“Banking is a very good business if you don’t do anything dumb.”—Warren Buffett
In my journey as a teacher, I have encountered people having loads of misconceptions about Bank & NBFC stocks. There are many reasons behind this notion. Some of it can be attributed to the 2 financial crises we have witnessed in the last 2 decades. However, if we try to understand things with an unbiased mind we can soon see how simple the business of banking or lending in general is. Where people go wrong is the way they manage this business as money is the raw material and finished product for this industry. Banks are sort of platforms for accepting and lending money and it involves leverage. Now leverage has a characteristic to amplify the outcomes. Good becomes better to best and bad becomes worse to worst.
We will look at a very interesting and probably the most important lever in banks & NBFCs that can provide us a guiding light on the path ahead. This one concept can help alleviate your fears and lack of understanding about a Bank’s Road to Successin under 10 mins
