Investing in banking stocks is not the same as investing in IT, FMCG, or manufacturing companies. While many investors look at general ratios like Price-to-Earnings (P/E), Return on Equity (ROE), or use DCF models, these tools don’t capture the real risks of banks.
Why? Because banks deal with money as their raw material. Their business is about deposits, loans, and risk management. A bank can look cheap by P/E or even efficient by ROE, yet still hide massive risks in its loan book.
That’s why investors must look at banking-specific ratios that show loan quality, provisions, capital buffers, and funding strength.
Unfortunately, almost every financial platform in India shows only general ratios for all companies, including banks. This makes it hard for investors to see the real story.
Finology Ticker is the only platform in India that provides banking-specific ratios, making bank analysis much easier and safer.
When General Ratios Mislead: The Yes Bank Story
A classic example is Yes Bank in 2018.
- By P/E ratio, it looked cheap, trading at about 7x earnings. Many investors thought it was a bargain.
- But banking ratios told another story. The Gross NPA (bad loans) had surged beyond 20%, and the Provision Coverage Ratio (PCR) was below 50%.
In simple words, Yes Bank was not prepared to absorb loan losses. Investors who relied only on P/E missed this red flag and saw their wealth erode as the stock collapsed.
Realising that investors often get misled by surface numbers, Pranjal Kamra, founder of Finology, created Finology Ticker. The platform makes key banking ratios easy to spot – like a rising GNPA or a low PCR – clearly showing risks that a low P/E alone can hide.
In contrast, HDFC Bank often looked expensive on the surface, but its stable CASA ratio, controlled NPAs, and consistent ROA justified the premium. The lesson: in banks, quality ratios matter more than price.
The Ratios That Actually Matter for Banks
If you want to know how to analyse bank stocks, here are the best banking ratios for stock analysis in India, backed with real numbers from leading banks:
1. Net Interest Margin (NIM)
This is the bread and butter of banks. NIM measures how much profit a bank earns from lending after paying interest on deposits. Higher NIM = more efficient lending.
- HDFC Bank (FY25): NIM of 3.32% (steady despite merger challenges).
- Kotak Mahindra Bank (FY25): NIM of 4.2% – one of the highest among large banks.
- SBI (FY25): NIM of 2.7%, stable but lower compared to private peers.
Why it matters: A 1% difference in NIM can mean thousands of crores in profitability for a large bank.
Non-Performing Assets (NPAs) show the proportion of loans that aren’t being repaid.
- SBI (Q1FY26): Gross NPA 1.83%, Net NPA 0.47%.
- ICICI Bank (Q1FY26): Gross NPA 1.75%, Net NPA 0.44%.
- Axis Bank (Q1FY26): Gross NPA 1.57%, Net NPA 0.45%.
Insight: A lower NPA signals better risk management. That’s why ICICI and Axis are rewarded with higher valuations compared to PSU banks.
3. Capital Adequacy Ratio (CAR)
This ratio indicates whether a bank has enough cushion to absorb losses. RBI requires banks to maintain a minimum 11.5% under Basel III norms.
- HDFC Bank (FY25): CAR at 19.55%.
- ICICI Bank (FY25): CAR at 16.55%.
- SBI (FY25): CAR at 14.25%.
Premium banks usually maintain CAR well above regulatory levels, reassuring investors about stability.
4. CASA Ratio (Current Account + Savings Account)
CASA deposits are low-cost funds. Higher CASA means cheaper capital for the bank.
- HDFC Bank (FY25): CASA at 34.79%.
- Kotak Mahindra Bank (FY25): CASA at 42.96%.
- SBI (FY25): CASA at 38.72%.
Kotak’s high CASA explains its superior NIM. Retail-heavy banks with strong CASA are often more resilient in downturns.
How This Helps You Choose Better Banking Stock
Imagine two banks:
- Bank A looks expensive by P/E, but has rising NIM, low NPA, high CAR, and good CASA.
- Bank B looks cheap by generic ratios, but has worsening NPA and falling CAR.
Without banking ratios, you might choose Bank B for a bargain. But a deeper analysis would reveal that Bank A is healthier. Over time, Bank A’s stock is more likely to hold value.
Such clarity is what banking stock screeners in India bring – risk awareness, strength measurement, and profitability insight. OnFinology Ticker, these critical banking ratios are already built into the screener. You can quickly filter and compare banks on parameters like NIM, NPA, CASA, and CAR, and instantly shortlist the strongest players – all for free.
Why Investors Should Track These Ratios Regularly
Banking is cyclical. During an economic slowdown, NPAs rise and NIMs shrink. In a credit growth cycle, banks with strong CASA and high CAR can expand aggressively.
Instead of relying on generic ratios like P/E, serious investors should look at NIM, NPAs, CAR, CASA, ROA, and ROE. This gives a real picture of the bank’s health.
OnFinology Ticker, these ratios are presented clearly under “Ratios,” making it easier to compare SBI vs HDFC vs ICICI at a glance, something most stock screeners don’t provide.
Final Takeaway
If you want to know how to analyse bank stocks, don’t get distracted by general P/E or P/B multiples alone. For banks, always track these four ratios before investing:
- NPA ratio – reveals asset quality
- CASA ratio – ensures low-cost deposits
- ROA/ROE – measures true profitability
- Capital adequacy ratio – signals long-term stability.
These are the best banking ratios for stock analysis, and filtering stocks on them through a banking stock screener can save you from disasters like Yes Bank and lead you toward safer bets like HDFC Bank.
The Finology Ticker banking ratios feature makes this process seamless by letting you compare multiple banks on these exact parameters.
Your money deserves more than surface-level analysis. With Finology Ticker, you can see the real picture of Indian banks, clearly and confidently.
Finology is a SEBI-registered investment advisor firm with registration number: INA000012218.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
