index
appears reasonably valued compared to Nifty 50, which trades at a P/E of 22.3 and P/B of 3.62
For long-term investors, that valuation gap could hint at potential upside.Rebased to Rs 1,000 in April 2005, the Nifty Private Bank Index
has surged to Rs 32,683 by June 2025, translating to a 20-year CAGR of over 18.6%, compared to 14.4% for Nifty 50
Over rolling 3- and 5-year periods too, the index has consistently delivered better returns, proving its strength across market cycles.Not
every year is a win, but in 6 out of the last 10 calendar years, the index has outperformed the broader market.Why consider this
An index fund tracking the Nifty Private Bank Index offers:1) Broad exposure to leading private banks.2) Low cost, since it passively
mirrors the index.3) Minimum investment starting at Rs 1,000, making it accessible to everyday investors.4) Systematic investment options,
Take part in the growth behind every swipe of a card, every EMI paid on time, and every SIP transaction made possible by private banks.(The
author is Principal - Investment Strategy, ICICI Prudential AMC)(Disclaimer: Recommendations, suggestions, views, and opinions given by
These do not represent the views of the Economic Times)
